Advice required on offset mortgage

anskills

Hi,

We recently sold our property, and are currently looking for new one. We sold our property for £212k, and when we redeemed our mortgage the outstanding balance was £121k over 18 years. We have paid/put aside £8k for solicitor fees for sale and eventually our new purchase. Aside from this we have approx £37k in savings, so overall about £120k to put down as a deposit on a new house.

We currently earn about £65k per annum, although we expect this to drop to about £50k in the next year when we start a family and my wife drops to part time. We are looking to purchase a house for approx £230k, so a mortgage for approximately £110k.

My financial advisor suggested we consider a 'one account' mortgage as we are quite disciplined with our money. I have read up on this product on a few occassions and understand the principles. I have also tried out the mortgage shrinker, and the results of this say i could shave 10 years off our mortgage (only 8 years), and save £27k in interest in the process. Also, it gives us plenty of flexibility to over/under pay and also cancel it if it's not working for us.

Now, call me a sceptic, but this sounds far too good to be true! I just wondered if anyone on here had experience of using an offset mortgage and whether the realities of it are as good as claimed. I have noted over the years that the balance of mortgage does seem to take forever to clear, so this may be the answer?!

Thanks,

Kevin

armour

Offset mortgages are brilliant. You should check out first direct. The money in your current account as well as your savings is offset against the mortgage debt and of course, if you need to you get instant access at mortgage rate.

anskills

nobody else able to offer any insight?

Peelerfart

Haven't got an offset mortgage and unable to comment on suiability,but I have read many comments on this board.

Not many complimentary about the "one account" though

Wh05apk

Offsets are not for every body, the rates tend to be higher, so to make them effective, you need a decent balance of savings, convenience is also important, something like first direct or woolwich, where current accounts are offset are better, to ensure you get benefit on every penny you have.

If you are disciplined, expect to have some savings, and like the flexibility, then they are great for you.

LittleMissAspie

I have an offset mortgage (with First Direct) and it's great, I can't imagine having a non-offset. We are good little savers and we are now saving over £80 a month on our interest thanks to our savings. They give you a summary each month, saying what your original interest would be and what your offset interest is.

You don't even need a separate savings account because you can link all accounts to the mortgage. I have all my money in a current account whereas my boyfriend prefers a current account plus separate savings account. We also have a joint current account. They're all linked and offsetting.

We have the freedom to adjust our standing order - we are only required to pay the interest each month. How much we pay on top of that is up to us. I'm not sure what happens if you reduce the payment below what is required to pay mortgage off by the end of the term though, not sure if they would contact you to check up on you or just leave you to it.

I also make manual payments each month to round the balance down to a round number.

We took out a 20 year mortgage but we should be interest-free in five years

originalmiscellany

Well said LittleMissAspie . We are offset, and love the flexibility. We have saved years off our mortgage by having an offset mortgage; every month we save what money we have left over, which we have the ability to access should there be challenging times. Also by paying interest only means that we actually only pay a small amount per month and then everything we overpay is off the mortgage and makes me feel great! Every month we get a mortgage letter telling us how much less we're paying; and it's really encouraging to see the savings every week.

We have been fortunate, we've gone from something like an 18 year mortgage to be cleared in just over 1, and that's all been thanks to the flexibility of an offset.

The other issue you need to be able to adjust to is the fact that every time you log into your bank, you will have a huge debt (mortgage) in front of you. It's a change in mindset from having a few k in the black to having thousands of pounds in the red.
However, when you remember your salary is immediately used to lower the mortgage (it's calculated on a daily basis), you see the advantages to the system.

So just do it.

nikki1520

We have an offset as well and love it. We both maintain separate accounts too for spending money- mostly to avoid conversations about the cost of shoes(me) and gadgets (him)

Once you get into it, it is really addictive seeing how much you can bring it down each month. And we have a one account, and no complaints about the service, although cheaper products are available

Gromitt

LittleMissAspie wrote: »

We have the freedom to adjust our standing order - we are only required to pay the interest each month. How much we pay on top of that is up to us.

Not quite. If the value of loan is worth less than 80% of the value of the property it is secured against, then they'll leave you to it as long as you are paying at least the interest. Otherwise, making capital payments is a requirement of your contract (How much is specified in your mortgage documentation pack). Either way, they have a right to request you to provide evidence that you can pay off the loan before the end date at any time.

sparklycat

We have an Offset mortgage with C&G through our account with lloyds. We are lucky as we had this a few year back and have a very low interest rate. (on a better rate than their current offset)We have paid off £30000 in the last 3 years which we would neve have done with a normal mortgage. It works brilliantly for us but they are not right for everyone. Think barclays are ok, seem to be pretty competitive.

getmore4less

One Account has the worst reputation in the offset/CAM market.

I would question you advisor on this?

As with any product you need to look at the overall cost, there is nothing special about offseting that a smaller mortgage and/or overpayments won't achieve.

In the good old days of massive Stoozing on credit cards the extra costs of an offset were not an issue, now you need to look a bit more carefully at the costs/benifits.

The flexability might be worth it with a reasonable income(ability to save/overpay) and family comitments.


Just in case you are not clear, AVOID the One Account they have a history of ripping off their customers.