Using my offset mortgage to the best of its ability

tiggerjj

Hey guys,
I bought my house in April and got an lifetime tracker offset mortgage from woolwich. I just want to check with all you clever lot that I am managing it the best way...

I had it set up to reduce the payments as then if i pay by standing order it reduces the term anyway and they say said if i had a reduce term mortgage i could not reduce payments in the future..... So my mortgage payment with no offset would be 455 pounds and I have a standing order for 550 so 100 overpayment per month minimum.

I have all my accounts with Barclays and so my pay goes directly to offseting my mortgage (until i spent it!!! :rotfl: )

I want to pay off my mortgage as quickly as possible, is there any difference between offsetting with 1000 pounds and overpaying 1000 pounds (for example) as far as i understand they are doing the same thing??? Is this right????

Is there anything else I should be doing to get myself mortgage free as soon as possible????

Also I know that 50k is protected in each banking group, how does that work if you have an offset account with more than 50k?? does it take into account the debt of the mortgage or not???

Thankss

Tigger

HappyMJ

Why don't people understand offset's before taking them out? You don't have savings you have a big debt that is £50k lower than it could be. Save up to the mortgage amount in the offset account and you pay no interest but you can always borrow it back again without having to ask the bank for a loan. So pay them the minimum over the longest term possible and save as much as possible in the offset account.

If bank goes bankrupt you don't lose money even if you had hundreds of thousands offset.

tiggerjj

HappyMJ, I do understand my offset, I just wanted to check that i understood it fully. I know that my xxxxk of savings means i pay interest on my mortgage - xxxxk amount. I was just trying to be a good MSEr and check.

Thanks for your reply

sujman

dont forget the other stuff like re-setting direct debit days to as late as allowed and using interest free credit cards etc etc

tiggerjj

Sujman, thanks for your post, a couple questions if i may,
the original direct debit was set by the bank for the date in the month we agreed the mortgage would be paid, i set the standing order for the same day, i assume this is as late as it can be set or am i missing a trick??

interest free credit cards, i have one barclaycard (and maybe a post office one when i get home and check my post....) which i use to purchase everything during the month so my money is sitting in my offset current account as long as possible. is this what you mean?? or is there something more i should be doing???

thanks
J

hillcats

One thing to remember though...
If you have a mortgage and savings with the same institution and the institution goes belly up then I believe your savings are immediately gobbled up against your debt so a 100k mortgage being offset with 20k of savings would then leave you owing 80k to them .
Not likely to happen I know but I understand this is one of the risks of offsetting.

sujman

tiggerjj wrote: »

Sujman, thanks for your post, a couple questions if i may,
the original direct debit was set by the bank for the date in the month we agreed the mortgage would be paid, i set the standing order for the same day, i assume this is as late as it can be set or am i missing a trick??

interest free credit cards, i have one barclaycard (and maybe a post office one when i get home and check my post....) which i use to purchase everything during the month so my money is sitting in my offset current account as long as possible. is this what you mean?? or is there something more i should be doing???

thanks
J

I have a 'one account' so its like one big overdraft and as such I dont have mortgage payments dates and SO's to set up etc, so can't help you there.

With the credit cards, what you are doing is exactly what I do. Where I do need to spend money (it's an obvious point but of course its more efficient not to spend the money in the first place than try and save the interest payment on it!), I use my interest free CC (Tesco) and will keep it there until I need to pay it off.

Only other things you could potentially do with your interest free CC, especially if you might never use the full credit by the time the interest free period runs out - it to pay for things your friends / family might buy but were going to ay cash instead but give you the cash and you bank it and pay for the item on the CC, if you know what I'm getting at!

getmore4less

If not using you ISA allowance elsewhere you can build up offset funds in cash ISAs which have the potential to be usefull in the future.


Interest free purchase CC can be usefull to build up temp offset funds(slow stooze)

If you do overpay you should be building up a reserve fund as and OD in the mortgage cuurent account.

ViolaLass

tiggerjj wrote: »

I had it set up to reduce the payments as then if i pay by standing order it reduces the term anyway and they say said if i had a reduce term mortgage i could not reduce payments in the future..... So my mortgage payment with no offset would be 455 pounds and I have a standing order for 550 so 100 overpayment per month minimum.

It's no good, I've read this para several times and I still don't get what you're driving at. Is the £455 per month interest and some capital repayment or just interest? Surely all you HAVE to pay each month is the interest and the amount of capital you pay (and therefore the amount you reduce the term by) is up to you.

DVardysShadow

hillcats wrote: »

One thing to remember though...
If you have a mortgage and savings with the same institution and the institution goes belly up then I believe your savings are immediately gobbled up against your debt so a 100k mortgage being offset with 20k of savings would then leave you owing 80k to them .
Not likely to happen I know but I understand this is one of the risks of offsetting.

I believe it is worse than that. The loan and the savings are regarded separately AIUI, until the savings are paid into the mortgage account. The distinction is that the savings are the banks debt until they are paid into the mortgage account. The borrowers debt is the amount outstanding on the mortgage and the offset does not reduce the debt - it only reduces the interest paid.

As above 20k of savings would be lost in the bankruptcy, but 100k of debt would stand. The 20k would be reimbursed under the savings guarantee - so 80k still owing.

But if the savings are 60k only 50k would be guaranteed, so still 50k owing - a loss of 10k.

Moral - don't let the offset go above the savings guarantee, either find another hoe for the surplus or use it to pay down the loan.