Offset for 60 y/o with 5 years left?

Locoblade

Hi All

My dad's just turned 60 and will shortly getting a pension lump sum which will more than cover the remainder of his mortgage which has about £30k/5 years left.

His initial thought was to pay off the mortgage outright but at the same time he doesn't like the idea of immediately losing access to a large portion of the money, so rather than make a net loss by putting it in a poorly paying savings account I've suggested to look into an offset mortgage instead, where he could put the lump sum in to cancel out the borrowing and gradually pay it off but at the same time have access to most of the funds in the unlikely event that he need it.

The possible issues seem to be his age, the fact that his earning might not qualify him for some deals (around £20k annual + approx £700 monthly pension), and the possibility of high fees negating any saving, so does anyone know of any offsets that have low startup fees and relatively low income requirements that might be suitable?

thanks

getmore4less

What's the mortgage rate?

TrickyDicky101

It's also worthwhile checking that he doesn't already have offset-like features with his current mortgage: for example, because my Nationwide Mortgage was taken out in 2005 (before April 2010 is the cut off date I believe) I can borrow back - for any reason - up to the limit of my overpayments on my mortgage (I am in the process of doing just this to pay for some solar panels).

Locoblade

Sorry forgot to get back to this the other day!

Dad's current rate is just under 3% variable as he's on the bank's base rate, but if he's offsetting the entire amount and unlikely to need access to it, the headline rate of any offset mortgage isn't that important.

Good point though TrickyDicky, he is actually with Nationwide and I think has been for several years, that would probably be the simplest solution by far, although IIRC from when we had a mortgage with Nationwide, there's a fairly low limit on how much you can overpay each month isnt there?

wileycat

Only while you're in the initial rate period, its unlimited overpayments when you go on the baserate. You have to be on BMR not SMR (I think).

Thats whats stopping me signing another deal as I lose the ability to pull my savings out of my mortgage account if I need them.

xxdeebeexx

I don't know if this is what you're looking for

http://mortgages.firstdirect.com/zerofeeoffers

We have an offset mortgage and love it. Unfortunately couldn't get one with first direct as DH did seasonal work. They might be a bit more relaxed now. Ours is with Nat West.

HTH

Dx

Locoblade

Thanks wileycat, will have to check which he's on.

Cheers Dx, we've got an offset with FD ourselves thanks partially to the advice on this forum about 3 years ago (+.49% tracker for life - that turned out rather well!) and those look ideal with no fees, the only questionmark would be the qualifying criteria as last time I looked I think they required a ~£25k annual income, which dad would qualify for if they take into consideration his montly pension, but not just on salary alone.

Joe_Bloggs

A 30K over five years at Nationwides base rate tracking BMR of 2.5% = 532.42 per month.

The interest starts at 62.5 and falls at a pound a month to nothing. Even if the rate was zero then the repayments would be 500 per month. Total interest 1945.

If the capital is repaid from the offset accounts then it will all be consumed in 5 years. The problem will be what to do with the income that would have been used to pay off the mortgage. A range of suitable savings accounts will have to be found. So the same problem exists in a different form.

The alternative is to research savings alternatives. The best savings rates are for fixed interest fixed term deposits. It may be worth looking at 4% in an ISA for three years. The annual limit for new money is only £5,340 per person year. There may be smarter advice on the pensions board.

J_B.