Offset mortgage - First Direct, quick query

LE3

Can anyone who has experience of a First Direct Offset mortgage help me with a quick dilemma?
I'm going to use nice round numbers for ease here!

If I am buying a property for 150K and I have 100K deposit
Would I be any better/worse of if:
a) I put 100K deposit down & mortgage for £50K. Overpay/add to savings £200/month
b) Put 75K deposit down, get mortgage for £75K & then put £25K into the offset. Overpay/add to savings £200/month

My brain says that I would be only be paying interest on 50K in both these scenarios - but the calculations come out differently - anyone explain why?

property.advert

In the first scenario, you would have a loan facility of 50k whereas the in the second example you have a loan facility of 75k.

Your net position is the same but often on calculators, they assume you will continue to pay the same mortgage amount. Thus, with 2 examples, you have your different scenarios. They are not always clear about this.

Just remember 75-25=50 and 50-0=50 and that is what you are dealing with.

LE3

So I *am* right in thinking they both calculate out the same?

I am wondering about retaining a small amount (in the offset) to be a buffer "just in case" of an emergency before I can rebuild my savings - but if it makes a huge difference to my mortgage, I'd rather stick more in the depoisit IYKWIM ...

Batchy

just remember these buffers, ie, money in the offset would count towards means tested benefits, if they were ever needed, like claiming to pay interest on mortgage etc. It doesn't pay to be prudent, if your saving for a rainy day, you'd often just be better off paying it into the mortgage as a deposit.

LE3

Batchy - I'm going to give you the benefit of the doubt & assume you mean well, but I think your advice that people shouldn't "save for a rainy day" is disgusting.
The main reason that the country is in the mess it currently is in, is because people have been encouraged to spend, spend, spend & not worry about tomorrow. I have NEVER drawn benefit, even when I was made redundant & was unemployed for 6 months I was able to support myself (I signed on so my NI was paid, I received no JSA) BECAUSE I had been so prudent with my money. If I ever did want to claim means tested benefits, I could simply pay that 25K off the mortgage & claim benefits anyway ...

dimbo61

Keep your hair on Batchy has given you a very important point to consider!
If you did lose your job and had over £16K in savings the nice benefits people expect you to live off your savings and no you cant just pay it off the mortgage.
So you dont have to put the full £100K into the mortgage but depending on LTV levels and deals offered you could put upto £16K in the offset as an emergency fund.

getmore4less

LE3 wrote: »

Can anyone who has experience of a First Direct Offset mortgage help me with a quick dilemma?
I'm going to use nice round numbers for ease here!

If I am buying a property for 150K and I have 100K deposit
Would I be any better/worse of if:
a) I put 100K deposit down & mortgage for £50K. Overpay/add to savings £200/month
b) Put 75K deposit down, get mortgage for £75K & then put £25K into the offset. Overpay/add to savings £200/month

My brain says that I would be only be paying interest on 50K in both these scenarios - but the calculations come out differently - anyone explain why?

Not 100% up on FD, but the end result will be the same amount of interest(which what matters).

If on repayment the requested payments would be different between the two.

I understand the benifits argument, but if you want decent wedge in retirement you have at some point build up decent savings so you need to go through the benifits barrier.
My view is ignore this benifits thing and get those ISAs filled up.

The other issue with the benifits thing is that for a lot of people they would get nothing anyway(dual earners) or get redundancy that would just make it a non issue so having a few extra £10ks to fall back on makes life a lot easier.