HSBC tracker vs Offset mortgage advice please

Archlever

Hi,

Am new to the forum and this is my first post. I've seen people being very helpful here, so I thought I'd seek some advice. Here goes....

We currently have a HSBC lifetime tracker mortgage at BOE + 0.54 (outstanding loan: £128,880, no tie ins). I have 14.5 years left on the mortgage (shortened the term from 21 to 15 years when we remortgaged in March). Probable current value of the house around £170,000 (what we bought it for in May 2004, aware this will probably fall further). Since the BoE cuts my mortgage has reduced to around £960, but I have a flexible montly payment of £1200 set up so overpay each month. We plan to move to a bigger house next year (as family is growing :j), and will probably look at properties around the £300,000 mark or slightly higher. I am a Higher rate taxpayer while the Mrs pays the basic rate of tax. We have around £50,000 worth of savings in all (including ISAs), and plan to put aside £18,000 from this as an emergency fund. We expect most of the rest to be used toward purchasing the bigger property. No other loans. We will have net monthly incomings of around £5000 (after the Mrs goes back to work post Mat eave) and can probably save around £1500 monthly to offset.

My questions are:

1. Will it make more sense to stick with our current mortgage and borrow more (possibly in additional lending at different rates from HSBC) to finance our home move; OR does it make more sense for us to offset (First direct or Oneaccount) presuming we put up £60000 as deposit?
2. I tried the mortgage shrinker from the one account and it shrunk absolutely loads off my mortgage (shrunk it by 9 ish years)...sound too good to be true...is it?
3. What are the pitfalls / catches in going for an offset mortgage?
4. If we decide to stay put in our current property, how does our current deal compare with offset mortgages that are out there? Am I doing the right thing by overpaying?

any advice is gratefully recieved.

Cheers

efunc

I don't really understand the concept of having all that money saved up doing very little, and then borrowing it again as a mortgage. The savings is just dead money and you're paying double to borrow it as a loan over 15-25 years. It's a little like having a perfectly good car locked up in your garage and then paying through your nose to hire another car everyday to get to work.

Can you not use the whole amount to offset your mortgage?

Archlever

True I could offset with the whole amount. However, let me explain the reason I remortgaged with HSBC. Our fixed deal came to an end and I had to remortgage in a hurry (having been lazy). This was also the time that lenders were pulling deals almost daily, so we went for the HSBC deal (for early completion). Now loathe to move mortgage before buying a new property as I'm not sure switching mortgages twice in a few months would be cost effective (in terms of fees etc).