Looking for a reason to offset your mortgage? Building society offers £1,000 freebie to borrowers, but only for the next two weeks
- Yorkshire BS offshoot Accord Mortgages offers offset borrowers £1,000 reward
- Offsets set savings against mortgage and you only pay interest on balance
- Offer of a definite £1,000 only runs until Friday 20 January
Accord Mortgages, part of Yorkshire Building Society, is giving away £1,000 to every borrower who chooses to take an offset mortgage in the next two weeks.
The lender, which offers loans through mortgage brokers, said the limited offer until Firday 20 January is intended to raise awareness of the benefits of offsetting your mortgage - especially when interest rates are so low.
An offset mortgage links your savings account with your mortgage debt and effectively allows you to pay less interest on your mortgage by forgoing interest on your savings.
Offsets can be an appealing option for borrowers in the current low rate environment
You don't earn interest on the savings balance at all, but you only pay interest on the remainder of your mortgage balance.
So if you had a £100,000 mortgage, for example, and £50,000 in savings, you would only pay interest on £50,000. The effective rate of return on your savings is that same as the interest rate on your mortgage.
To promote this virtue, Accord will put £1,000 into a linked savings account for all borrowers taking out new offset mortgages over the time period.
Borrowers should be aware, however, that this flexibility comes at a price, with offset rates usually higher than those on standard mortgages.
Accord's David Robinson said: 'Offsets are an appealing option for borrowers in the current low rate environment.
'The more money a borrower has in their savings account the less interest they pay on their mortgage, enabling them to reduce monthly repayments or pay their mortgage off early.'
Accord's offset mortgages are available for both house purchase and remortgage customers and include a choice of home loans with no up-front fees.
Borrowers can opt for a two-year offset at either 2.14 per cent at 75 per cent loan-to-value or at 2.24 per cent at 80 per cent LTV. Both mortgages are fee-free and come with free standard valuation, plus the £1,000 cashback.
For those looking to fix for longer there is a choice of five-year offsets available, including a 2.49 per cent mortgage at 75 per cent LTV which comes with a £995 fee.
Andrew Montlake, of Coreco mortgage brokers, said offsets should be particularly attractive for those with savings, bonuses or the self-employed who can have a bigger build-up of capital to offset.
He added: 'They can save thousands of pounds worth of interest or take years off their loan term by choosing an offset deal.
'Unfortunately, they're not so well understood and are still an underused offering which can bring enormous benefits to those who can use such a product effectively.'
Scottish Widows is currently offering a two-year offset mortgage up to 75 per cent LTV at a rate of 1.59 per cent, which comes with a product fee of £1,499, a valuation fee of £465 and additional fees at £25.
Accord also offers a 1.74 per cent offset deal fixed for two years up to 80 per cent LTV with a £995 product fee and valuation fees at £390. This offer doesn't come with the cashback however.
Rachel Springall, of personal finance site Moneyfacts, said: 'Cashback offers and other freebies can be enticing but borrowers would be wise to not lose sight of the overall true cost of any mortgage deal which will include the rate, fees and any incentive. The best deal will come down to true cost and a borrower's financial circumstances.'
You can use This is Money's true cost mortgage calculator to compare mortgages including fees.
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