Offset mortgage good in my situation?

camason

Hi All,

My partner and I are currently renting (paying £550 a month) and we're looking at buying a property around £125,000.

She's employed, earning £15K per year.

I'm a company director, previously earning around £20K a year, but I'm looking at a much higher payout this/next year - the business is likely to create £70,000 (for me) this-year alone. Whilst I hope this will last, I am making an assumption that this fortune might not continue past the next 2 years.

We currently have £40,000 savings, and living costs of just £1100 per month. We will be able to save around £4,000 per month on average for at least the next 12 months, hopefully 24.

My current thinking is to get an offset mortgage (I've seen rates around 3.9%), paying £40K deposit, leaving us with an £85K mortgage. We should then be able to save another £45K per year, offsetting the mortgage.

Using this logic, we could get a 25 year mortgage with low monthly repayments, and pour the entire £85K amount into savings within 2 years, meaning we'll only be paying capital back after the 2 years (I think!).

The main draw for us with offset mortgages is the access to savings - there's a chance that my work could dry up without much notice, bringing me back down to about £20K/year. The access to the savings to live for a number of months is a great incentive.

Does my logic seem correct? Would you advise a different strategy?

Many thanks,

dimbo61

I have an offset mortgage and love them but I also have a normal job where I get paid the same every month.
I think Offset mortgages suit self employed people as you say you can build up savings in the offset which also save you interest on your mortgage.
First direct and Yorkshire building society have some very good deals at the moment

TighterThanTwoCoatsOfPain

Unless you're paying a premium in the Interest Rate for having the offset facility then there are no downsides.