Egg offset calculator... I am confused

baloola

Dear all

I read here that in an offset mortgage making lump sum payments or putting the money on the offset savings account will have the same effect...

I have just tried the egg calculator and with a lump sum of £22,000 the term of my mortgage will be reduced by 6 years and 6 months.
but If I put the same amount in the savings offset the term will only be reduced by 3 years and 10 months??

Is this right?

silvercar

With a lump sum payment the £22,000 comes off the outstanding total so the mortgage is paid off earlier. By putting £22,000 in the offset savings you gain the benefit of not paying interest on that amount but it doesn't come off the capital outstanding. So the mortgage carries on for longer - the length of time it takes to pay off £22,000, at the end of which you would still have £22,000 in the offset account.

baloola

oops thanks Silvercar I have just realised what a silly question it was.... I am not thiking straight this morning lol

Thank you :-)

Joe_Bloggs

Sivercar is right. Money in offset accounts is still under your control. It is not spent in offsetting capital. No savings interest is paid but you can always add to it or borrow from it at your mortgage rate, when necessary. There will be a point before the end of the mortgage in which the capital outstanding on the mortgage equals the amount in offset savings. This will be at the same time as the initial ,one off pre-payment, mortgage case. You could pay off the capital at this point and be mortgage free. The Egg offset rate is pants.
J_B.