Woolwich example: how to lose money by offsetting

setmefree2

Hi

The other good thing about the offest is that you can see it online 24/7( I don't think you can do this with a straightfwd tracker - but happy to be proven wrong) You have to ring up for the balance or get it annually through a statement.

silvercar

lonestar1 wrote: »

Dont forget that any savings you have in an offset account arent including in most benefits means testing which could come in very handy if your made redundant

This really does depend on how the lender operates.

For those current account offsets like FD, the mortgage is described as a negative balance. The lower the negative balance the higher your amount of savings. So you wouldn't be showing any savings in a means benefit calculation (though you would also be showing lower interest needs if you were relying on the benefit system to pay the interest on your mortgage).

For non current account mortgages, the savings element is often shown as a balance on a separate account and would probably count as savings for any means test.

TighterThanTwoCoatsOfPain

MarkyMarkD wrote: »

- I can lock in a rate of BBR+0.74% for as many years as I like, and get a "facility" far higher than the size of my present mortgage which would enable me to port it in future should I wish to move

Are you sure that's necessarily right? My understanding from my previous ports are that I am effectively redeeming my mortgage, and applying for a new mortgage. They then waive the redemption penalty and let me keep the same deal on my NEW mortgage. 3 times now I have had new account numbers with the same lender..

Would be wary that just because you have the large facility now, when the time comes to move, IF their lending criteria changes they may not let you port regardless.

Just to add, these are just the thoughts floating around in my head, nothing concrete to substantiate it as have never banked with them....Perhaps worth checking out?

silvercar

The value would be that, provided you met the lending criteria at the time you wanted to port, you would get your new higher mortgage at the existing rate. Whereas, if you hadn't of taken the higher amount now, you would get your existing mortgage amount at the existing rate and the excess at whatever rate was on offer at the time.

jamesd

TighterThanTwoCoatsOfPain, say you need a mortgage of 100,000 and the property is worth 200,000. If you want an emergency fund you might borrow 150,000 and keep the extra 50,000 in the offset account so it's not costing you any interest unless you use it. If you move you also have that already approved 150,000 mortgage to use.

MarkyMarkD

Tighter, and Silvercar

I understand both of your points. My argument is precisely that, subject to meeting underwriting criteria when I move, I will be guaranteed the BBR+0.74% rate which might otherwise no longer be available, and for the higher amount than I actually need to remortgage right now.

I don't expect to be unable to meet their underwriting criteria if and when I move.

Having said that, what Barclays tell you they can lend you (in theory) and what their affordability calculation will allow you, are quite different things. Heaven knows why they don't use the affordability calculator before telling you one figure.

They are knocking huge amounts off how much I can borrow because of 0% credit card balances, which is a pain.

jamesd

MarkyMarkD, they don't understand stoozing, assuming that's what it is?

MarkyMarkD

Tell me about it. I had the same nightmare with A&L when I remortgaged to them 3 years ago. Despite having ample income (and cashflow) to cover everything I got an outright decline in the first place, and had to appeal to the underwriters to get the mortgage sorted.

Barclays/Woolwich will actually only lend me £30,000 LESS than A&L lent me 3 years ago (despite a slightly higher income), and that's conditional on repaying £15k of 0% balances. D'oh!

What annoys me about lenders is that they are happy to totally ignore any assets you have, whilst paying huge attention to any liabilities. As you say, I could pay off all of my stoozed balances tomorrow if I wanted to. But it is economically stupid to do so, particularly when you've already paid an up-front fee.

Hobo_2

MarkyMarkD wrote: »

I am definitely marginal about taking the offset compared to the non-offset.

My reasons for going for it are more related to the benefit of locking in the BBR+0.74% on a larger sum of money than I actually need for my mortgage, to give me the option of porting the larger amount if and when I move house.

If I opt for the non-offset, I can do the same, but I'll have to pay interest at 5.74% on £70k that I don't really need. I can't invest £70k tax-free.

If I say £70k @ (say) 6% less 20% tax = £3,360 compared to paying £70k @ 5.74% = £4,018, in one year the £595 fee has been more than covered.

And that's ignoring the fact that, by having an offset, I'll stop having to spend any time and effort moving money around as I currently do on a daily basis. Having £70k offset is like having a £70k authorised overdraft which gives a lot of flexibility.

Hi , MarkyMarkD Same here got sick of moving money around etc.
Signed up for the offset tracker 4 mths ago @ 5.69 (starts 23July)
Had same thoughts as yourself really, borrowed way more than i need, saw it as not a bad gamble/flexibility going forward.
Chose int only, with monthly payment reduction/amount offset, for full term.