Could somebody please help on an offset mort. calculation

beev

I am going round in circles here and wonder if somebody could help me using the calculator in the offset thread above to work out whether it is viable for us. My head half say yes but I can't get my head around paying an extra 1.25% interest purely for the pleasure of having an offset mortgage.

Heres the figures, any help would be greatly apreciated.

Offset rate 3.75%
Non offset rate 2.5%
Savings rate assuming 0.7% cos this is the rate we are getting for doing nothing as we are at the moment
Mortgage amount £147000 (31 yrs remaining)
Average current account balance £1000 at a pure guess but account can go as high as £4000 in the month with two separate salary dates means our month never runs out (18th and 31st)
Savings balance (at the moment) £7000

Thanks.
Flumoxed.com

beev

bumped up
please, anyone, I can't get my head around the calculations given in the sticky thread above. TIA.

Peelerfart

Search for Locoblade's calculator snd input the detailes in that.
I haven't seen the calculators in the sticky but Loco's is very easy to use and modify.
If you can't find it just shout

RufusA

IMHO I can't see how it can be worth it!

£147k @ 2.5% over 31 years = £572.55 / month

With an offset, on your starting figures at absolute best case scenario you are knocking in effect £11k off the mortgage (7k savings + 4k ac balance):

£136k @ 3.75% over 31 years = £624.47 / month

Over the course of 31 years :eek: the offset would COST you an extra £20k assuming you can keep a £4k current account balance, and interest rates stay constant. That's ignoring the £50/year interest you'd get on your savings, and the fact with your non-offset you'd still have £7k sitting in your savings account at the end of the period.

Unless the offset and non-offset mortgages have near identical interest rates, OR you have a huge amount of savings, you are unlikely to benefit from an offset.

IMHO you are better off sticking with a 2.5% mortgage (assuming other aspects of mortgage are equal) and overpaying when you can to reduce your term (assuming overpayments are allowed).

HTH - Rufus.

getmore4less

If you can mortgage at 2.5% then an egg savings account at 3.25%([EMAIL="2.6@20%tx"]2.6@20%tx[/EMAIL]) is a better place for your savings.

offset interest hike is not worth it.

beev

Thank you so much, the tool is really useful. Basically an offset mortgage would repay in 29 years and save 21K interest. However, I have tinkered with the figures and if I overpay by £200 per month it will cut to 19 years and save £53K in interest.

I have input the figures for the mortgage we have now at 2.5% and an overpayment of £200 per month and it could cut to 20yr loan and save 23.6K interest.

Loving the calculator tool, going to tinker around with it a little more but kind of thinking best to overpay on what we have and save via another vehicle for the extra we have spare each month to maximise savings and minimise interest paid.

I was looking at RBS Regular Saver, at 4% Net for 12 months, putting £250 per month in, as a home for my money but going to check out Egg now. Thanks again.