Offset or not?

superpup

Hi, my partner and I are looking to buy a house together in around 6 months time. We plan to buy at around 250k with a deposit of 100k, maybe more. We will have no savings at that point. Our outgoings will be around £1,500 per month (this includes an est figure for mortgage), our combined income will be a minimum of £4,500 per month (net) so will be able to save a substantial amount.

I saw the one account, did the calculation etc then found this site! I saw the offset calculator on another thread but just couldn't get my head around it.

I like the idea of the one account, all together, easily see how you stand. But everyone is slating the interest rate and saying that you need a large amount of savings to make this worthwhile. We wouldn't have savings at day 1 but would accrue some pretty quickly.

Or would we be better going for a fixed rate interest only with an overpayment option and putting additional money into a savings account to pay off at the end of the term?

Any advice would really be appreciated.

thanks

MortgageMamma

One account are not at all competitive rate wise on offsets, woolwich would be a better bet, as you could run your current account alongside it and have the interest gained on your income going through the current account offset against your mortgage

there are other lenders who do this too but at the moment the woolwich have an excellent product, called a tracker capped, which basically tracks the bank of england base rate btu will not go above 5.99%. it is set at 0.18% above base rate for life with I think a £495 application fee. This means if rates rise you have protection, but if they drop you can gain - the beauty of the product is that there is no end to the incentive period, you can stay on this deal for life if you want

I'm not sure if this is an exclusive product only for applicants going through brokers but I do know its only available for online applications - have a look on the website

by the way, I don't normally mention specific lenders in posts but I'm enthused about this product and think it MIGHT be suitable for you

As always, if you need advice specific to your circumstances please make an appointment with a whole of market mortgage broker and get proper indemnified advice not off a forum

MortgageMamma

superpup

Thank you.

I really like the sound of the capped tracker mortgage, it sounds perfect but I don't really understand your 1st paragraph (apart from the bit about one account not being competitive). I'm only just getting my head around all this, sorry.

MortgageMamma

Well basically your current account would be linked with the mrotgage and the money running through your current account would reduce the mortgage, as the interest payable on the mortgage and the interest gained on the current account would be calculated daily, thus producing the potential to save you significnt money.

I cant do the actual maths as its time consuming and you are not a client (and its 11pm on sat night lol!) but it works for higher earners

the beauty of the woolwich tracker capped is that you are not tied into it at all, i.e. there are no early repayment charges, just a closing admin fee of £275, but to be honest I can't see anyone who has it wanting to redeem it unless they move house or just pay off their mortgage. Its fully portable too which means if you move house and your lending requirements and property are withing the lenders criteria, you can transfer the mortgage onto the new property

superpup

Ah, so we would have a current account with the Woolwich as well? So it works a bit like the one account without the savings and having everything under 1 roof. Sorry, I too am suffering with the 11pm on Sat night thing too, lol.

And I really appreciate the advice already given, I don't need exact calculations, just a shove in the right direction, which I'm extremely grateful for.

It does sound really good, just hope it's still around when we're ready to buy!

MortgageMamma

Woolwich will most likely always have the OPENPLAN mortgage , its what they are renowned presently, but the rates and products do change periodically.

Good luck with the house hunting, I'm going to have to go to bed now I've finished my domination of the mortgage forum for this evening!

superpup

Me too, Goodnight, thanks for the advice.