offset mortgages -inflexible?

tali

offset mortgages are there to reduce your mortgage term -they claim to be flexible , but surely they are inflexible as they tie you in because if you move your mortgage to a different lender what happens to the years of offsetting that you reduced your mortgage by -its not portable is it ?
eg i could have by offsetting reduced my mortgage term from 25 years to 20years - what if i want to change lender? -what happens to the 5 years ive saved? and if you do change you will have to move all salary/ d debits/s orders etc from obsolete offset account
or have i misunderstood it?

silvercar

"portable" in mortgage-speak refers to moving the mortgage with the same lender to a new house - possible with offsets.

Your years of gain will either be in the form of a now reduced mortgage as you have overpaid and you will be transfering a lower mortgage. Or you will have benefited by reduced mortgage payments and your mortgage outstanding amount is unaffected. Or you will have a savings pot that can be transferred to the new lender.

If you have a current account type of offset you will have to move direct debits etc, if you just have a savings account offset this won't be necessary.

jamesd

The saving in years comes because the offset money reduced the interest portion of your monthly payments, assuming that they stayed the same. Then, more of those payments was off the capital, increasing your equity and leaving you with a lower outstanding mortgage balance.

The effect: when you change lender you keep all of the saved years, even if small differences in calculations between vendors produce differences of a few months each way.

The saved years projections may assume that you continue to keep the money in the offset account. If the new mortgage is not an offset mortgage you'd do that by putting the savings into the new property to reduce the mortgage amount.