Soon to be first-time-buyer: buy cheap or spend a little? Your view?

Nine_Lives

marathonic wrote: »

the Nationwide site, if that's who you are going with,

I don't know who we would go with tbh. We'd need to look into it closer to the time. I just mentioned Nationwide as their on site calculator is quick & easy to use.


I googled offset mortgage explained last night to try & get my head around it. I can only assume that i clearly haven't understood it as my understanding of it doesn't make it seem so great. My understanding is this:

You somehow link a (singular, or perhaps many) savings account to your mortgage & any interest accrued on this account goes towards paying your mortgage off.

I can only assume that understanding is way off the mark, because the interest earned could be minimal & not the "save thousands" that folk talk of.

gentoo

AMO wrote: »

No offence, but I don't think you're in the same boat as the other chap. He seems older wanting a shorter length mortgage and has a higher deposit.

Perhaps you're right. I may have made the mistake of thinking that 48k was the OP's entire savings as opposed to his deposit as he may have savings beyond that for fees and contingency funds.

I was just trying to make the point that although we have savings of a similar amount I am considering using less of it towards a deposit and keeping the rest 'just in case'.

Sorry for any confusion.

KateLiana27

K_P83 wrote: »

I don't know who we would go with tbh. We'd need to look into it closer to the time. I just mentioned Nationwide as their on site calculator is quick & easy to use.


I googled offset mortgage explained last night to try & get my head around it. I can only assume that i clearly haven't understood it as my understanding of it doesn't make it seem so great. My understanding is this:

You somehow link a (singular, or perhaps many) savings account to your mortgage & any interest accrued on this account goes towards paying your mortgage off.

I can only assume that understanding is way off the mark, because the interest earned could be minimal & not the "save thousands" that folk talk of.

We have an offset mortgage. You don't get any interest on the money in the linked accounts. But that amount is subtracted from what you owe, and you only pay mortgage interest on the rest.

So:

You owe £100 000 on the mortgage.
You have £70 000 in the linked savings account.
You don't get a penny in interest on the £70 000, BUT you will only pay mortgage interest on £30 000, not £100 000 (as you would without an offset mortgage).

So effectively, your "savings" interest rate is the same as your mortgage interest rate.

And if there is an emergency, you can access the £70 000 any time you want.

It's a good option for people who have lots of savings that they don't quite want to hand over to the bank, just in case.

Makes sense?

dimbo61

I aso have an offset motgage with YBS and we have saved our Emergency fund in the offset account.
By building our savings and overpaying the mortgage we have saved £50,000 in interest and reduced the term by 12 years

Nine_Lives

KateLiana27 wrote: »

Makes sense?

Superb!! Yes, makes a lot of sense now & i now see why people save £1000s.

My only question then - is why don't more people do this?

My only assumption is people not being aware of it as an option - similarly, it's all well & good us talking about the highest paying ISA / savings account / regular saver etc, but there will be people out there (& up until about 3 years ago i was one of them myself) who just lump there money anywhere as an ISA is an ISA right?! And savings accounts are savings accounts right?! And they will be totally unaware of chasing interest rates.

From the way you describe it i just can't see why many people don't do it. I'm sure my parents didn't & others i've spoken to don't mention it at all.

KateLiana27

As to why more people don't go for them - offset mortgages generally don't have the absolute lowest interest rates. We could have got a whole percentage less interest by going with a different (non-offset) mortgage by the cheapest provider. But I knew that we would never be comfortable enough to hand over our life savings to the bank, so on balance, offset at a slightly higher interest rate would still save us money.

Also, most people don't have piles of money sitting around in savings when they buy a house! Usually they would use that money to buy a more expensive house instead. People like you and me are in the minority

mr_parsnip_features

Just wanted to say that this thread has some fantastic advice in that I've only come to realise recently, and that I might have benefited from when buying my first house. One of the best threads I've read and highlights why I love this site.

Nine_Lives

I hear what you're saying about offset mortgages could have a higher rate of interest. The reason i'm posting back on the thread after such a delay is that i may have £40k in an account which i could link for an offset mortgage.

Without going into the whos, whats, wheres and whys (it's all 100% legal btw), it'd be £40k that'd possibly get dipped into now & then.

These linked accounts - can you dip into them? Also, i would guess that even if the interest percentage was marginally higher for an offset mortgage .... £40k would make quite a difference, enough to perhaps make the higher interest rate irrelevant??

It's all up in the air at the moment, but it doesn't harm anything by enquiring.

Crazy_Diamond

I was originally going to say that I agreed with your GF but having had a quick look at the property available in LA1 I didn't really feel that you get much more for your money at £175k than at £125k. Perhaps buy something slightly cheaper but with scope for some improvement?

This one looks great for an easy life though, no DIY. In fact there seems to be a lot of really decent semis at the £135k mark e.g. this one is really nicely decorated and overlooks the park although the garden is quite small.
http://www.rightmove.co.uk/property-for-sale/property-22909362.html?premiumA=true

Nine_Lives

Aye the house does look nice, but it's sort of in an area, or on the edges of an area that we're wanting to avoid living in .... though i understand folk on here wont know what areas are nice & what aren't in a place they don't live/have never been to.

I should perhaps not be so rigid with the £125k figure & be willing to flex a little. Still, a lot can happen in 12 months i guess.