Offset mortgage,is this right?

devildog

I too have an offset mortgage account and interest is calculated monthly however I have just the one main account with no separate savings accounts tied to it.

Tony69

holly_hobby wrote: »

Interest isn't credited to any offset linked account - thats the trade off for the lender reducing the amount of mge used for interest calc purposes (which is more advantageous unless you aren't liable for income tax i.e income below PA).

I've googled Santanders offset deals, and copied their leading page for info, which doesn't seem to match the t&cs you've been provided with ... have a check ... (here is also the direct link http://products.santander.co.uk/mortgages/flexibleoffsetmortgages.html ) ...

"Flexible Offset Mortgages
Take control with a Flexible Offset Mortgage





Our Flexible Offset Mortgages gives you added freedom – and a great long-term deal. It allows you to offset your savings against your mortgage. So the more money there is in your savings pot, the less interest you’ll be charged, allowing you to pay off your mortgage earlier. Find out how much you could borrow with our online mortgage calculator or view our current Flexible Mortgages deals.

• Why choose a Flexible Offset Mortgage?
• How much could you borrow?
• Other ways to apply

Flexible deals


Why choose a Flexible Offset Mortgage?

• Freedom - overpay when you choose so you pay less interest over the mortgage term, then underpay or take a payment holiday whenever you need
• Savings - offset your savings against your mortgage and cut the interest you pay over the term of your mortgage
• Reduced payments – our Flexible Offset Mortgages track the Bank of England base rate so you benefit from lower monthly repayments if this rate reduces, but remember it may also go up
• Long term - added flexibility means you needn’t look for a new deal every few years
• Extra borrowing – you could borrow additional money in the future, at the same rate as your mortgage up to an agreed limit
• Benefit packages - available on some of our Flexible Offset Mortgages, these include a free standard valuation, and standard legal fees paid for remortgaging or £250 cashback if you’re moving home. If you pay off your mortgage within the first two years you will need to repay the £250 cashback or a maximum of £200 for the remortgage legal work.
• Risk - you need to be comfortable with repayments that could rise as well as fall

Mortgage repayment options


Hope this helps

Holly

I have emailed my Mortgage advisor to look into this again sending him the above link also.

For me also to make things more confusing, on the mortgage offer it has these 2 statements "If you make an overpayment into your mortgage account or transfer money there from your savings account, the amount you owe and the interest you pay will be recalculated immediately" which to me suggests that the money has to be paid into the mortgage account for the interest to reduce...however elsewhere it says "You may pay money into your savings pot which is a compulsory feature of this product and this will offset interest charged on your mortgage, as long as the terms of the mortgage conditions are met".

holly_hobby

Tony69 wrote: »

I have emailed my Mortgage advisor to look into this again sending him the above link also.

For me also to make things more confusing, on the mortgage offer it has these 2 statements "If you make an overpayment into your mortgage account or transfer money there from your savings account, the amount you owe and the interest you pay will be recalculated immediately" which to me suggests that the money has to be paid into the mortgage account for the interest to reduce...however elsewhere it says "You may pay money into your savings pot which is a compulsory feature of this product and this will offset interest charged on your mortgage, as long as the terms of the mortgage conditions are met".

Gosh how to confuse the customer !!

As I say the traditional offset arrangement, is to offset (for interest calc purposes) the capial held in a linked (non interest baring) account against mge borrowings.

There are variants to when this adjusment is made, as you can see from other peeps comments, but the fundamentals of an offset remain unchanged.

Let your broker take the stain and sort this out for you .....

Do pop back if you want any more comments ...

Hope this helps

Holly

surreysaver

I have a Santander offset mortgage. They way it works is, although the monthly payments stay the same, the savings pot is credited with the amount that you would have saved if they did it normally. So instead of your monthly payments going down, your savings will go up. If that makes sense?

taxi73

surreysaver is right...if you have savings in the offset part it pays you interest..you can use this money any time..if you want money to come directly off your mortgage just pay in as normal (your payment is automatically allocated to offset savings unless you phone them direct asking them to pay it off your capital)..if you have it paid off your capital you also have the choice of keeping the monthly payment the same or reducing the monthly payment...it's a great product if used right and has a lot of flexibilty..

getmore4less

This is a perfectly normal offset,

Interest charged is based on net borrowings.

Monthly payments are calculated on the mortgage account and only change when something changes like amount owing or the interest rate.

Some lenders like Barclays alow your payment to change monthly but the default is to fix the payment for the year, actualy they keep the payment at the same level(or higher) at the year change unless you want it to drop.

anselld

tony69 - you just need to remember throughout the T&Cs that "monthly payment" is not necessary the same as "interest".
Interest will be calculated daily on the net balance.
Monthly Payment is just a number calculated from time to time.

If you want complete flexibility the First Direct offset does more like you are expecting. The monthly payment varies exactly with the offset interest and you can move money between offset capital and current account in either direction at will. So no idea why Satander make it so difficult.

getmore4less

surreysaver wrote: »

I have a Santander offset mortgage. They way it works is, although the monthly payments stay the same, the savings pot is credited with the amount that you would have saved if they did it normally. So instead of your monthly payments going down, your savings will go up. If that makes sense?

Iteresting approach but thats Santander for you.

vacheron

surreysaver wrote:

I have a Santander offset mortgage. They way it works is, although the monthly payments stay the same, the savings pot is credited with the amount that you would have saved if they did it normally. So instead of your monthly payments going down, your savings will go up. If that makes sense?

This makes sense, though it does seem a little odd and unconventional!

I assume therefore that this money deposited by the bank into the offset account must recieve special dispensation so that it is not considered as income and therefore liable to taxation (which is one of the great benefits of offsetting)?

Thrugelmir wrote:

A lender is not going to revise a monthly payment every month. The cost of implementing a system would be very time consuming and expensive to administer.

Our offset account (Woolwich) calculates the outstanding balance and revises the next months payment each month along with online access to the daily mortgage balance. In addition each month they post me a full 5 page statement which details the interest paid and saved against each individual day in the previous month, I can't see how that much administration would be involved as it seems a relatively easy thing for a computer to do.

Thrugelmir

vacheron wrote: »

I can't see how that much administration would be involved as it seems a relatively easy thing for a computer to do.

Providing the lenders system is programmed to do this, then perfectly possible. My lender a small BS, does not.