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Offset v Fixed+Savings Help
Brighty
Posts: 755 Forumite
Hi guys
Trying to decide between an offset and a fixed rate+savings and have used the calculator, but not sure it's giving me the full picture.
I've plugged in my numbers
104k owed over 25 yrs
3.29% 4 yr fix with £99 fee with nationwide
3.69% offset with £500 fee with first direct
Savings of 15k at 2% at basic rate tax
Overpayment/monthly saving of £500
Calculator comes out with the offset ahead by £850 over the 4 years of the fix deal, but i think this assumes my £500 a month would be put into the 2% savings, whereas what i would intend to do is put this into the nationwide mortgage as an overpayment. I assume this would put the fix way ahead of the offset but am unsure. Any ideas on the numbers?
Cheers
Brighty
Trying to decide between an offset and a fixed rate+savings and have used the calculator, but not sure it's giving me the full picture.
I've plugged in my numbers
104k owed over 25 yrs
3.29% 4 yr fix with £99 fee with nationwide
3.69% offset with £500 fee with first direct
Savings of 15k at 2% at basic rate tax
Overpayment/monthly saving of £500
Calculator comes out with the offset ahead by £850 over the 4 years of the fix deal, but i think this assumes my £500 a month would be put into the 2% savings, whereas what i would intend to do is put this into the nationwide mortgage as an overpayment. I assume this would put the fix way ahead of the offset but am unsure. Any ideas on the numbers?
Cheers
Brighty
0
Comments
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How big is the mortgage?0
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0
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The offset mortgage calculator id not that good too many errors last time I looked.
the equation starts as
M : mortgage debt
S : standard rate
O : offset rate
C : savings capital
N : net savings rate
(M*S) - (C*N) == (M-C)*O
which simplified is
C(O-N) == M(O-S)
which become a simple ratio check of the mortgage saving againt the rate diferential
C/M == (O-S)/(O-N)
For your simple case just compare the two mortgages as normal overpayments on each(overpayment or offset is the same impact on interest costs).
if you want to keep the savings with the nation wide just do a 4y compound or more coorectly add the interest to the monthly payment so the savings stay the same in both cases.
Add the fees set the payment the same(add the savings interest to the nation wide) see whats left after 4 years.
I use a simple calculator to do this
http://www.whatsthecost.com/mortgage.aspx0
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