Home Mortgage Loans - part 2

by Matthew Bourne

Overpayment via flexible home mortgage loans means that you get to reduce your mortgage capital as well as pay off interest accrued on the capital each month. For each successive month that you make an overpayment the amount of interest paid on the overall mortgage is therefore reduced. An overpayment of just £65 on an £80,000 mortgage with the interest rate at 6.0%, will see mortgage loans paid off 5 years early, amounting to a total saving of some £15,000.

Offset home mortgage loans

Offset home mortgage loans were unveiled to the home owner in 1998, and have gained a great deal of respect from home owners since that time. Offset mortgage loans help to pay off a mortgage early by using what is known as a 'sweeper' system. Providing that the home owner has their current and/or savings account with the mortgage loans provider, their available balance is 'swept' across to their mortgage account each day to offset/reduce the amount of mortgage capital subjected to interest.

To illustrate the advantages of offset mortgage loans, take a mortgage of £100,000 and a balance of £10,000 in your current account and/or savings account. Instead of the interest rate being applied to the £100,000 every day or every month, the interest rate would be applied to your mortgage balance less the balance in your current account / savings account. This means that interest would only be applied to £90,000 of your mortgage, effectively making 10% of your mortgage interest-free!

Copyright (c) Matthew Bourne

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