Barclays (Woolwich) Offset tracker question.

squashed

Hi - can anyone help?

I currently have an Offset Tracker from Barclays - set to 'Reducing Term'.

I plan to borrow a significant amount of money (2 year loan) from the offset reserve and increase my monthly payments - then in two years I'll pay it all back.

The advisor at Barclays has suggested that I should switch the mortgage type from 'Reducing Term' to 'Reducing Payments' and overpay.

I've asked a couple of times why it should make any difference - but speaking to two advisors they both say the same - something to do with where the payment money gets allocated when it's paid - capital vs interest.

Can anyone explain in simple terms?

chivers1977

You have been correctly advised.

If you have "term adjusting" you only pay the contractual monthly payment. Interest from the reserve is added to the mortgage thus increasing the balance. If you amend the account to "payment adjusting", you pay the CMP plus interest for the reserve. The DD does this automatically.

Either way you need to arrange a Standing order into the reserve account to clear the debt down or else repay it by the end of the mortgage term

squashed

Thanks for your explination and help