Fully offsetting to keep a good mortgage.

patp

Hi,

I have a Barclays (Woolwich) offset mortgage which has a rate of 0.48% over the baserate. At the moment this is clearly a very nice thing, but I am in a position to pay it all off. We might move house soon and need a mortgage, so I would like to keep this product - I can move it to another property.

What I thought of doing is fully offsetting and arranging to make zero payments. Is this a good idea, and will the bank let me do it?

Thrugelmir

In answer to your question no.

Whether Barclays will you to port your mortgage is another matter entirely. Lenders are progressively getting borrowers off these highly discounted rates.

joolley

Barclays will let you port. However, you will be able to borrow only £100K above your existing level of borrowing. If you owe £20K only, you will be able to port 0.48% above base to a mortgage of £120K only.

At least that was what Barclays/Woolwich offered me when I was trying to port my similarly good rate to a bigger house. Thankfully, I had a lot of equity because I had been overpaying like mad, but after that information I stopped overpaying and saved the money in an interest paying account instead. That move may not make much sense to many but for me, I wanted the ability to borrow up to what barclays/woolwich would allow me in terms of salary multiples and affordability rather than some arbitrary figure based on how much I had overpaid. The amount I was offered by Barclays was twice the current mortgage + 100k.

getmore4less

Keep the mortgage and pay as little off as you can.

If you can move and stay within the full amount available, check your reserve, then it avoids any new borrowings which will be at much higher rates if they let you port.

Currently you can get more for your money by saving elsewhere.

joolley

Also, the new rules at Barclays means that your reserve will drop to £20K. No more any amount up to 90% ltv. It will still build up as you pay up the mortgage.

getmore4less

joolley wrote: »

Also, the new rules at Barclays means that your reserve will drop to £20K. No more any amount up to 90% ltv. It will still build up as you pay up the mortgage.

Are they going to do that with offsets, not seen a letter.

If they are just take it out and stick it in savings.

joolley

getmore4less, yes they are. I had a £68k reserve on my offset which was reduced to £20k on porting. The mortgage adviser made clear that this was the new policy.

patp

Thanks all. By extension of this thinking, surely it would be best to pull out the whole reserve and invest it elsewhere, and set the payments to whatever the interest is, leaving the capital debt as it is until interest rates change and I pay off using the savings?

getmore4less

joolley wrote: »

getmore4less, yes they are. I had a £68k reserve on my offset which was reduced to £20k on porting. The mortgage adviser made clear that this was the new policy.

OK so you take out the full reserve before you port then port the lot and just keep it in the offset pot.

gwapenut

joolley wrote: »

Barclays will let you port. However, you will be able to borrow only £100K above your existing level of borrowing. If you owe £20K only, you will be able to port 0.48% above base to a mortgage of £120K only.

At least that was what Barclays/Woolwich offered me when I was trying to port my similarly good rate to a bigger house. Thankfully, I had a lot of equity because I had been overpaying like mad, but after that information I stopped overpaying and saved the money in an interest paying account instead. That move may not make much sense to many but for me, I wanted the ability to borrow up to what barclays/woolwich would allow me in terms of salary multiples and affordability rather than some arbitrary figure based on how much I had overpaid. The amount I was offered by Barclays was twice the current mortgage + 100k.

Is this others' experience of Woolwich / Barclays? I currently have a base + 1.29% mortgage and would like to be able to borrow up to £200k short-term for buying a new house (while selling another house), down to £100k extra longer term.

Had not realised there was any kind of cap on the amount, thought the total amount of old mortgage plus further advance was worked out on salary multiples?

joolley

There wasn't the cap before. Terms recently changed in December or thereabouts. If you want to port one of the old mortgages with excellent terms, unlimited overpaying, low rates for term and no ERC etc that aren't offered anymore, then there is the cap of £100K above current lending. The mortgage used to be portable up to maximum salary multiples/affordability as decided by Barclays to the new property but not anymore. Previously the reserve was up to 90% of value . This is now capped at 20K.