Tax Tip 13: How to reduce mortgage payments if you are a sole trader

If you are a sole trader many mortgage providers will now give you a business offset mortgage that allows you to offset the money in your business bank account against your residential mortgage.

The main benefit of this is that your business current account effectively earns tax free interest at the mortgage interest rate (say 4.5%). And this in turn means that

–         The total lifetime interest cost of your mortgage will be reduced

–         And your mortgage will be paid off early

For example, offsetting an average of £30,000 in a business bank account against a 25 year, £100,000 mortgage with a 6% interest rate will reduce the overall lifetime mortgage cost by £40,000 and pay off the mortgage 8 years early.

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