Advice needed re. new mortgage... interest only/fixed rate or offset?

ziopin

Hi, please could anybody help. I've been looking to get a new mortgage for a while, here are the details:-

We have a £262,000 mortgage, LTV of about 72% - current HSBC account 3.95% - 19 years remaining

Am thinking mortgage rate is bound to increase in the very near future, so want to get something sorted asap.

Should I go with Firest direct offset - it's an interest only mortgage (so what would I do about the shortfall?) Could somebody please explain this? I have tried to work it out, but am completely confused.... this is what I've worked out.

Mortgage payment is about £850 a month (interest only) therefore I still have the 262,000 debt, am I right so far? So I need to pay the original debt of £262,000, if I divide that by 228 months (19 years) I need to save £1149 a month on top of the interest £800 Is that right?

Oh, so confused!

Also looked at the one account, I have 35,000 in savings and going by their mortgage calculator, I could pay the whole mortgage off in 8 years. WHAT!!!

First direct also offer a fixed rate of 4.69 (monthly payments just over £1700) for 5 years?

Abviously I want to pay it off in the shortest amount of time possible, before the kids go to university would be nice :rotfl:

Any help would be much much appreciated.

Thanks

getmore4less

http://www.whatsthecost.com/mortgage.aspx

Stick numbers in and see what you payments will be.


One account calculator is often misleading

originalmiscellany

Am thinking mortgage rate is bound to increase in the very near future, so want to get something sorted asap.

Correct: It's at a current BOE at 0.5% which is almost as low as it can go. It will have to go up over the next few years, but by how much no-one knows. Some think it'll be under 2% for the next 5 years, others fear it'll be 5% in a years time!

Should I go with Firest direct offset - it's an interest only mortgage (so what would I do about the shortfall?) Could somebody please explain this? I have tried to work it out, but am completely confused.... this is what I've worked out.

[COLOR="rgb(139, 0, 0)"]If it's interest only, you will need to do something to make the shortfall up, savings or an investment which will cover the actual cost of the mortgage as opposed to just servicing it.[/COLOR]

Mortgage payment is about £850 a month (interest only) therefore I still have the 262,000 debt, am I right so far? So I need to pay the original debt of £262,000, if I divide that by 228 months (19 years) I need to save £1149 a month on top of the interest £800 Is that right?

[COLOR="rgb(139, 0, 0)"]Top of my head those figures look about right. 262k is a big amount for a mortgage [/COLOR]


Lots of threads on here about First Direct and offset mortgages, we've got one and it's amazing, especially in our current state of 2 incomes and low expenditure. You can make infinite overpayments (without any constraints) and if times get tough can be happy with interest only.

Crucially is that you have some repayment mechanism in place to pay the mortgage off though.