Home Buyers Guide

Chapter 6: Choosing the Right Mortgage

5. Offset Mortgage

Offset Mortgages link a customer’s mortgage with their current and savings accounts. The money in your current and savings accounts are 'offset' against their mortgage balance, which reduces the interest they pay on your mortgage.

For example, if you have a €200,000 mortgage, €3,000 in your current account and €9,000 in your savings account, by offsetting your savings and current account, you would only pay interest on €188,000.

Advantages of an Offset Mortgage:

• You could save money on interest payments

• Potential to reduce your mortgage term

• It is a tax efficient way to use your savings. Because you don't actually receive interest on your savings (instead you pay less interest on your mortgage), you don't pay DIRT tax on them.

Disadvantages of an Offset Mortgage:

• You have to have your current and savings account with your mortgage lender.

• There are a limited number of lenders offering offset mortgages in Ireland.

• The interest rate charged is usually higher than you would pay on a standard mortgage.

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