offset equal to mortgage - is this a good strategy?

rmg

Hi,

I will be in the fortunate position in a few months where the amount in my offset account will equal what I owe on my Mortgage (approx 50k). :j

My mortgage is up for renewal.

I do not want to pay off the mortgage yet as I want to keep the money in the offset available in case of emergency.

My plan is to sign up for another 3 years with an offset, and continue to pay my normal monthly repayment amount. (I have been told by my provider that I have to continue repayments even if my offset equals my mortgage). Each month, I will then take out the same amount as my repayment from my offset account and place it in a savings account (with a slight delay to make sure that I never have less in the offset than I owe on the mortgage).

From what I can see this will essentially mean that I pay no interest, continue to pay off my mortgage and start to save with interest, whilst also having access to lump sums if required for emergencies.

Can anyone see any holes in my plan or suggest a more cost effective way to manage things?

thanks.

originalmiscellany

the only way it could be improved would be to have an offset say 30k, get a fix so you know exactly what you're paying then you use the other 20k in a variety of saving schemes where you don't touch them for a diff length of time, e.g. one scheme for 12 months , 1 for 24 and so on. I'm pretty sure that it'd be a higher interest rate than you're paying on your mortgage - thus overall you make a profit in the long term

jimmyjones_2

Congratulations on paying off your mortgage.

Your plan seems good to me, I have exactly the same plan and hope to be in your position in december 2019.

JimmyTheWig

What do you mean by "up for renewal"?
Do you mean that the promotional rate will end? Or is it the offset itself that will end?

If it's just the rate that will end, make sure you don't pay any fees to get another good rate. You're not paying any interest, so doesn't really matter if the rate is 2% or 8%. If you do nothing will you not just go onto their standard variable rate and keep the offset? if so, I think I'd just do that and save the hassle.

getmore4less

What is the mortgage rate?

We took all our money out of te offset to get better rates in savings.

dimbo61

You are right to keep the offset at the moment but dont pay any fees to change deal ( what does it revert to now)
The idea of taking out the " mortgage payment each month " and putting it into savings hopefully cash ISA,s earning a good rate of interest is sound money management.
well done on being fully offset

Jock_Tight

This is exactly what we did in 2007

All detailed in my diary, link is in my signature.

At the start we had £64k in our offset account which matched our mortgage so paid no mortgage interest. Like yourself we could have paid off the mortgage there and then however preferred to treat the offset account as an emergency fund with instant access.

Each month we take the mortgage payment out the offset account and deposit elsewhere making more interest (3 x Lloyd's Vantage for example, paying 4%, however will drop to 3% end of this month + cash ISA's etc).

We started upping our mortgage payment and by end of next year will be mortgage free!

All the best,
Jock