Offsetting vs repaying the capital

gelato_cat

Hi all

We're about to get a First Direct offset mortgage. It's very flexible and allows us to overpay/offset as much as we like.

As we do not earn interest on the offset amount, nor do we get charged interest on the corresponding amount on the mortgage, am I right in thinking we are better off offsetting any overpayments in a linked account rather than putting it into the mortgage?

My thinking is that if either of us loses our job, at least we have cash available to make the minimum payments on the mortgage if we have offset it. We are able to withdraw money from the mortgage at any time, so could pull our overpayments back out, but I'm not sure what the best way is.

So, what's the best way of using one of these mortgages to pay the least back over the shortest amount of time??

Suze

dwsjarcmcd

Suzey, I think you have described it very well, in that what you are proposing gives you flexibility. The financials should be equal but you can call on the money if you need to. The only negative comment is that when you lose your job (fingers crossed you don't!) is probably the worst time to call on it!

David

gelato_cat

Thank you. I wasn't sure if the financials worked out exactly the same either way - I thought I'd missed something glaringly obvious!

And, although I haven't checked, surely the bank wouldn't allow us to withdraw from the mortgage in order to make the minimum payments (hence my desire to offset instead)?! Or would they??

Suze