Offset Mortgage and which one?

bertocorredor

We are in the process of buying a property (around £220000 -55000 deposit) and have been shopping around for mortgages. We have been told to look into offset mortgages as we could overpay around £20000-£25000 a year. Are they really the best solution for us? If yes, which would be your recommendations?

Thanks a lot,

Berto

getmore4less

Could be a good solution if you want to keep acces to the money.

First Direct, YBS, Barclays seem to be the common ones people are choosing

AVOID one account.

Another option might be a low cost tracker they are a bit cheaper can overpay(on many) and a little bit cheaper usualy.

handytips

For fixed rates Scottish widows Bank. However i think you have mis understood what an off set mortgage is. if you are looking to pay off that sort of money over and above what you owe. It will probably be better if you determine a budget you want to spend on the mortgage on a monthly basis and then get someone to tailor your budget to a mortgage term. Plus you could still overpay, usually 10% of capital outstanding per annum. FACT. 99% of all people with an Off set mortgage do not use the product features. Basically if you havent got a large lump sum to put into the Off set then why doe you want an offset mortgage. Seek Advice from a local broker it may be a better option and it will certainly be explained to you.

bertocorredor

Thanks guys for your tips.

Handytips, I think I understand more or less what an offset mortgage is. Our aim is only to find the deal where we end paying the less possible amount of interest over the life of the mortgage, without committing ourselves to monthly payments of over £1400. At the moment we are both in good jobs and our calculation is that we could overpay around £2000-£2500 a month to get the mortgage down as quickly as possible, as jobs come and go
Doing a quick and dirty calculation we could basically pay off the mortgage in the next 5 years with an offset mortgage (around £14000 would be paid on interest). That sounds like a pretty good deal to me, taking also into consideration that I assume a 4.5% interest rate for the calculation. At a 3.5 we would be paying around £12000 in interest.
About a mortgage where we tailor our payments and then overpay, well it's attractive but most mortgages don't allow to overpayment above 10%, leaving us with 16000 the first year, already 9000 less of what we want to overpay, and the amount allowed would decrease yearly.

handytips

Ok then Scottish Widows or Woolwich are the market leaders. Check them out although Woolwich admin when applying can be appaling at times.

getmore4less

First direct usualy has better deals than the Barclays(Woolwich)

Barclays does allow cash ISAs if you want to build then up at that same time.


You don't have to go offset there are other products that allow unlimited overpayments and are usualy slighty better rates than the offsets.

not so easy to get the payment back.

The hany thing with the offset is if you make it portable as well is you can go 100% offset ASAP, so it costs you nothingto have a masive deawdown facility on hand to buy things, or you can move taking the mortgage with you and start again.

Once you go with the offset get the longest term you can for maximum flexability

The other handy think with Barclays is you can structure it so you have no savings so it is hidden for benifits purposes if income dries up completely.

ViolaLass

handytips wrote: »

FACT. 99% of all people with an Off set mortgage do not use the product features.

Source?

. . .

kingstreet

I tend to think the OP would be better off with a flexible mortgage with unlimited overpayment facilities. As these are normally attached to offset products anyway, the two are likely to go hand in hand.

A lump sum in the offset cuts the interest payable, while flexible overpayments mean variable amounts can be used to reduce the capital balance or term.

Viola - a few years ago, I remember someone from one of the lenders telling me there was very little take-up of the options on a flexible mortgage. I've never heard any stats concerning offset products in isolation.