Just get an offset-mortgage it's a total no brainer

JethroUK

Got repayment mortgage with Alliance & Leics and if we stuck with it we still be paying it now - crap!

Best thing we did was move to offset mortgage (with First Direct)

They offset any savings we have with them (we offset 3 accounts) against the mortgage (what we borrowed) and only charge interest on the difference - in our case they virtually cancelled each other out which virtually wiped-out any/all interest

All the payments we made were coming directly off the capital and we were mortgage free in few years :rotfl:

There were no fixed payments - just an end date when the loan had to paid up by, which meant we could/can pay as much/little as we like, we could also borrow/draw back if we wanted it without notice (just click a button)

The account we offset (as many as you like) were current account earning no interest, no restrictions, just spend whatever you need - whatever is left in the accounts at the end of the month is offset against the loan

Totally flexible, no ties, no payments & in our case no interest

I cant understand why anyone would use any other mortgage?

If you have any savings what so ever it is not going to earn as much interest (long term) as your mortgage is charging you

So why would you want savings earning crap interest (£20K earning 3% pa) when you have a mortgage (£200K costing 6% pa)

When you could get offset mortgage (£180K @ 6% pa) and full access to all your money

Total no-brainer for me

getmore4less

I cant understand why anyone would use any other mortgage?

Because they can and most often are cheaper.

offsetting cash flow saves very little money.

originalmiscellany

Jethro, I'm a big fan of offsets, but they're not for everyone! I agree they offer a lot of flexibility, but that is the biggest weakness, if you're not dedicated, the temptation of having say £100k accessible to spend on a holiday/car etc means that any benefit is lost instantly as one mis-spends their savings.
However the freedom of interest only and regular overpayments is brilliant, especially if you have an erratic salary e.g. a contractor.

Sadly it looks like interest only mortgages are coming to an end soon - or a lot harder to get, which I imagine will mean offset will be more challenging to get too.

I should add I really love them, as it meant I cleared an 18 year mortgage in just over a year using their flexibility, where when i Was on a "traditional" mortgage I only overpaid a little bit. Once the penny dropped, it worked brilliantly in our circumstances.

Am pleased though Jethro that you're pleased with how it's worked for you

Mrs_Z

Mortgage @ 6%??? That's rather expensive.

I think I stick to my repayment @ 2.39% and pile up any surplus money to 'crappy' savings @ 3% (tax free).

PS. Is this April fool thread???

aliasojo

Mrs_Z wrote: »

Mortgage @ 6%??? That's rather expensive.

I think I stick to my repayment @ 2.39% and pile up any surplus money to 'crappy' savings @ 3% (tax free).

Me too. Repayment @ 1.39% and ditto the savings.

Nowt wrong with an offset but to call it a 'no brainer' is just daft and a bit short sighted.

HappyMJ

JethroUK wrote: »

So why would you want savings earning crap interest (£20K earning 3% pa) when you have a mortgage (£200K costing 6% pa)

When you could get offset mortgage (£180K @ 6% pa) and full access to all your money

Because it is much cheaper to be on a standard variable rate at 4%.

Example
180k@6% costs £10,800 per year
200k@4% costs £8,000 per year and the 20k can still be invested at 3% earning £600 per year.

originalmiscellany

You're right 6 % is very high! Oops for not noticing that...

Lavendyr

To give a direct comparison - First Direct's lifetime tracker repayment mortgage is 0.1% cheaper than the equivalent offset.

You need to do the maths, simply put. By putting your savings against the offset, can you save more than you would by having more capital to repay at any given time yet paying 0.1% less for it?

Totally depends on the situation. Many people won't have sufficient additional savings to make it pay.

Thrugelmir

JethroUK wrote: »

When you could get offset mortgage (£180K @ 6% pa) and full access to all your money

Total no-brainer for me

At 6% wipes any benefit of offsetting small amounts of savings.

So unlikely to be suitable for the majority of households.

JethroUK

originalmiscellany wrote: »

Jethro, I'm a big fan of offsets, but they're not for everyone! I agree they offer a lot of flexibility, but that is the biggest weakness, if you're not dedicated, the temptation of having say £100k accessible to spend on a holiday/car etc means that any benefit is lost instantly as one mis-spends their savings....

Suppose you can have too much of a good thing

soooooo flexible it's open to abuse

JethroUK

Mrs_Z wrote: »

Mortgage @ 6%??? That's rather expensive.

I think I stick to my repayment @ 2.39% and pile up any surplus money to 'crappy' savings @ 3% (tax free).

PS. Is this April fool thread???

Then why not borrow £100K @ 2.39% and stick it in your 'crappy' savings account @ 3% (tax free) (borrow from one bank and lend it to another) and retire on the proceeds

Dont quite work does it?

If you truly think you can borrow cheaper than you can lend then you should set up a bank