coming out of fixed rate, offset mortgage

boocha99

Hi,
I apologise in advance for my ignorance!
My husband and myself are about to come out of a fixed rate offset mortgage with the coventry(5.99%) on 31st march and have been informed that we will go on new rate of 1.35%:j, which is 0.85 above base rate its a variable tracker . Our mortgage has £138000 left over 25 years,Im nearly 40 so we are really keen to get this term reduced.
This new rate means that our new mortgage payment is £350 cheaper,we were thinking of paying £200 into the offset account a month,I have been looking on the internet at offet accounts, overpaying etc and im a bit confused (easily done!)
Do you think this payment of £200 a month would greatly benefit us with regard to our mortgage term etc?
Thanks in advance

dimbo61

I bet you did not consider the follow on rate when you took out your fixed rate mortgage ?
I would also be jumping for joy if my mortgage went down by £346 a month.
Your new mortgage rate in March will be 1.35% and you can get better in cash ISA,s and some regular savers so I think you should fill your ISA allowance first £5100 each from april.
I would also build up the savings in the offset account up to £16K ( think benefits in case you lost your job)
You could keep your mortgage payment the same as you are currently paying and with the new interest rate you would have the mortgage paid off in 14 1/2 years ( only if the rate stayed at 1.35% !!!!)
I have an offset mortgage which is fixed and it drops onto a tracker but I have a 3% collar:-(

dimbo61

You have been paying you mortgage every month for the last 2/3/5 years without any problems ?
If you asked your lender to keep your payment static ( Ie what you are currently paying ) You would be overpaying a £1000 every 3 months.
Thats £3000 by xmas just an Idea

boocha99

dimbo61 wrote: »

You have been paying you mortgage every month for the last 2/3/5 years without any problems ?
If you asked your lender to keep your payment static ( Ie what you are currently paying ) You would be overpaying a £1000 every 3 months.
Thats £3000 by xmas just an Idea

That's the thing, for the last six months or so we
were struggling on the 5.99% as husband works in the construction industry so his wage has reduced, the extra £350 would come in handy but this is to good an oppurtunity to miss and we have worked out that we could afford to put £150 away a month and still enjoy the lower 1.35%!
he
rang the Coventry last night and advisor said that if we put £150 into offset account a month, at first would only create about 16p but obviously every month this would improve, like the idea of being able to get to it in an emergency.
What is relevant here is that 2010 is the start of a new era for us, we have never saved anything in our lives, have just paid off 2 credit cards and really want to get this right, I'm wondering if like you suggested we should just straight out overpay mortgage, would Coventry do this? How do you go about it?
Sorry for any typos,typing on phone!!

dimbo61

Paying it into the offset account or off the mortgage will have the same effect!
I also have an offset mortgage and love it to bits ( even if its fixed at a high rate!)
You need to put the money into the offset account as your emergency fund ( husbands work!!!) once you have built up a few thousand in the offset account I bet you sleep easier at night.
When we needed a new car the money to pay cash was sitting in the bank ( which we repaid asap) same with holidays, TV etc
Better than loans as lower rate and offsetting the mortgage when not needed.
Build up emergency fund of 6 months income up to £16K ( benefits!)
Then overpay the mortgage and well done on getting rid of credit cards debt.
You have a very good mortgage rate so get saving into the offset GOOD LUCK