But while the super-rich are best positioned to ride out the mortgage crisis, even the more modestly wealthy are finding ways to stay one step ahead.

For example, with an offset mortgage, the money in a savings or checking account is deducted from the mortgage balance, reducing the amount of interest charged each month.

Savings interest is usually subject to income tax. However, with an offset mortgage you don’t pay taxes because you don’t earn interest in the traditional way, but rather offset your savings against your mortgage balance.

“People who have large cash inflows from asset sales or bonuses and want to reduce their interest burden immediately prefer offset mortgages,” says Mr Barnett. “It can also be tax efficient.”

Many moderately wealthy customers also choose tailored mortgages that combine different products, according to Welch.

“Some people choose a third with a tracker, a third with interest only or a third with compensation,” he says. “People who borrow more than a million have more choice and can develop tailored solutions to reduce their debt servicing costs.”

Megan Rimmer, a licensed financial planner at Quilter, says a client of hers decided to pay off part of his mortgage when his fixed-rate contract ended. Given the significantly higher interest rates, the customer paid back enough to ensure his monthly payments remained the same. “They had cash on hand, so there were no tax implications for using investments,” she says.

Older, wealthy homeowners have to pull even more levers.

Another of Mr Welch’s clients, a Cotswolds-based engineering contractor in his 70s, released £2 million of equity from his £4 million home after paying off most of the mortgage.

Mr Welch says: “One million pounds was invested in a private bank to generate income to cover interest payments and the rest went to them to enjoy.”

Source : www.telegraph.co.uk

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