Offset v Savings

dac1083

I have a Barclays (Woolwich) Offset Mortgage with an outstanding balance of £23000. Tied with this I have drawn down £30000 in Mortgage reserve, (overdraft), for an extension on the house.
I have a lump sum of £25000 which sits in a "pot" in the account but cannot work out if it would be better to pay this into the Mortgage where it would almost clear the balance but would be lost to me as a lump sum; pay into the reserve (overdraft) pot to reduce that and keep it accessible or leave it as it is where it is helping to reduce the interest on the mortgage but is still accessible.
I have put this to a number of Barclays "advisers" but none of them seem able to give me a clear answer.
Can anyone help?

getmore4less

Since you have an offset the reserve SHOULD be at the mortgage rate(regular trackers are at the SVR) but check this.


If the rates are the same it should make no difference, offset, reduce reserve,reduce mortgage.

Remember if you overpay your mortgage the reseve goes up anyway so you don't lose the acces by paying down the mortgage.

One thing to watch out for is the reseve being withdrawn, Barclays offered customers this option(default was to remove) a while back but would charge to reinstate it.

dac1083

Thanks for the response. The reserve is fine and there has been no suggestion of withdrawing it. (The mortgage is only a few months old).
My query really relates to how best to manage my £25000 lump sum which currently sits in a separate "pot". Should I leave it there where it will help to reduce the interest or should I pay it into either the mortgage or the reserve.
I understand your point that the reserve facility will increase if I pay my money into the mortgage but then, if I draw it down, will I not be paying even more in interest?
Also, if I pay into the mortgage and the reserve increases, do I have instant access to the increased reserve or do I have to apply for it?
It can't be that easy as even Barclays staff can't give me a definitive answer!

GGGG

For information- Woolwich's maximum reserve for drawdown on NEW cases is now £20000.

getmore4less

It is that easy,

it makes no(cost) difference where the money is.

The reserve looks just like a current account with a big overdraft so you can do transfers on line or use the cheque book that came with it.

It again make no cost difference where you take the money from, an offset account or the reserve the interest rate should be the same and you only get charged on the net amount after offsetting.