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    • Thrugelmir
    • By Thrugelmir 7th Oct 10, 2:04 PM
    • 49,007 Posts
    • 40,800 Thanks
    Thrugelmir
    • #2
    • 7th Oct 10, 2:04 PM
    • #2
    • 7th Oct 10, 2:04 PM
    Is there such as product as a buy to let offset mortgage?
    Originally posted by adam1982
    Why do want an offset facility on a BTL mortgage?

    Cheaper to borrow less money at the outset.
    A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against a rainy day.
  • adam1982
    • #3
    • 7th Oct 10, 2:13 PM
    • #3
    • 7th Oct 10, 2:13 PM
    Hi,

    Because i have a property that wont sell at the moment and i currently have 82k outstanding mortgage. I want to pay off a further 40k and then have the remaining 40k on an offset buy to let. I would then keep another 40k in the offset account rather than tie it up at the moment.

    If you think im talking 'b******s just say!
    Last edited by adam1982; 07-10-2010 at 2:18 PM.
    • Thrugelmir
    • By Thrugelmir 7th Oct 10, 2:52 PM
    • 49,007 Posts
    • 40,800 Thanks
    Thrugelmir
    • #4
    • 7th Oct 10, 2:52 PM
    • #4
    • 7th Oct 10, 2:52 PM
    BTL mortgages come with an arrangement fee of 2% - 3.5% of the amount advanced. Or in the case of the post Office a flat 1,500.

    You may find that BTL lenders won't be interested in a 40k advance. As there's insufficent profit for the trouble of lending. Higher initial fees discourage applications.
    A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against a rainy day.
  • adam1982
    • #5
    • 7th Oct 10, 2:54 PM
    • #5
    • 7th Oct 10, 2:54 PM
    good point.

    If i did want to look into this further is an offset buy to let mortgage actually possible?
    • Thrugelmir
    • By Thrugelmir 7th Oct 10, 3:27 PM
    • 49,007 Posts
    • 40,800 Thanks
    Thrugelmir
    • #6
    • 7th Oct 10, 3:27 PM
    • #6
    • 7th Oct 10, 3:27 PM
    good point.

    If i did want to look into this further is an offset buy to let mortgage actually possible?
    Originally posted by adam1982
    Not a huge number of lenders in the market.

    Mortgage Works, Paragon, Post Office to name a few.

    At least give you a feel for current product options.
    A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against a rainy day.
  • luckyfool
    • #7
    • 7th Oct 10, 3:30 PM
    • #7
    • 7th Oct 10, 3:30 PM
    I'm not aware of any BTL lenders offering offset products, as there is virtually zero demand for it. Interest costs on the Buy to Let can be offset against the rental income, so for most people it is counterproductive to offset savings against the mortgage debt as it may increase any tax bill. If you want to be able to pay the lot off I would take a deal with no redemption penalties, or alternatively a good 2 yr fixed rate (or whatever type of deal suits) and just stick it in savings and pay the mortgage off at the end of the fixed rate.
  • adam1982
    • #8
    • 7th Oct 10, 3:38 PM
    • #8
    • 7th Oct 10, 3:38 PM
    thanks for the replies guys!

    I think based on your advice the interest only option would work out best.

    One thing i am unsure of is if we have a buy to let mortgage does this effect how much we can borrow for our lived in house mortgage or do they treat it as a separate thing?
  • luckyfool
    • #9
    • 7th Oct 10, 4:46 PM
    • #9
    • 7th Oct 10, 4:46 PM
    Completely separate as long as it is self financing.
    • Thrugelmir
    • By Thrugelmir 7th Oct 10, 5:16 PM
    • 49,007 Posts
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    Thrugelmir
    Completely separate as long as it is self financing.
    Originally posted by luckyfool
    Paragon use a 7% interest rate and a 130% of rental income on an interest only basis to determine this.

    As far as I am aware highest in market place so a useful benchmark.
    A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against a rainy day.
    • bwlv1
    • By bwlv1 22nd Sep 12, 10:55 PM
    • 299 Posts
    • 135 Thanks
    bwlv1
    hi all, hope its ok to comment on such an old thread but you might be able to help me,

    regarding an offset b2l mortgage, for example clydesdale banks current offering with no early repayment penalties etc, could this be a better option than a fixed rate that carries erc's, even if i dont offset anything against it it may save me if i renovate and wish to sell quick.

    thanks for any replies
  • Gingerbullet
    Reigniting the offset & buy to let question
    My husband and I currently have an offset on our home mortgage and as we have savings, have found it a great way to reduce interest on the loan. We're planning to live abroad for a couple of years and let the flat while we're away.
    We'll be leaving our savings here so would like to continue using them to reduce mortgage interest. We'll need to convert to a buy-to-let while it's rented out.
    Does anyone know of a lender who offers a buy-to-let offset mortgage? Thanks in advance.
    • kingstreet
    • By kingstreet 29th May 14, 1:53 PM
    • 29,277 Posts
    • 15,527 Thanks
    kingstreet
    My husband and I currently have an offset on our home mortgage and as we have savings, have found it a great way to reduce interest on the loan. We're planning to live abroad for a couple of years and let the flat while we're away.
    We'll be leaving our savings here so would like to continue using them to reduce mortgage interest. We'll need to convert to a buy-to-let while it's rented out.
    Does anyone know of a lender who offers a buy-to-let offset mortgage? Thanks in advance.
    Originally posted by Gingerbullet
    Ask your current lender if it will grant consent to let.

    As mentioned earlier, mortgage interest is an allowable expense against the rental income, so offsetting means you will end up paying more tax on the surplus rent after expenses.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • supraman
    As mentioned earlier, mortgage interest is an allowable expense against the rental income, so offsetting means you will end up paying more tax on the surplus rent after expenses.
    Originally posted by kingstreet
    Can you elaborate on this please?


    I will give an example in the hope that it might identify any misunderstanding that I have:

    Scenario 1: If I have a buy-to-let mortgage of 50,000 at a rate of 5% and an annual rental income of 6,000 then I have:


    Interest: 5% x 50,000 = 2,500
    Gross Profit: 6,000 - 2,500 = 3,500
    Tax: 40% x 3,500 = 1,400
    Net Profit: 3,500 - 1,400 = 2,100


    Scenario 2: However, if I am able to offset 30,000 and effectively reduce the mortgage to 20,000 then I have:


    Interest: 5% x 20,000 = 1,000
    Gross Profit: 6,000 - 1,000 = 5,000
    Tax: 40% x 5,000 = 2,000
    Net Profit: 5,000 - 2,000 = 3,000


    So, yes, I pay more tax, but only because I'm making more profit, which seems like a good thing. Am I missing something?


    By the way, I realise that I could simply increase my deposit by 30,000 on a non-offset product, but I want to keep the money available for investing in other properties.


    I also realise that in Scenario 1, the 30,000 could be invested in a bank account that pays interest, which would reduce the advantage of Scenario 2. However, the interest rate would be lower and I would have to pay 40% tax on that interest.
    • kingstreet
    • By kingstreet 2nd Jun 14, 6:55 PM
    • 29,277 Posts
    • 15,527 Thanks
    kingstreet
    No, you're missing nothing.

    There are no offset BTL products though.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • supraman
    There are no offset BTL products though.
    Originally posted by kingstreet
    Well actually the Clydesdale Bank offer one. I was just about to apply for it when the adviser explained that, rather than reducing the interest, your monthly payment stays the same, but any excess becomes a capital repayment, even with an interest-only mortgage.


    I was very disappointed as this seems to negate the benefit of offsetting your savings until you have a need for the money, most likely to buy another property.
    • kingstreet
    • By kingstreet 3rd Jun 14, 7:54 AM
    • 29,277 Posts
    • 15,527 Thanks
    kingstreet
    That's not my definition of an offset mortgage. That's just a product which allows overpayments, which most products do anyway.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • supraman
    That's not my definition of an offset mortgage. That's just a product which allows overpayments, which most products do anyway.
    Originally posted by kingstreet
    I understand what you're saying and I agree with you to some extent.


    I did eventually take out 3 buy-to-let offset mortgages with the Clydesdale Bank and they're working out pretty well for me. I decided that the subtle distinction between reducing the monthly payment or keeping the same payment but apportioning some of it to capital repayment wasn't as big a deal as I'd first thought. In particular, my understanding is that it's possible to request that this "overpayment" be refunded at any time, although I think it does require the payment of a 40 CHAPS fee.


    So, as long as it continues to be possible to get the overpayments back, the Clydesdale Bank offering is effectively a true buy-to-let offset product and I'm not aware of anybody else in the market offering a similar product.


    By the way, I have 7 different bank accounts, all of which offset against the 3 mortgage accounts. It's also possible to be quite specific about which bank accounts offset against which mortgage accounts.
    • kingstreet
    • By kingstreet 24th May 15, 4:16 PM
    • 29,277 Posts
    • 15,527 Thanks
    kingstreet
    Ten more days and we could have had a cake, candles and jellly and ice-cream.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • supraman
    Ten more days and we could have had a cake, candles and jellly and ice-cream.
    Originally posted by kingstreet
    Brilliant!


    Errr, yeah, sorry about the delay in replying. I only revisited the site today and saw your message for the first time.
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