Offset mortgage - Simple question

Modman_2

I hope this is a simple question, apologies but I couldn't see a straightforward answer.

I have a normal mortgage of 93k on a house worth about £150k

I have £43k savings that is just sat in Premium Bonds and my savings acct (Actually I have the money for my folks so can't spend it as they'll want it in a few (5) years when they move back to the UK)

OneAccount says I can knock 8 years off my mortgage. My question is though, do they work this out by saying when i get my mortgage down to £43k (The amount of saving I have) and then take all my savings to pay off the balance - Or do they work it out just on the interest saved and I'll still have the £43k left after the mortgage is paid off? Sorry I hope that makes sense.

Thanks!

whu

I only know how the First Direct ofset works but it might be the same - it works by deducting your savings from your mortgage and then charging interest on the balance - so in your case it will be 93-43=50-so they will charge you interest on 50 - but if you overpay each month ie pay the mortgage on 93 it will reduce the term of the mortgage - cant tell exactly by how much without details of your mortgage rate/term - hope that helps

dimbo61

You need to post your current mortgage rate and what kind of deal you are on now.
Any ERC if you move.
With £43 k of ( mum and dads savings ) which you could offset in a offset mortgage it might well save you alot of interest to take out that kind of mortgage.
Are mum & dad happy to allow you to use there money to offset your mortgage.
Also depends on the deals available to you re offsetting.
GOOD LUCK
PS I have an offset mortgage and think they are great.

_dave__4

Modman wrote: »

OneAccount says I can knock 8 years off my mortgage. My question is though, do they work this out by saying when i get my mortgage down to £43k (The amount of saving I have) and then take all my savings to pay off the balance - Or do they work it out just on the interest saved and I'll still have the £43k left after the mortgage is paid off?

I just played with their calculator a little bit, and it looks very much like your 1st suggestion - they're using the £43k to pay off the mortgage!!

They quoted a rate of 6.7%, and suggest that offsetting £43k on a £93k mortgage over a normal term of 14 yrs would reduce the term by 8 years.

You can use this calculator to see how much you'd need to pay each month to keep the savings intact:-

http://calc-calc-calc.net/get/calc/Mortgage-Offset-Payment/v1/?l=93000&o=43000&i=6.7&t=10

[That link shows the monthly payment to reduce the term by 4 years; you can change the term as you wish. The normal monthly payment on a mortgage of £93k over 14 years would be about £855 : http://calc-calc-calc.net/get/calc/Mortgage-Payment/v1/?a=93000&i=6.7&t=14]

Does that help?

Gorgeous_George

This is how all One Accounts work.

The confusion (or lack of clarity) makes these accounts seem better than they are. The interest rates are generally higher than other accounts and therefore people spend more than they need to.

Some people just don't seem to get it.

It works for people who save to pay tax bills or who like to hold significant savings taht they can access etc., but is usually little benefit to Joe Public.

GG

Modman_2

Well details of current mortgage:

Original amt was £125k 5 years ago. (House WAS worth £135k, now about £150k given housing crisis)
Currently on tracker for the past year with C&G which I think is 0.59 above BOE rate?
Monthly payments are +-£750p/m
I overpay £300 per month
Balance right now is £93k
Outstanding term SHOULD be 20 years bit I think it's down to 17 now due to the overpayments.

So, does that help?

Still not 100% sure on my original q of do they use my savings to settle the mortgage or just for the interest?

Thanks - Daniel
Mum & Dad have insisted I use their £43k as they're cautious with it and the premium bonds were only getting them £600ish a year (Roughly 1 x £50 win a month) They'll want it back in about 4 years.

Gorgeous_George

The calculator assumes that your savings will be paid off the mortgage.GG

dimbo61

So you have a tracker at 5.09% at the moment which is good.
You are overpaying by £300 a month which is even better.
The one account would bring your balance down to £43k and then use mum & dads savings !!! to clear the mortgage hence very short term.
I would cash in some of the premium bonds and put 2x £3600 into cash ISA,s in mum & dads name, same again in april 2009 to build up some real 6%+ interest.
If mum and dad are happy to loan you some money invest in cash ISA,s as well.
Keep the mortgage payments static and increase the overpayments ( if allowed ! ) by the interest you are saving.

getmore4less

The thing with most offsets is you can get the money back that you offset. so they are different to just paying off the loan.

The calulated dates do require the use of the offset pot to repay the loan but you don't have to pay off you can continue with the loan just paying NO interest(thats what we have with Barclays).

Most calculator do make it look a lot better than it really is because they do not take acount of the interest you could have been earning.

The one account is not the best offset product.

Offset would work for you if you can finds one with a good rate(FD have withrawn theirs) and give you access to the money in 4 years time while saving you loads of interest on the loan for those 4 years, Inthat time you will have built up a fair ofset pot of your own with the overpayments and you might want to look at some Stooze money to help out as well.


Don't think you can put money in an ISA for a non resident.

Chinkle

If you've got savings then offsetting them against your mortgage is no bad idea.

However, they aren't YOUR savings, but your parents. Who want them back in 4 years. While they may not have invested them in the best way till now, they were expecting a return on their investment.

What will happen in 4 years will you just return their £43k?

caveman38

Off topic:
Did FD ever do a tracker offset mortgage. I can only FR offset or tracker not an intigrated one.