Thinking about an Offset Mortgage

princessdon

The deal we are looking at has zero fees

3.7 % - we are currently on 3.99% for 2 years

We really don't have a large mortgage (approx 70K) left to pay and 14 years left so paying that amount of fees when the mortgage is low makes no sense to me.

but they don't take ISA's so it would just be other savings that we would have to use (plus the kids maybe if worthwhile) which again only pays 2.5% and is tax free

vacheron

getmore4less wrote: »

Setting up a lifetime tracker for as long a term as possible with the intention of becomeing 100% offset makes a lot of sense if the costs are relatively low say < £1k.

A quick look at barclays(to offset ISA), not competative £1500 fee and 3.69%
probably better to keep the ISA's and look for a better offset.

I was going to mention something along similar lines. The main factors to consider to justify any additional setup fees for a fully offset mortgage are:

• What level of overdraft facility will you expect to have available.
• How long will the facility exist (how long a term remains on your mortgage).
• How old are you, what are your life plans?

Obviously if you don't "need" a mortgage at the time of applying (as it seems is the OP's situation) then these calculations must be compared against the full setup fee and any other fees which may be required.
In our case we needed a mortgage for approx 30k at the time which made our decision far easier.

We paid £995 setup for our Barclays repayment offset mortgage which now has 180K outstanding and is fully offset with 23 years left to run. This gives a 180K overdraft at 3.49% which will slowly diminish over the next 23 years.

As I don't intend to change mortgages the overall cost of this faciity works out at just under £40 per year, or 10p /day (the difference in of taking out just £400 each year via unsecured borrowing at 13.5% rather than using the offset facility!)

I think this is well worth the reassurance it provides. The ability to finance extensions, university fees, cars and whatever else may come long at such a low rate until I reach 60 years old.

My only regret in hindsight is that I absently chose the standard mortgage term of 25 years when I could and should have gone for 30. This would have meant even lower monthly repayments with a higher reserve facility available for a longer time and the effective yearly "cost" would have averaged at £33 per year rather than £40.

Good lord. what has this forum done to me!

princessdon

I think the other thing for me is how bad I am with money

Checked my ISA's and savings accounts when we looked at this and we have approx 50K in rates with 0.25%

I was kinda hoping this sort of mortgage would take away the eejit in me that opens so many accounts - has money (little bits) everywhere and none at a good rate once the bonus period ends.

princessdon

Actually after a bit of reading on this site I am now wondering if a 4.25% ISA from nationwide (would need to move to the flex account) - but surely I can put in say £1000 a month and withdraw it via DD to my Halifax account (I pay £15 pm) but like the addiitional benefits such as AA and mobile phone insurance etc.

Their flexible mortage is fee free, no penalites - and is less than the ISA rates?

Am I being silly here?

HappyMJ

princessdon wrote: »

Actually after a bit of reading on this site I am now wondering if a 4.25% ISA from nationwide (would need to move to the flex account) - but surely I can put in say £1000 a month and withdraw it via DD to my Halifax account (I pay £15 pm) but like the addiitional benefits such as AA and mobile phone insurance etc.

Their flexible mortage is fee free, no penalites - and is less than the ISA rates?

Am I being silly here?

No you are not. 4.25% tax free is better than 4% so you will be making money every time you save into the ISA. I prefer that way of doing that rather than switching and changing mortgages. When they say fee-free is it really. They could add on valuation fees , solicitor and TT fees so just check that it really has no fees rather than just no product fees.

and....pull your finger out and get those 0.25% savings earning some decent rates. Even my easy access account (not ISA) pays much more than that 3% with Santander before tax.

It's usually cheaper sourcing AA cover and mobile coverage seperately but if you also use the other benefits such as free travel insurance then the packaged accounts may be worth considering.

princessdon

Yes I need to look carefully and the ISA isn't announced till Saturday - but the mortgage is free free and also they pay valuation - only legal fees to pay.

I know I need to sort out accounts - get a letter about reverting back to standard rates then, days turn to weeks to months and a year has passed.

Insurance for 2 x mobile phones is more than the £10 pm (I forgot I get a £5 reward so it's not £15 but £10) plus the home emergency cover and travel insurance make it worth paying the £10 pm for me. I get Audi Assistance on my car anyway but OH doesnt have cover.

I guess I will wait until Saturday - given that I have been on SVR since last Oct and done nothing till now (see a trend here ROFL) a few more days won't hurt.

I'm determined to be more financially aware this year and going forward

The_J

Sounds like you are going with First Direct.

Have you considered the 2.99% lifetime tracker with offset? I think that's probably better than the 3.79% 3yr fix I take it you are considering. You are not tied in on the tracker though and if rates increase then you can move mortgage company or move your savings over.

Transfer your existing ISA to Nationwide, the cash savings to the offset (it should be plenty savings to make it worthwhile).

getmore4less

£5pm to insure a moblile look for a better provider(what is it to add to house) or get a cheaper phone, mine only cost £10 no point in insuring it.

HappyMJ

getmore4less wrote: »

£5pm to insure a moblile look for a better provider(what is it to add to house) or get a cheaper phone, mine only cost £10 no point in insuring it.

OK...I would not expect a higher rate tax payer to go around showing off a £10 phone. They'd be laughed out of town. There is this thing keeping up with your own income. I would expect a higher rate taxpayer to have a nice phone such as an iPhone 4GS or Samsung Galaxy S2 or maybe a Blackberry where they can read emails on the go. I can go around with my £1.99 phone as I don't earn much. Even benefit claimants these days have iPhone's...it's more of a status thing though they don't use them anywhere near their full potential. They are actually quite powerful devices and can do a lot more than just Facebook updates and play a few games on.

princessdon

You are correct we do both have smart phones (HTC and I4) but it has nothing to do with a "higher rate tax payer". Mine is so I can allow my nearly teenage DD the luxury of an Iphone and it's apps and give her a £10 phone (wouldn't trust her as far as I can throw her).

We both have work BB's - so this is a luxury I am looking to cut (I kid you not when I say I am now on the ball with finances!)

I can't beleive for many years how much money I have wasted - this forum and also a personal experience have really made me think.

Just did a "check" on all my savings and accounts. I couldn't have told you the balances or the intrerest rates - that is about to change.

My first priority is sort out the savings rates / ISA's with better rates than the 0.25 I am currently on - then look at the mortage

I have also written out a check for the mortgage to to down to bank on Saturday (this is a huge step for me) but I'm not getting that rate after tax so intend to pay off an amount I am comfortable with

I only wish I had discovered this earlier as I have had the same bank/utilities/phone/BB supplier for years and think I have spent way more than I should

Sits on the bimbo step - but with pride as I hope it will change