Current Account/Offset Mortgage

MM2005

I have read the post detailing the calculations to work out whether we'd be better off with an offset etc. and as far as I can see I would be. I originally was looking at just getting a good flexible mortgage as I intend to overpay the mortgage considerably. I am currently with Nationwide who limit overypayments to £500 on their tracker/fixed products.

I had a look on the Virgin One account website, using their calculator and I realise it's made to look rosy so you'll buy their product but it is also bloody tempting to go with an offset mortgage! According to their calculations I'd pay my mortgage of £134,000 off in just under 4 years, which would be great considering the nominal term I have at the moment is 23 years!

I would appreciate any expert opinions on the below details and if an offset/current account mortgage looks good then what are people's recommendations on who to go with.

House Value: approx £200,000
Mortgage Value: £134,000

Currently with Nationwide paying £775 per month on a 2 year tracker due to expire.

I have £20,000 premium bonds which I am prepared to withdraw to use to offset. I also have another £10,000 in savings (plus 2 x £3,000 ISA's - not sure if these could be used). The savings may be reduced by £5,000 depending on whether we buy a new car!

So, I could have £30,000 savings (+ £6,000 if the ISA could be used - currently with Yorkshire Bank for that).

Myself and my wife bring in almost £4,000 (after tax) per month. I am a higher rate tax payer.

Our total outgoings per month (inlcuding the mortgage payment) are about £2,500 - this includes all bills and pocket money etc. (we've just started budgeting properly after years of squandering it really!). So, we have about £1,500 per month spare - £1,000 of which I'd like to overpay on the mortgage. The other £500 would be saved but used for a couple of holidays per year (maybe not use all of it but possibly).

So, going on the figures above do you all agree an offset looks the best option? If so, which one. If not, which other options do you suggest? I realise the main benefit is from overpaying vastly but it looks also (to me) that the offsetting on the amounts mentioned (and future build-up) is worth doing also.

Thanks for reading through this and any advice you can offer.

Cheers
MM

silvercar

The downside of offsets is that the rates are not the best on offer. People have worked out that if your savings amount to a third of your mortgage value, you will be better off.
For a higher rate tax payer it makes more sense as your saving tax on your saving's interest.
There seems to be 2 sorts of offsets around those linked to a current account, where your salary and savings go into the offset pot or those stand-alone mortgages where you have an offset mortgage and a linked savings account that is separate from your (existing) current account.
Some schemes offer 2 sorts of mortgage payment:either reducing your payments each month so you're paying interest on the difference between your mortgage and the amount in your savings or keeping the payments constant and effectively reducing your capital outstanding amount.
BTW I've got a 4.99% 2-year fixed rate with Coventry BS.

bockster

just some info;-

1, of course you can close or draw on your isa,s and use that money however you wish, i've also read that some offset providers have an isa element to the offset savings account that you can transfer into, therefore not loosing the isa status of that money for ever. and from then you can pay into the isa part up to your limit each year.

2, depending on cicumstances, you would'nt have to overpay with some of your extra money and pay into the offset savings account with the rest. just putting it into the offset savings account would have pretty much the same effect, but keep that money available if required!

3, we've just completed to a yorkshire building society offset mortgage and found them very efficient and pleasant to deal with. they offer a fee,s free offset, but that may only be suitable to lower capital ammounts due to not as good a rate as others available.

hope this is useful, happy hunting

Joannaclaire

We're looking into this as we've just had an offer accepted.

The best ones I've found (through a broker) are the Abbey one at base pus .49% for life of the mortgage. Costs 599 to apply, but they give you 250 cshback and also a free valuation. A&L have a flexible mortgage which is base minus .11% for two years. Although it isn't an offset as such, it is flexible so you can overpay. You are tied into that for two years though.

And through L&C mortgage brokers there is a special deal with HSBC that is not available elsewhere for 18 months at 4.69 (base plus .19) followed by 18 months at 5.25 (base plus 0.75) before it reverts to 5.5 (base plus 1%) for the life of the mortgage. Ther is no tie in with that one, so you can leave when you like (ie before it goes to te base plus 1%) and also have as many HSBC savings and currnet accounts as you like linked into the mortgage to offset.

We are leaning towards the Abbey deal as it is a good rate (just as good as alot of the fixed ones out at the mo), only has an 18 month tie in or else you repay the 250 and vaulation cost, and as our mortgage isn't huge it means if we choose to stay with this deal, it would probably be better number wise, as it would avoid remortgage costs etc.

herbiesjp

I can't comment as to which route is better for you as I do not know enough about you to make that kind of judgement - however there are offset rates out there lower than 4.99% offering incentives for re-mortgages.

So if that is the route you want to take, have a good look around, or get in contact with a good adviser

HTH

MyUserNamesTaken

The Woolwich Openplan offset mortgage I have just completed on is 0.59% above base rates for the life of the mortgage, with a fee of £450. They pay for the valuation and the solicitor's fees.

MM2005

Thanks for the replies. I like the look of the Yorkshire BS offset (a few options there). I guess it's down to taking the plunge, whether it's a flexible or an offset. Does anyone know the limits on the YBS offset's for overpayments?

Do the better rate offset's/flexible's tend to limit the overpayment amount?

Daniel_B

MM, I'm surprised you haven't looked in to First Direct offsets:

3 year fixed rate at 5.09%, reverting to our standard variable rate for the remaining term, currently 5.50%

5 year fixed rate at 4.89%, reverting to our standard variable rate for the remaining term, currently 5.50%

You should have it cleared by then!

Dan

YorkshireBoy

MM2005 wrote:

Thanks for the replies. I like the look of the Yorkshire BS offset (a few options there). I guess it's down to taking the plunge, whether it's a flexible or an offset. Does anyone know the limits on the YBS offset's for overpayments?

Do the better rate offset's/flexible's tend to limit the overpayment amount?

I'm currently with YBS and I'm looking to switch to their BOE+0.75% offset. According to discussions I've had with them, and their website, there are no overpayment or early repayment penalties on either of their 'full-term' offset products.

See http://www.ybs.co.uk/mortgages/current_products/products/offset_ftt_fee.jsp

or give them a ring on 08451 200 100

herbiesjp

Daniel_B wrote:

MM, I'm surprised you haven't looked in to First Direct offsets:

3 year fixed rate at 5.09%, reverting to our standard variable rate for the remaining term, currently 5.50%

5 year fixed rate at 4.89%, reverting to our standard variable rate for the remaining term, currently 5.50%

You should have it cleared by then!

Dan

Do you work for First Direct? I only ask as you say "reverts to OUR standard variable rate"

Daniel_B

LOL :rotfl:

No I don't work for them, but I am a very happy customer, and readily, frequently recommend them to all my friends and family.

I wouldn't do that if I wasn't 100% happy with them.

The wording above, is merely there as I didn't know what deals they had on at the moment, so visited their website,and copied and pasted it into the post.

:beer: though, that made me chuckle :rotfl: