Offset v Overpaying repayment mortgage

rjenk74

Hi all,

If an offset mortgage and a repayment mortgage had exactly the same interest rate and term, is there any difference between overpaying the repayment one by say £200 p/m, or putting the £200 p/m in an offset account and paying the balance off when you hit it.

I am just talking figures as opposed to other benefits such as easy access to money (positive or negative depending on how are with cash)

Hope that makes sense and sorry if this has been asked before

Regards and thanks for reading
Rich

funscott

overpayments might have a cap on how much per year you can pay.

smckay

As the £200 would be reducing the capital on which interest is calculated I dont see why there should be any difference.

But as the offset mortgage is pretty much just a large overdraft what is to stop you paying the £200 off your mortgage and then taking some of it "back" should you need it?

Leg-end_2

Is there any likelihood that you may need to get your hands on money quickly? If so putting it into an offset is likely to be easier.

rjenk74

Hi thanks for the replies, and yes the easy access of the offset could be a plus as its nice to know you can get at it if need be but likewise a negative as you can get at it maybe too easily :-)

Thats really why was really just interested in figures, as in what are the benfits/negatives to one or the other purely from a financial aspect, not easy access/tempation.

For me at the momemt they seem exactly the same (so long as interestes are the same) hence the decision for one or the othere can then purly be based on preference of access to cash, without sacrificing 'performance' as it were!

Of course when the rates for each are different, then you get another headache to consider :-)

again thanks for the response's
Rich

Trying_to_be_good

With my offset, the monthly repayment isn't recalculated no matter how much is in there (except maybe annually - still had it less than a year!).

But if I overpay by more than a certain amount (£500, I think), they recalculate i.e. reduce the monthly payment, which I don't want.

So I'm paying into the offset, rather than overpaying the mortgage. Hope that makes sense, as I know what I mean!

Spangled

rjenk74 wrote: »

Hi thanks for the replies, and yes the easy access of the offset could be a plus as its nice to know you can get at it if need be but likewise a negative as you can get at it maybe too easily :-)

If I was still living on my own, I'd go for the offset. But such an account wouldn't work now that I have a missus - she'd just see the £££ piled up in the offset account and view it as spare spending money. So every spare penny I have these days just goes into paying down the repayment mortgage where she can't get her hands on it...