Offset Mortgage or Not?

kazzy50_2

Hi All

I am currently on a fixed rate mortgage with the Halifax of £95000 which finishes May 2011. It is at 7% so I am paying about £200 more than I need to.

I also have £18000 in loans and credit cards which I would like to clear.

I have in the past added them on to my mortgage but I really don't want to keep doing that anymore or it will never get paid off.

I was thinking about getting an offset mortgage with First Direct so that I can have my mortgage and my debt separate but will still only be paying what I am now just on my mortgage.

I am doing this more to clear my debts rather than reduce my mortgage quicker.

Am I doing the right thing or are there better options. I don't really want to have any more loans and this is at 3.9%.

Any comments will be appreciated.

Cannon_Fodder

An offset mortgage ideally requires some savings, to make it worthwhile. If you have spare savings, clear some of the debt ?

Whilst less than 7% is probably doable (subject to your LTV, credit history etc), it will be higher than an non-offset product, as a rule.

With such a low loan rate, maybe keep that as it is, and research a lower mortgage rate.

Except, what early repayment charge would Halifax require, if you changed product before May 2011 ? i.e. how long would it take to recoup the ERC ?

getmore4less

Whats your LTV?

FD offset is only 0.1% premium and £500 extra fee forthe 65% LTV version.

For just debt reduction the regular tracker may work out slightly better unles you need the offset facility fto manage cash flow.

If you have previously moved debt tothe mortgage an then run up debt again you realy need to look at that problem first befor doing it again.

kazzy50_2

Thanks for your reply.

ERC is 1% I think but have to check that.

We have about £1000 in savings but would rather save that for emergencies than you it to pay off debt as it would not really make a whole in it. Can use it as well as our wages each month to offset some interest.

Our house is worth about £180000 an have £95000. We have a good credit history.

As I said this is more to clear debts than to reduce mortgage.

Just wondered if there were any other options that I had not considered.

Thanks again

kazzy50_2

I am having a good sort out of our finances. I have not been working much this year due to illness but have now got a new job with much better money.

I need to sort it out once and for all, cut up credit cards as I know that if I have them, I will use them. Taken me 42 years to realise that. I have split up our wages so that my husbands goes into the account with all the direct debits and mine goes into a separate one just to use as spending money and food. Hopefully this way I can track spending.

I just wanted a way to clear the debt and lower our monthly outgoings. As we were paying so much on our mortgage, it seemed a good time to change it all.

Thanks for your comments.

Thrugelmir

Many lenders are not be keen on consolidating debt. As it gives the borrower an easy way out. That can easily be repeated. Focus first on managing your own money properly. Cutting up the credit cards is often easier said than done. Join the debt board and you'll find plenty of support and encouragement to tackle your problems.