Offset Mortgage - Can you clarify ?

Lil_Dee_2

Hi there, I'm looking at remortgaging, and I'm tempted with the offset mortgages on offer at First Direct.

1. Hubby and I have savings of £26k (we have other emergency cash too)
2. House Valued £180k
3. Remaining mortgage £70k
4. Term 15 years
5. 3.79% 3 year fixed, with any amount of overpayment allowed

We are looking to make repayments of approx £600-650pm, so that we repay the capital well within the 15 years. We are lucky, and have parents that provide us with cash presents for birthdays/Xmas, so we usually use this to pay off bits of the mortgage as and when they happen.

Can anyone advise if this is the way to do it - or should we pay the mortgage interest each month, and then use our residual money to add to our offset savings - is there any logic as to why one way is better than the other ?

I am also waiting to hear if I can open an ISA with FD, and then use that as part of my savings off-set, in which case I'll look to take two out over the next few weeks - one for each financial year.

I'd appreciate any advice or thoughts that you guys/gals may have out there. Many thanks in advance, LD

The_J

Lil_Dee wrote: »

Hi there, I'm looking at remortgaging, and I'm tempted with the offset mortgages on offer at First Direct.

1. Hubby and I have savings of £26k (we have other emergency cash too)
2. House Valued £180k
3. Remaining mortgage £70k
4. Term 15 years
5. 3.79% 3 year fixed, with any amount of overpayment allowed

An offset mortgage would suit you well.

Can anyone advise if this is the way to do it - or should we pay the mortgage interest each month, and then use our residual money to add to our offset savings - is there any logic as to why one way is better than the other ?

Same difference. In the offset account you have access to it, depends how disciplined you are.

I am also waiting to hear if I can open an ISA with FD, and then use that as part of my savings off-set, in which case I'll look to take two out over the next few weeks - one for each financial year.

You can't, offset is tax efficient anyway. If you want to build up your ISA allowances for when the mortgage is paid off and the offset isn't available then you will have to do it separately.

Lil_Dee_2

Thank you J, for clarifying this for me. Very much appreciate you taking the time out. Cheers :beer:

getmore4less

You might be better of getting a lower rate

life time is 3.29% 2.79%(£999 fee)
the fixed goes on to SVR which is higher


There does not seem to be a need to fix.

What rates are the other emergency savings getting once you offset you put everything in the offset unless you can get a better rate elsewhere.


Barclays allow ISA's to be offset handy to build up a use or lose saving pot.


Don't forget to use FD monthly savers.

dimbo61

So offset is a good idea and getmore4less has also pointed out the FD do a life time tracker which may provide a better rate over the life of the mortgage.
You dont say how much of your savings you have in ISA,s ( long term savings)
I would be tempted to use some of the savings to pay off part of the mortgage and bring down savings to less than £16K ( think benefits) and if possible put the savings into cash ISA,s and also pay into the 8% FD regular saver.
You would pay off the mortgage quicker