It is probably a bit of push to describe your house buying arrangement as a strategy, as you may not have thought of it like that, but ultimately you do have a strategy of sorts, and this normally involves a mortgage.

When you decide to buy a house and you want to or need to use a mortgage, you will have plenty of choices, including how long to run the mortgage (e.g. 20 years? 25 years?), which lender to have the mortgage with, how and when to repay it, and whether to fix the interest rate or let it run on a variable rate. Should you overpay at times? Do you use an inheritance to reduce it, should you be lucky enough to receive an inheritance? These and many other factors will come into play at various stages.

One way or another, by design or otherwise, you will have a strategic approach to this.

This is where the offset mortgage option may be of some value to you, in the right circumstances.

It is only with the benefit of hindsight, probably many years (even decades) in the future you will be able to look back and judge how efficiently you ran the mortgage and how much it cost you versus how much it could have cost you. Most people wont bother to do this, because by the time you have paid off your mortgage it is too late to go back and do something different.

An offset mortgage is a way now, to try and reduce your ongoing costs, or to “make money” from your mortgage.

The idea is simple. You have a mortgage account as normal, but alongside this you have another account.

That other account holds a positive cash balance, but has no interest attached to it. So, you get 0% in effect as a positive return.

However, the value of that account is used to reduce the balance of your mortgage on any given day.

Nearly always, the interest cost on a mortgage is more than the interest return on a positive balance, savings-type account.

If your savings-type account, running alongside the mortgage reduces your mortgage balance, then the amount of interest you are being charged on your mortgage is reduced.

And that is a great way to accelerate the repayment of your mo0rtgage, and/or save mortgage costs.

To illustrate, imagine you have a £250,000 mortgage with an annual interest rate of 3.5%. But you also have £50,000 in savings, and you don’t want to use that to pay off part of your mortgage in one go.

With an offset, you can deposit this is a savings account alongside the mortgage and for every day it is in there, it reduces the balance of the mortgage.

The £50,000 effectively is gaining a 3.5% interest, probably higher than the amount you would get in a normal savings account. If it is 1% more, then this effectively gains you £500 per year.

There are many variations on the offset mortgages that are available, and these can include ones where you keep paying the normal monthly mortgage payment and reduce your mortgage much quicker, others where you pay your salary into the offset account, and have access to your income as normal, but each day the positive account balance created by your salary reduces your mortgage balance, and other options along similar lines.

The takeaway is that the offset option in some way will enable you to use positive account balances to help reduce your overall mortgage cost.