offset mortgage

alibinns023

Ok I am well confused,We have an offset mortgage with 8 years left to run,we originally borrowed £66k which is now down to £62K as we have been overpaying,as well as offsetting,it is at 3% and the interest has been £166.06 since it went to 3% in 2009.I keep getting letters saying we have saved £400 odd by off setting,where is this going,as it hasn't come off the balance,and how come every year the interest amount is the same,when the balance of the account is going down?
Not sure if it's worth changing the mortgage,and starting again elsewhere,also is it really worth offsetting when we only have £3k in savings,in fact I am sure that this mortgage wasn't right for us in the first place.

opinions4u

If anybody can make any sense of that in a way that allows them to clarify the options open to you, I will be mighty impressed.

What's your monthly payment?

jaybeetoo

How are you planning to pay off the £62k (or whatever it will end up as with your overpayments) when it matures in 8 years?

getmore4less

more details needed lender and original deal rate term etc..

3% is not that bad so probably worth stayaing with that.

£62k over 8 years @3% needs a payment of at least £727 so if you are paying £166pm you need to be saving at least £561pm as offset/overpayments.

alibinns023

ok Monthly i should be paying £166.06,but I am paying £250.
We are paying off the £62k with an endowment,which will have a shortfall,but that's a whole other problem.
And it was with the Norwich & Peterborough.
The original deal was at 5.69% for 14 years,it is a base rate tracker mortgage,with a floor of 3%.
I think we were missold it as my Husband is self employed,and have hardly any savings.
They send us evey 3 months a thing saying to increase the monthly payments,which we try to do,but it looks like the mortgage is set up to take the fixed interest payments,and doesn't take into account the changing balance outstanding.
Also the amount we have saved by offsetting hasn't been credited tot he account,does that happen at the end of the mortgage?
Best bit is,they no longer have mortgage advisors in branch,and the person in the mortgage dept had no idea of the answers to my questions.

getmore4less

Missselling won;t wash, offsets are potentialy ideal for self employed, variable income so good for cash flow and you offset the tax money.

check your endowment performance then consider cashing it in offsetting the funds and redirecting the endowment payments to the mortgage.

if you are convinced your overpayments add up to morethan the reduction in the ballance then there might be something wrong

Without full history and full details of how the mortgage works it will be difficult to say much else.


time to gete out your T&C and read the details

alibinns023

Maybe not missold,but not explained properly.
I am mostly concerned that we are paying the same amount of interest on £62K,that we were paying on £66 when we started,how does that work,if we have reduced the balance by £5K,surely the interest per month should reduce even if only a few pence.
And we do offset out tax money,but as we earn so little we don't actually pay tax,so don't save a lot.
I have arranged for someone to ring me saturday,and talk about it,but i think an independent mortgage broker may be the best way to go,he can look at it,and advice us if it's the best,or if we should swap to something else.

Morgage_Confused

"ok Monthly i should be paying £166.06,but I am paying £250"

is £166 the interest only element? in otherwords is this an interest only offset?

if it is then you are only paying about £84 off the balance for the months you have been overpaying

alibinns023

Yep the £166.06 is the interest,so I am overpaying £83.94 per month,which hasn't reduced the amount of interest per month,even though I have paid off £5444.81 from the original amount I borrowed.If interest is worked out daily or even monthly,surely after paying off a lump sum it should have gone down a bit.

alibinns023

Yes it's interest only offset,with an endowment policy to pay the capital.

opinions4u

First of all, if your rate is 3% it's fairly competitive.

Secondly, your debt is falling. So your overpayments appear to be achieving something.

You state your monthly interest is £166.06. Is this the contractual monthly payment or does your statement say "interest: £166.06" for each calendar month?

What interest has shown on your last few statements? How often do you get them?