offset or overpay

kevinshaw

Say I have £8000 in savings, should I overpay on my current mortgage (there are no penalties to do this) or should I change my mortgage to an offset type? Any suggestions would be appreciated.

kingkano

your choice! It would depend on ALOT of factors. Is this your only savings? If so you need access to them in case you NEED it! (rainy day). What is your current mortgage rate/deal?

If you have a fully flexible mortgage you'd be able to pay an overpayment, but get the money back (borrow back or underpay) with 30 days notice.

If your mortgage rate is low, it might be better to save the money in a high interest account?

Offsets get a mixed review here. If you can find one with a good interest rate there is no reason why you shouldnt change I guess. Most on here argue they have bad rates tho.

skim

I think if you've only 8k then I'd just overpay than offset, I think you need to have much more savings to make an offset make sense.

For me it does & it's brilliant, I've just bought an house at £100,000 more than my old house, yet the payments are the same & will reduce quickly.

Bargain_Rzl

It depends what you mean by "offset". There are other ways of offsetting without using an actual offset mortgage product.

I currently have approx £4k in cash savings, and a mortgage fixed rate which expires in December 2008. By the time my fixed rate expires, and assuming my circumstances remain stable, I could have built up my savings to as much as £10k-£12k (though £8k-£10k is probably more realistic).

I am not overpaying my mortgage because my savings accounts (lump sum in an ISA, monthly payments gradually building up in a Regular Saver) are both currently beating my mortgage interest rate. The ISA is at 6.5%, and the Regular Saver is at 8% gross, which will equate to 6.4% net as I am a standard rate taxpayer. The mortgage is at 4.89%. When I come to remortgage, I'll make a decision about how much to keep as cash savings and how much to pay off the mortgage (which might be nil, if there are still savings rates around which beat the mortgage rate I'm able to get), but effectively at the moment it's "offset" and at my disposal if I need it.