first direct offset mortgage question

purplepatch

I had a conversation with fd this morning and despite him trying to explain it all very patiently, I'm still confused!! Didn't help that my DDs don't leave me alone while I'm on the phone so it is hard to concentrate fully :rolleyes:

Anyway, we've nearly completed our remortgage to fd's offset mortgage 2yr fixed deal, £130k but we wanted £10k for home improvements. So had thought we were getting a £140k mortgage, but they do it as 2 separate accounts - one for the £130k and one for the £10k.

So my question is, say we don't use the £10k for a year or so, and it just sits there untouched in the account, are we actually paying anything in interest on that amount in the meantime?

Sorry if it's a thick question, but I need to get my fuzzy head around this!!

lisyloo

are we actually paying anything in interest on that amount in the meantime?[/QUOTE}

I believe the answer is no, but there are 2 things you need to check.

Firstly the account that contains the £10K needs to be linked (offset) to your mortgage.
This is almost certainly the case, but it's worth checking just to make sure.

Secondly I THINK that first direct would charge you interest on £130K.
I was waiting for a more definitive answer but no-one has posted.
Some lenders would charge you insterest on £140K and give you interest on £10K, but I think FD charge interest on the net balance.

Hopefully someone will come along to say for definite.

purplepatch

Yes, they are linked, I gleaned that from my conversation this morning.

Thanks for your reply

UK007BullDog

Are the £10K on the same interest rate as the main loan or is it on a SVR? If it is it might be an expensive Loan.

purplepatch

Exactly the same rate, same terms, all done at the same time. Like I said, we thought we were doing a remortgage of 140k but they break it down like this.

--TD--

You pay interest of the net amount of all linked accounts.

If the £10k smaller loan has a zero balance you wont be paying interest on it until you draw upon the funds.

CopperPlate_2

I have this too. Took out a second mortgage later on - until you draw down on it (i.e. use the funds available) it just sits therer as 'unused' capital and comes off the amount being charged interest.