offset mortgage intrest?

[tali122]

offset mortgages i assume pay no intrest on savings or currents accounts linked to the mortgage - but then the banks claim since you pay no tax on no intrest you gain?? - but how can this be ?- you're getting NOTHING in intrest so how can you gain?, maybe im misintreprted it , some clarification would be welcome, its a bit like me not being able to afford a ferrari (which i cant anyway)and then been told that ive saved �100k as a result!

[dzug]

You gain because you pay less interest on your mortgage. The amount your mortgage interest is calculated on is reduced by the amount of your savings.

So there is lets say �5K of the mortgage that you are not paying interest on because your savings offset it. If you were getting interest on this �5K, it would be at a lower rate than the mortgage interest rate for a start, and you would be paying tax on it reducing it still further.

[stevie21]

I think the two benefits are that on the mortgage, any money owing will be charged at, say 6% interest : whatever the figure is I'd say it should be more than you'd earn in interest in savings.
Instead of paying 6% interest, your savings save you paying this 6%. In a sense, this is akin to earning that 6% on savings.

Secondly, the 6% that you're not paying in interest to the bank - if thought in terms of being akin to earning 6%, is tax free. With normal savings accounts, if the bank advertises that they'll pay you 6%, it's 6% gross and you actually receive 4/5ths of this. 4.8% if you're a taxpayer.

thus, 1. your savings get a higher rate.
2. it's tax free.
make sense?