Hello and welcome back to another five minute Friday here on meaningful money. It's great to have you with me

See all your smiling faces just joking. I can't see you I can see my own smiling face on the monitor there. There. So Matt asked me a question about offset mortgages and the benefits of those versus taking

the money that you're perhaps

offsetting against the mortgage and investing it instead. So let's stick

five minutes on the clock down here. Say a quick thank you to my friends at

7 I am for sponsoring the show down here and let's dive in so a quick reminder about how offset

mortgages work I believe these originated in Australia but I might be wrong

about that the idea of an offset mortgage is that you own a house and on that house you have a mortgage which will not be for the full value of the house.

I think it's Binday in Penzance because there's lorries coming up and down the street and parking right

outside my window with their engine on. I think that's better. So you have a house with a mortgage on it and if you have an offset mortgage

Those things come with a bank account or they're linked to a bank account and any money you have inside that bank account reduces effectively the amount of money that you owe on the mortgage.

So if you have a hundred thousand pound mortgage and ten thousand000 in an offset account, you're only paying interest, crucially,

on the difference between the two, which is $90,000.

So thinking about that, the money inside the bank bank account which is offsetting the mortgage

is providing you with a guaranteed return. How much well whatever the interest rate

on your mortgage is you are essentially saving that so it's a guaranteed return of let's say 2.5% if that's

the rate you're paying on your mortgage but because you're not actually gaining that

two and a half percent you're just saving it on interest charges, that return, so to speak, is free of income

tax, capital gains tax, all that sort of stuff.

So it's pretty valuable, even with interest rates as low as they are.

Offset mortgages are a great place to hold your emergency fund

because essentially that money is just parked,

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