Offset Mortgage

Allows you to set-off the balance of your mortgage against any money you have in your current account (held with the same lender). You pay interest on the net amount, so your mortgage, in theory at least, should repay earlier than expected.

The concept took off in the early nineties, with two basic types of offset deal. The first offset mortgages launched in the UK were current account mortgages (CAMs), linking a homeowner's current account with the mortgage. The second type of offset is where the deposits are kept in separate accounts or 'pots', but linked for the purposes of interest calculation. Both of these allow borrowers to pay interest only on the mortgage, minus savings.

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