Overpayments vs offset mortgage ?

biggoatyman

We have a Nationwide tracker mortgage which is outside the initial term, and has reverted to the SVR of 2.5%. It now allows us to make unlimited overpayments without penalty.

We are considering making a one-off overpayment of £40k which is most of our savings (excluding an emergency fund which we are keeping in a cash account).

We are relaxed about this as we know we can draw the money back out if we had to.

My question is, would this arrangement be exactly the same as having an offset mortgage, with the £40k in a linked savings account ? If not, what are the differences and are there any downsides to what we are proposing ?

thanks for any advice !

getmore4less

Should be the same as an offset.

The risk is Nationwide change their policies, so far they seem to be keeping old terms intact.


With a motgage rate of 2.5% it should be possible to get close or better rates for some of the money.

cash ISA, monthly savers.

Thrugelmir

biggoatyman wrote: »

My question is, would this arrangement be exactly the same as having an offset mortgage, with the £40k in a linked savings account ?

Although the savings would be offset. A higher rate of interest of interest on the remaining mortgage balance would be mean that there's no benefit. As you would be unlikely to obtain a rate of 2.5% on a new mortgage.

Joe_Bloggs

Thrugelmir said:-

Although the savings would be offset. A higher rate of interest of interest on the remaining mortgage balance would be mean that there's no benefit. As you would be unlikely to obtain a rate of 2.5% on a new mortgage.

So at least that is as clear as mud.

I have the same mortgage but I can use fixed rate cash ISAs that can beat the mortgage interest rate. I can also find savings accounts that pay 2.4% net. Use you cash ISA allowance if you have not already done so before overpaying.

J_B.

thewinelake

We're in the same position.

I nearly jumped ship to a FirstDirect product, but then found that what I had was essentially +2% tracker with offset possibilities.

The only tiny weeny gotcha is that you have to make requests to draw-down in writing a week or two in advance. It's a good deal, although the all-important details are not on their website.

Of course I'm still absolutely kicking myself for missing out on the HSBC/FD +0.5% lifetime tracker :-(