Is an offset mortgage right for me?

ravravrav

I would be borrowing about 70% of my house price with the 30% as a deposit. Savings would then go down to nil. I've searched online using Moneysupermarket and offset mortgage quotes seem a tad more expensive than other types of mortgages but as I would like to try and save up once we have the mortgage and pay it off early would an offset be better?

Once the house has been purchased I'd go back to 0 savings, and then each month I would probably be able to put away a few hundreds pounds at most. But the idea is that over a year it becomes a few thousand and that way I can cut down on paying extra interest.

Is there anything else to consider with regards to this sort of mortgage option for me?

R_P_W

what is the interest rate on the offsets you are looking at?

impact of the offset with very low amounts in there is going to be minimal.

You might be better looking at a non off set if you can get a better rate and then overpay to reduce the interest over the term....but if you have zero savings this probably isnt the best option as you should really build your savings back up in the short term.

All depends really on the comparison of interest rates between an offset and non offset.

Wh05apk

Highly unlikely there would be any benefit, you can overpay the amount you are talking about with most mortgages, that would probably be better for you, possibly in a few years then, if you build up a decent amount of savings (which you would like to retain access to) then you could re-mortgage to an off-set at that stage.

Generally I work on about 10-15% of the mortgage amount to make it worthwhile.

cv65user

hi i am in exact dilema as you. i got 50 ltv , 100k deposit if i put down thats all my savings gone.

the offset mortgage i seen is natwest but its 4% svr . but whats best is you can over pay as much as you want. however it obviously would be charging me 4% on the remaining mortgage whilst i build up my savings again.
dont forget that this is only a two year deal

so I have decided to stick with a low hsbc 2 year fixed 2.64% . so at leeast now im only being charged 2.64 rather then 4% on outstanding mortgage only then when i have built up enough savings. only then will i move to a offset mortage - theres bound to be some more offset mortgage deals around at the end of my 2 year deal.

besides on the hsbc i can over pay up to 20% of the mortgage *monthly* payment which is more beneficial as if it was 20% of the mortgage say 1 year later . you will owe say 75k not 80k . so 20% of 75k is not that much of an overpayment rather then 20% of 80k (which you do not owe anymore )

-- would mean it would nnot be compounded

getmore4less

Wh05apk wrote: »

Highly unlikely there would be any benefit, you can overpay the amount you are talking about with most mortgages, that would probably be better for you, possibly in a few years then, if you build up a decent amount of savings (which you would like to retain access to) then you could re-mortgage to an off-set at that stage.

Generally I work on about 10-15% of the mortgage amount to make it worthwhile.

Which is far too low in most cases,

50% is nearer the level you need these days to break even.

Last one I checked was 55% for a FD offset mortgage with a 0.3% premium and savings around 2.8% tax 20%

http://forums.moneysavingexpert.com/showpost.php?p=50879345&postcount=797.

ravravrav

thanks all, useful answers!

bigadaj

Surely peopLe would be best off in general aiming fir an ltv, typically 75%say ot 60%, aim for the best deal at that point and then overpay if they feel comfortable. Retaining an emergency fund is prudent, so any excess savings that an individual can make should be put into tax free savings, overpayments and pension, in that rod in my opinion.

The one exception would be to gain matching payments from an employer for a pension, or if an individual pays tax above the basic rate.