To Off Set or not to Off Set...

ShowMeMoney

I currently have a mortgage of 42000, and am considering remortgaging.Considering my current product is 7.19% interest!
FD have offered me their Free fee variable rate mortgage - 5.29% Offset Base Rate Tracker. I have £9000 savings. I am a higher tax earner.
I am debt free. I have £500 disposable income monthly, this could pay off the capital.

My dilemma is this offset product seems too good to be true...So, what is the catch? I could be mortgage free within 5 to 8 years! Awesome!!

Please help!Any suggestions would be gratefully accepted..

tinkerbell84

I have an FD offset mortgage (fixed for 10 years though).

It's a no-brainer if you have savings/disposable income, want the flexibility to access the money and are a higher rate tax payer.

There's lots of info on the forum - do a search and have a read

ShowMeMoney

Thank you, tinkerbell84!
The forum is fantastic! You guys are so helpful to us money saving virgins..
Just about to complete application for FD Offset
Ps
Good luck on your weight loss..

getmore4less

If you have that deal from FD, I would take it since it is no longer available and it was one of the best around.

No need to remortgage again, just save as much as you can and head towards 100% offset as quick as you can

The_alchemist_3

I would agree - being self-employed and having to put tax away we are able to use this as part of the off-set which is great and as a higher rate tax payer I don't think you can get anywhere near the equivalent in savings -which looks even more likely now! I posted a thread on here yesterday just as a reminder to people with off-set to make sure that the savings pots you can create are linked to the mortgage so you actually get the effect you are looking for. Our weren't initially and we were getting interest on the savings not the savings against the mortgage.

Good luck esp. getting mortgage free !

ShowMeMoney

With regards to Repayment options, I initially opted for Interest only, but am
baffled by the other options' wording...
a)interest & full capital repayments: you intend to make repayments above the "interest only" payment, sufficient to repay the mortgage capital over your selected term.
b)interest & part capital repayments: you intend to repay an additional amount monthly, above the "interest only" payment but not sufficient to repay the mortgage capital over your selected term.

I intend to make a monthly standing order to repay the capital, but which one do I opt for...?
Sorry, I must be dumb or ...please help clarify!!

getmore4less

ShowMeMoney wrote: »

With regards to Repayment options, I initially opted for Interest only, but am
baffled by the other options' wording...
a)interest & full capital repayments: you intend to make repayments above the "interest only" payment, sufficient to repay the mortgage capital over your selected term.
b)interest & part capital repayments: you intend to repay an additional amount monthly, above the "interest only" payment but not sufficient to repay the mortgage capital over your selected term.

I intend to make a monthly standing order to repay the capital, but which one do I opt for...?
Sorry, I must be dumb or ...please help clarify!!

I do not have a FD offset so this may not be 100% mine is Barclays.

You can set the loan up to have payments based on interest only or repayment(or in between).
This will determine how the debt account is handled over the term of the loan.

The next option is usualy how your payment is calculated based on the offset funds, usualy keep it the same(overpay) or reduce it.

It really depends how much of the funds you want to keep access to

If you go interest only you have full access to the full amount for the term, repayment gives you a reducing amount, this is my prefered method since even if you take out your full offset you are still on target as if the mortgage was a normal one.

tinkerbell84

I have an FD offset mortgage.

Option a means that they will take interest plus a payment to repay the capital over the term of the mortgage. You can always withdraw the amount you've paid off if you need to, but you actually see your mortgage balance reduce every month.

Option b means the same, but as it's only repaying part of the capital you'll see the mortgage reduce by less and still be left with a balance at the end.

So, for example, without offset balances my interest charge each month (interest only) would be about £800 per month. On full repayment it's £1200 (20 year mortgage).

I'm doing full repayment, and offsetting, so hope to have it all paid off in 10-13 years

It also means FD just take 1 payment every month rather than having to arrange 2. You can also adjust the amount you pay (over and above the interest) every month online

ShowMeMoney

Terrific!
I believe option a to be the best way forward.And I can still have the option of adjusting payments accordingly...Excellent!
Tahnk yous! Much obliged...