Yes, you can and it is a very effective way of becoming mortgage debt free sooner.
Most people have some savings and a current account. Offset accounts combine
the mortgage with your savings. To maximise the savings you could choose to
operate your current account with the lender although this is not necessary
with all offset mortgages. Your earnings would be paid in and all your direct
debits paid out. Instead of earning interest on your credit balances, the lender
deducts this from the mortgage interest. Since interest is "saved" rather than
"earned" there is the extra benefit of no tax paid on the savings Overpayments
that you make are always accessible.
Many people use these accounts to set aside funds to settle a tax bill or simply
save for other expenditure like a car, holiday or school fees. Typically, you
can choose to maintain your normal monthly payment and 'overpay' each month
- this effectively reduces the mortgage term. Alternatively, you can request
to keep the mortgage term the same and your monthly payments will reduce. These
accounts normally calculate the interest owed daily. Which means that every
£1 invested is working hard to reduce the overall cost of the mortgage. For
example, if you have a mortgage of £150,000 and savings of £15,000, you will
only pay interest on £135,000.
Click here for a calculator
that shows how much you can save
