Pay down mortgage or use money to offset?

ManicMum

Hello

It is gettiing a bit late for me and brain seizing up more than normal.

I have about 80k savings, acquired recently. Currently on 4.99 variable so keen to get off that. outstanding mortgage is 104k. I want to get an offset but at moment, won't qualify based on 104k and household income multiples. I can pay down my A&L mortgage by about 65k as don't want to leave myself with no fallback. I would then have 15k to offer as offset. Or would it be better to just pay off say 20k and then say i have 60k to offset? I am assuming they will offer us a mortgage of around 3 times income. Bit confused on how best to play it.

Also, what sort of checks are they now doing? My husband's company in precarious financial position and various staff have been put on lay off, but not him. We are therefore anxious to get new mortgage before worse happens. Is it just 3 month's payslips still?

thanks MSEs. :beer:

getmore4less

Why do you want the offset?

What happens if income does drop?
If you had no savings would you qualify for benifits
can you live on one salary?

paying down debt with a recent windfall would be OK if both working but not so easy ro justify if on notice or allready redundant.

There are a couple(barclays,oneaccount) of offsets that can get round this but not the cheapest at the moment.

If benifits are not in the equation then consider, max out the mortgage based on LTV and income multiple that gives the best deal.

Be carefull drawing on the offset money to live off,

Its back to why offset?

ManicMum

Hello

I thought offset because i thought if you had a fair bit of savings it would save you money in the long run. My Dad had one and he says it saved years off his mortgage. If my husband lost his job we would have no income pretty much as i only work part time and don't earn much, therefore why pay 4.99% mortgage at moment when we can get a better deal now we have thhis money? At least if things get messy, mortgage will be costing us a bit less each month.

If we threw all our cash at the mortgage now then i guess we would get benefits as have 3 children too. If I offset 80k on a mortgage then benefits office would say we have 80k savings and wouldn't help. So bearing that in mind, was thinking about something along lines of paying 65k off current mortgage, then going to offset for a 40k mortgage and offsetting 15k (the remaining amount) against that. Does that make sense?

Hubby has not had any letter to say he is going to lose his job, just a general one they send each week giving overview of company's position. Guess i should act quickly?!

ManicMum

If benifits are not in the equation then consider, max out the mortgage based on LTV and income multiple that gives the best deal. QUOTE]

confused why you say max out the mortgage? I am leaning more towards restraint at the moment. Can you explain? Thanks

getmore4less

ManicMum wrote: »

If benifits are not in the equation then consider, max out the mortgage based on LTV and income multiple that gives the best deal. QUOTE]

confused why you say max out the mortgage? I am leaning more towards restraint at the moment. Can you explain? Thanks

It does not cost more to have more money(LTV stays good) if you are offset but gives more flexability.

Back to the benifits look into those in detail that may make your choices a bit more obvious.

benifits knowledge limted to savings are a no no.

Unused authorised overdrafts seem to be OK, so that makes the oneaccount an option and with Barclays you can create that situation

Whats the house worth?

ManicMum

It's worth about 150k.

So are you saying offset might not be best? Fixed? I think benefits kick in at 16k savings and then on sliding scale depending how much you have in bank. Thhink i will bung a large chunk off my current mortgage now as then can't be accused of depriving myself of capita if did this after he lost his job. Even if hubby was made redundant and could only get a low paid job, low mortgage not so much of a worry.

thoughts appreciated.

Thrugelmir

Keeping emergency savings in an offset account makes sense. So does paying down your existing mortgage if your current SVR is 4.99%.

However with a low LTV if you repay a sizable chunk of your mortgage. A low rate tracker may be better. HSBC for example. Then invest the balance of your savings into an ISA.

dimbo61

My ideas !! Not advice!
1 pay £65/70K off mortgage now and put the rest of the recently aquired savings into Cash Isa,s in both names £5100 each.
2 ask your lender to keep your mortgage payment static ( that way you are overpaying the mortgage each month ) and you feel no difference
3 only reduce the mortgage payment if your other half loses his job and you also have cash in savings to fall back on.
4 keep a close eye on the budget as you dont want to dip into savings until an emergency arises ( ie need new car/boiler etc)
5 By reducing the mortgage balance now you could afford the payments if things get tough for a while.
Good Luck

ManicMum

Yes, dimbo - my thoughts exactly. think will do that but look for better mortgage deal too.

Thrugelmir - can you explain why tracker might be better? I have seen some offsets for about 2.49% upwards so trackers wouldn't be any lower would they? And will rise in same way offset will once base rate goes up?

cheers

Thrugelmir

ManicMum wrote: »

Thrugelmir - can you explain why tracker might be better? I have seen some offsets for about 2.49% upwards so trackers wouldn't be any lower would they? And will rise in same way offset will once base rate goes up?

cheers

Depends on the interest rate you can obtain on your mortgage. With a low LTV there are some good lifetime trackers available. Remember to factor in product arrangement fees if you opt for a fixed term product.

Here's a link to the FSA website. May help you explore your options better.

http://www.moneymadeclear.org.uk/tables

getmore4less

ManicMum wrote: »

Yes, dimbo - my thoughts exactly. think will do that but look for better mortgage deal too.

Thrugelmir - can you explain why tracker might be better? I have seen some offsets for about 2.49% upwards so trackers wouldn't be any lower would they? And will rise in same way offset will once base rate goes up?

cheers

First direct trackers are cheaper than their offsets