Offset Information
How would you like to make your savings work even better for you?
Traditionally savings accounts are kept separate from your mortgage. If you put them together in a Hinckley and Rugby Offset Mortgage you could save money and reduce the term of your mortgage.
Making your savings work even better for you is easy – the amount of your savings is offset against your mortgage and over the life of your mortgage we only charge you interest on the difference. By offsetting you can avoid paying tax on the interest you would earn on your savings.
A Hinckley and Rugby Offset Mortgage is designed to save you money over the long term. Your monthly payments will not be automatically reduced by offsetting. This is because your savings balance could vary each month meaning your mortgage payments would also have to change each month, making budgeting complex.
Because your monthly payments remain the same you are effectively overpaying on your mortgage every single month, reducing your mortgage balance and leading in turn to a reduction in the amount of interest you will be charged over the mortgage term.
Example
For instance, Mr and Mrs Jones have a £100,000 mortgage but also have savings of £10,000 which they want to invest.
If they took out a Hinckley and Rugby Offset Mortgage, interest would be effectively charged on just £90,000 rather than the full £100,000, which may help them to pay off their mortgage earlier and could therefore save them money.
Assuming that Mr and Mrs Jones make no payments or withdrawals from their Offset savings account, with a repayment Hinckley and Rugby Offset Mortgage they could potentially reduce their mortgage term of 25 years by up to three years and nine months and save themselves approximately £28,000.
If Mr and Mrs Jones have a 25-year term interest-only Hinckley and Rugby Offset Mortgage, they could save themselves approximately £33,000.
The example can be shown in graphical form as follows:
The figures in the example assume a continual current interest rate of 6.0%.
What if I need my savings for something else?
The Hinckley and Rugby Offset Mortgage is totally flexible. You can access your savings at any time.
Seven working days are required before money can be paid out against a cheque receipt. The minimum withdrawal is £250 and can be made by cheque (which can be made payable to third parties, if required) or by BACS, made payable to the bank account from which your monthly mortgage payment is paid.
The minimum balance is £250 - if you wish to go below this figure you can do so, but the balance must be taken down to nil.
You can add to your savings at any time as long as you do not exceed the balance of your mortgage.
The Hinckley and Rugby Offset Savings account has been kept as simple as possible so it does not offer on-line banking or current account facilities but it is still quick and easy to gain access to your savings and to arrange telephone BACS transfers from your savings account directly into your bank account, without charges.
Please see our Offset Savings account leaflet for full details of the savings account.
Will I earn interest on my savings?
The linking of mortgage and offset savings can be very tax efficient because no actual interest is paid on your savings. Instead, mortgage interest is only charged on the net balance of your accounts. This means that you receive a notional interest credit on your savings equivalent to the full gross rate of interest charged on your mortgage, without any tax being deducted.
For example, a notional interest credit at 6.0% would be equivalent to a gross savings rate of 10.0% for a higher rate taxpayer and 7.5% for a standard rate taxpayer.
What happens when there is an Offset Mortgage rate change?
When there is a change in the interest rate applicable to your mortgage, your monthly payments will be recalculated based on your reduced mortgage balance to ensure your mortgage will be paid off over the term agreed originally. At this time, your monthly payments could reduce.
Should you wish to pay off your mortgage sooner you can contact us to arrange to maintain your monthly payments at a higher level or to ask us to reduce the original contractual mortgage term.
WE HAVE NOT GIVEN YOU ANY ADVICE OR RECOMMENDATION IN RESPECT OF THIS PRODUCT OR IN RESPECT OF YOUR SAVINGS OR INVESTMENTS. WE HAVE GIVEN YOU INFORMATION ONLY ON THIS MORTGAGE PRODUCT AND RECOMMEND THAT YOU TAKE SPECIALIST FINANCIAL ADVICE NOW OR IN THE EVENT OF ANY CHANGE IN YOUR CIRCUMSTANCES DURING THE LIFE OF THE MORTGAGE.