£100,000 Invest or offset/pay off mortgage

lipidicman

If you cant be trusted to save, then you cant be trusted to use an offset mortgage, - they require discipline if they are not to cost you a lot of money.

If you are struggling to pay the mortgage then use the lump sum to pay off the mortgage - surely thats simple.

Also set up standing orders to save into Halifax or Abbey regular savers (or both depending how big your monthly payments are now) and forget about 'em for a year

johanna_3

Thanks for that. But why do offsets need you to be disciplined. If your payments are lower where's the discipline. Or am I missing the point? Why will they cost me more. I'm new to all this high finance -need educating!

Rafter

Offset mortgages are very flexible and do require some discipline.

With a conventional repayment mortgage the loan plus interest is paid off over 25 years.

With an offset mortgage you have complete discretion over how much you pay each month, usually as long as you are covering your interest bill.

The risk is that with say a £100,000 mortgage facility in place you decide to use it to pay for cars, holidays, home improvements etc and at the end of 25 years you still owe the bank £100,000 and have paid loads of interest in the process.

Given what you have described I'm not sure an offset mortgage is for you. If you still think it is, you can get a better deal than the One account from Woolwich OpenPlan or FirstDirect Smart Mortgage.

Here is a revised recommendation:

Pay off all your credit card debt and any other loans.

Put some money is one savings account for 'emergency use'

Put aside any money you plan to spend short term from this, for example on a holiday.

Use the rest to pay down your mortgage.

Once this is done, try to ensure that some of the money you are now saving each month is put into Savings. Eg a Cash Isa at £250 per month to save for the longer term.

At a later date you can decide whether to use these savings to boost your retirement income, pay for special events or pay your mortgage off earlier.

Good luck.

R.