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    • osaddict
    • By osaddict 10th Jul 17, 2:08 PM
    • 280Posts
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    osaddict
    Offset (and Scottish Widows)
    • #1
    • 10th Jul 17, 2:08 PM
    Offset (and Scottish Widows) 10th Jul 17 at 2:08 PM
    Hey guys,
    A broker has recommended a mortgage to me, which has an offset facility. As I have some savings this looks like a handy addition. It seems that this mortgage *doesn't* allow for regular overpayments, just one lump sum per year. The question I have directly here:

    * If I were to 'overpay' the mortgage by 1k vs put 1k into the offset account - is the result the same? - Assuming in both cases I told the lender the goal was to keep existing monthly payments the same, so, reduce the term.

    I am lead to believe it is but I don't entirely follow the logic of this.

    On a side note - my broker has recommended a Scottish Widows 2 year fix, with offset facility. This seems to suit me well and has a good rate. Anyone on here got any experience of this product?

    Thanks!
Page 1
    • amnblog
    • By amnblog 10th Jul 17, 2:12 PM
    • 9,752 Posts
    • 3,768 Thanks
    amnblog
    • #2
    • 10th Jul 17, 2:12 PM
    • #2
    • 10th Jul 17, 2:12 PM
    If the desired result is to pay the mortgage off quicker, then yes, the result is the same whether you repay the £1,000 off of the capital or offset it.

    Offsetting it means that the lender is treating the mortgage as if that £1,000 were repaid from an interest calculation point of view.

    This is a good product, but only someone who knows your case can say if it is right for you.

    If you don't follow the logic of what your broker is saying, ask them to explain it again.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • getmore4less
    • By getmore4less 10th Jul 17, 2:27 PM
    • 29,801 Posts
    • 17,818 Thanks
    getmore4less
    • #3
    • 10th Jul 17, 2:27 PM
    • #3
    • 10th Jul 17, 2:27 PM
    Offset allow the equivalent of unlimited overpayment with a borrow back facility.

    The effect on cost and term are the same as overpayment as long as you don't spend/withdraw the money.

    With both you are just borrowing less by the same amount so works out the same.
    • osaddict
    • By osaddict 10th Jul 17, 2:49 PM
    • 280 Posts
    • 47 Thanks
    osaddict
    • #4
    • 10th Jul 17, 2:49 PM
    • #4
    • 10th Jul 17, 2:49 PM
    If I take my current mortgage situation, If I make a 5k overpayment then that's it, it's gone. I can't claw it back.

    If I'm under the offset route, and a 2 year fix.. If I put the 5k in the offset, don't touch it.. What happens at the end of the fix, when presumably I move to another provider?? The offset account is just an un-associated account.
    • amnblog
    • By amnblog 10th Jul 17, 3:04 PM
    • 9,752 Posts
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    amnblog
    • #5
    • 10th Jul 17, 3:04 PM
    • #5
    • 10th Jul 17, 3:04 PM
    If I take my current mortgage situation, If I make a 5k overpayment then that's it, it's gone. I can't claw it back.

    If I'm under the offset route, and a 2 year fix.. If I put the 5k in the offset, don't touch it.. What happens at the end of the fix, when presumably I move to another provider?? The offset account is just an un-associated account.
    Originally posted by osaddict
    If you move lender, you can close the offset account and put the balance into the pot to redeem what you have outstanding (by then, there will be no early repayment penalties).
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • osaddict
    • By osaddict 10th Jul 17, 3:57 PM
    • 280 Posts
    • 47 Thanks
    osaddict
    • #6
    • 10th Jul 17, 3:57 PM
    • #6
    • 10th Jul 17, 3:57 PM
    Thanks for the reply. That's helpful... so under the following scenario:

    1. Start an offset with 50k, pay in 20k into offset account over life of 2 year fix. Move offset to a new provider. Move 50k into a different savings account.

    2. Start a typical fix, pay in 20k as over payments, for simplicity assume amounts and dates are the same as above.

    Would I be correct in saying that 1. would be the better situation - if you could afford it, as you'd be 'over paying' the same, 20k, but the 70k sitting there would mean you're overpaying on a smaller pot?
    • amnblog
    • By amnblog 10th Jul 17, 4:00 PM
    • 9,752 Posts
    • 3,768 Thanks
    amnblog
    • #7
    • 10th Jul 17, 4:00 PM
    • #7
    • 10th Jul 17, 4:00 PM
    Now you've lost me.

    Are you saying you have £50K to offset day one?
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • osaddict
    • By osaddict 10th Jul 17, 4:29 PM
    • 280 Posts
    • 47 Thanks
    osaddict
    • #8
    • 10th Jul 17, 4:29 PM
    • #8
    • 10th Jul 17, 4:29 PM
    As an example, yes. So view this as say someone's 'rainy day fund' or something... so you'd want to keep it at the end of the fix and not dump it onto the mortgage at the end.
    • amnblog
    • By amnblog 10th Jul 17, 4:33 PM
    • 9,752 Posts
    • 3,768 Thanks
    amnblog
    • #9
    • 10th Jul 17, 4:33 PM
    • #9
    • 10th Jul 17, 4:33 PM
    If you are saying, can I offset £50K and put in somewhere else (not towards the mortgage) later - yes you can.

    That's the point.

    A £50,000 over payment would need to be borrowed back if you want it.

    £50,000 offset is still your money.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • osaddict
    • By osaddict 10th Jul 17, 4:58 PM
    • 280 Posts
    • 47 Thanks
    osaddict
    So in my y two situations above, I have overpaid £20k on the mortgage over two years... But in the first scenario I have had 50k sitting there reducing the size I have to pay interest on. So, it works out better. Well, by my logic anyway.
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