Full offset - advice please!

Sweets2

Hi all
hoping someone may have had experience with offset mortgages can give me a bit of their words of wisdom...

...am looking to be "mortgage-free" in as much as not having to pay out a large sum each month, but I don't actually want to pay off the mortgage just have an amount in the linked offset savings account equal to the amount outstanding.

What usually happens to the monthly direct debit mortgage payment when fully offset???

I'd like to have an idea of other's views before I ring up the mortgage company to hear their rules. Fingers crossed one of you can spare a min to help!

YorkshireBoy

I'm in that fortunate 100% situation with a YBS interest only offset mortgage and they have suspended the monthly payment.

YBS operate with two methods for calculating the monthly payment...

Gross: ignores your offset savings balance.

Net: takes your offset savings balance into account.

They didn't cancel my DD straight away though; they continued to collect £1.xx per month throughout 2007/08 and then wrote to me on the annual review date earlier this year to say "your new mortgage payment will be £0.00 per month".

Sweets2

Thanks YorkshireBoy. :-)
That gives me a benchmark to have in mind when I ring ... mine is repayment with Abbey so it'll be interesting to see if they have that gross/net concept or if I actually have to prompt them to offer to recalc.

dimbo61

Good luck on being fully offset but what are you going to do once you have say £50,000 in the offset and £50,000 mortgage ?
If you carry on paying your normal mortgage payment each month and at the same time transfer out of offset the mortgage payment into a cash ISA or other savings account( HALIFAX 10% saver )you will hopefully get a better rate of return than your mortgage rate.
Having a lot of money in the bank and getting made redundant will mean no benefits so consider reducing the offset and putting into TAX free ISA,s or pay extra into your pension.

Sweets2

Lots of interesting points there, dimbo61, much appreciated.

I'm self-employed so the whole redundancy/benefits thing isn't really an issue - got some aside for leaner periods & insurance for my family in case something happens to me - and was thinking of maybe leaving the offset and in future, earmarking what would have gone on repayments as available for other types of investments/savings.

Hmmm decisions, decisions. Will look into that cycling through you describe and see what the results look like. Thanks!

dimbo61

I am a paramedic so the whole OH MY GOD !
Have you got enough money in the bank to live off for the next six months because you cant work with a broken leg comes to mind quite often.
I have said this lots of times please have 3/6 months of income in cash ISA,s if employed and 9/12 months in cash ISA,s if self employed.
Consider running down the offset to say £35,000 as covered by government ( this has gone up but cant remember the figure )
Make sure you use the wifes tax free allowance and fill 2x£3600 cash ISA,s each year.

Sweets2

:-)
had a mini lightbulb there - forgot that a % of the first £35k only per parent institution is covered in case bank flops, thanks for a timely reminder. (There's rumour gov't may look to increase this to £50k, wonder if they will?)

We're stocked up on ISAs and keeping fingers crossed they retain their tax free status for the foreseeable. Will take a wander over to the other MSE boards to look for any best buy tips for regular savers etc.

(I'm a girlie btw! Just happens that I'm the one watching the pennies)

Thanks again to posters. It really helps to have a fresh perspective.

getmore4less

Mortgage/savings should offset in the event of a collapse.

If you can set up the DD to be from one of the offset accounts then once 100% they sort themsleves out.