Offset/Non-Offset comparison

youreds · 18 November 2005 at 1:47PM

I've read with great interest the Sticky thread on Offset mortgages & whether the numbers add up or not.
I'm currently on a Standard Life 0.75% discounted Freestyle Offset which ends in January, at which point we'll be switching.

With my Mortgage Man coming a week on monday to sort out our next mortgage I've spent the last week doing a lot of number crunching, to see if offset is still the way to go.

I found a pretty good spreadsheet template for mortgage amortization on the Microsoft Office site & have plugged my numbers into this along with the best offset rate I can find currently (YBS @ BR + 0.45%). I have also added some columns & formulae for savings into a copy of the same spreadsheet, along with the best discounted tracker currently (4.19%), the key column I've called 'breakeven' this is the point when savings equal the mortgage outstanding, there are also columns for net interest i.e. interest charged - interest earned, also you can add regular or one off deposits which is handy in my case as I have a SAYE scheme maturing in Nov '06 which will yield at least £9500 (more if the shares pick up!). I think I have got the formula for calculating the savings interest right, if not I'm sure a MSEer will put me right & I'll alter it accordingly. The only thing I can see wrong with the spreasheets is that mortgage interest is calculated monthly & not daily.

With my numbers - £84000 over 20 years, with £20k savings, the non-offset certainly seems the way to go for the first 2 years with my breakeven figure down to £56k with £5207 interest paid, compared the the offset which has me down to just shy of £57k, but over £6k interest paid. These figures include me putting the difference between monthly payments into my savings. The reason I've looked at 2 years, is because most discount deals are for 2 years, but any other figures can be plugged in.

I'd appreciate it if some spreadsheet guru could have a quick look & see if all the figures stack up. Should I have it right I'm sure these will be of use to other MSEers out there.

Click here for spreadsheets

Youreds!

Joannaclaire · 18 November 2005 at 4:29PM

Interesting doing the speadsheets - I might have a go, as we're considering an offset with Abbey vs a flexible tracker (2 yrs @ base -.11% with A&L) and it would be handy to work out the better deal.

You've probably seen it already, but Abbey has one for base =.49 for life with free valuation and legals if you are remortgaging, or £250 towards legals plus valuation up to £1100 if you're an FTB.

youreds · 19 November 2005 at 10:07AM

Joannaclaire wrote:

Interesting doing the speadsheets - I might have a go, as we're considering an offset with Abbey vs a flexible tracker (2 yrs @ base -.11% with A&L) and it would be handy to work out the better deal.

You've probably seen it already, but Abbey has one for base =.49 for life with free valuation and legals if you are remortgaging, or £250 towards legals plus valuation up to £1100 if you're an FTB.

Abbey deal looks good, but I think YBS must just pip it at BOE + .44% for life. These 2 must be the best Offsets out there currently. Please let me know what results you get with the spreadsheets, usual disclaimers apply though, I'm not an IFA etc. etc. I'd also be grateful if one of the resident mortgage men on here could cast a glance over them & advice if they are accurate or not.

Cheers

Youreds!

Joannaclaire · 21 November 2005 at 3:04PM

Finally got a chance to sit down and do the spreadsheets. They work fine and my excel and maths skills are not exactly expert. Thanks for those spreadsheets - really useful.

Looked at the abbey offset at 4.99 vs the A&Lnon-offset tracker mortgage at 4.37. Even at a higher interest rate, the offset wins hands down and works out at paying the mortgage off much earlier (six years instead of seven and a bit with the non offset if we keep saving at the current rate). Plus no extra fees for remortgaging every couple of years if we go for a lifetime tracker.

KTF · 21 November 2005 at 4:15PM

I am a bit confused. Shouldnt the spreadsheet named offsetschedule take into the savings figures as it looks like a straight repayment calculator to me so how does it calculate the interest saved by linking it to your savings?

Robert_Sterling_3 · 21 November 2005 at 5:04PM

youreds wrote:

With my Mortgage Man coming a week on monday to sort out our next mortgage Youreds!

You seem to be able to pick a mortgage without the aid of your mortgage man.

If he does not charge and he suggest a better mortgage than you would have chosen yourself ... Great.

If he charges less than you would save by taking his recommendation instead of your choice ... Great.

youreds · 29 November 2005 at 10:46AM

KTF wrote:

I am a bit confused. Shouldnt the spreadsheet named offsetschedule take into the savings figures as it looks like a straight repayment calculator to me so how does it calculate the interest saved by linking it to your savings?

You are correct, it is a the standard repayment calculator, but my £20k savings are entered as an overpayment in month 1, netting down the amount to £64k borrowed, but the monthly payments are the same as for £84k.

Youreds!

youreds · 29 November 2005 at 11:04AM

Robert_Sterling wrote:

You seem to be able to pick a mortgage without the aid of your mortgage man.

If he does not charge and he suggest a better mortgage than you would have chosen yourself ... Great.

If he charges less than you would save by taking his recommendation instead of your choice ... Great.

It certainly was interesting, he basically found the best tracker & fixed deals with little or no fees. It's all well & good getting a rate of around 4.3-4.5% for 2 years, but the £500 odd fees wipe out the savings. Winners for me are Halifax @ BOEBR + .49% with no fees & all legals & valuation paid, almost neck & neck are Nationwide @ +.44% with a £99 admin fee & legals & valuation paid.

Youreds!

KTF · 29 November 2005 at 11:08AM

Are you sure that the Nationwide doesnt have a product fee? Its listed as having one on their website.

youreds · 29 November 2005 at 12:20PM

KTF wrote:

Are you sure that the Nationwide doesnt have a product fee? Its listed as having one on their website.

It depends which product you go for, some do & some don't, are you looking at http://www.nationwide.co.uk/mortgage/remortgage/rates.htm ?
With all of their products you have a choice of with or without fees, with the difference in rates. The one I'm looking at is their Tracker BR+ .44% with no fee or with fee @ + .04%.I'm posting from work so don't have the Key facts illustrations he gave me to get the exact figures. Also bear in mind IFAs can get deals that Joe Public can't get & the other way round too, before reading Martin's mortgage article I didn't realise YBS, Egg & HSBC aren't available through IFAs at present.

Youreds!

KTF · 29 November 2005 at 12:22PM

Ah, yes. I forgot that you could not pay a fee but take a higher rate with Nationwide.

Offset/Non-Offset comparison

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