If you've a savings account with a lender and then decide to have, for example, an interest-only type of mortgage with the same lender, you could be quids-in!
Why? Because you can opt out of the interest payable to you via your savings account and, instead, reduce the amount of your mortgage loan on which interest is payable. Understand? No?
Right, pay attention. Say my mortgage loan is £100,000. And I have a savings account with the same lender of £40,000.
Taking £40,000 away from £100,000 leaves a figure of £60,000. So, instead of charging interest on the £100,000 mortgage, the lender charges interest on only £60,000.
That's an offset mortgage! In reality, it can be even more complicated than that, but perhaps that's for another time.
