Scenario:
Our clients’ existing fixed rate was ending and he was looking to restructure his finances. He had a loan of £1.3m outstanding on a his home valued at £1.8m. In the background, he had £1.5m cash which he was looking to offset against the mortgage interest. The existing debt was on capital repayment however the client wanted to borrow as much as possible on an interest only basis to minimise monthly costs.
Solution:
There are a handful of lenders who offer Offset mortgages. Having an offset facility allows borrowers with cash savings to offset against the interest they pay on their mortgage. In this case, the client had enough savings to completely offset against his mortgage meaning he would pay no interest on his mortgage. Whilst he also would not receive interest on his savings, the savings rate he was receiving was less than the mortgage interest being charged therefore this made sense.
Key figures:
Property value: £2,200,000
Loan amount: £1,300,000
LTV: 60%
Repayment type: Part interest only
Product type: 2 year fixed
Interest rate: 1.65%