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50k in mortgage & 50k in offset what happens?

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Sorry if this has been asked before. I am allowed by my bank to put a maximum of 50k into my offset account. If I do this and then overpay my mortgage down to 50k what would the bank do?

I'm assuming that I would effectively have an interest free loan where I would pay a set amount off the capital until the mortgage is eventually paid off.

Is this correct?
Mortgage Free in 3 Years (Apr 2007 / Currently / Δ Difference)
[strike]● Interest Only Pt: £36,924.12 / £ - - - - 1.00 / Δ £36,923.12[/strike] - Paid off! Yay!! :)
● Home Extension: £48,468.07 / £44,435.42 / Δ £4032.65
● Repayment Part: £64,331.11 / £59,877.15 / Δ £4453.96
Total Mortgage Debt: £149,723.30 / £104,313.57 / Δ £45,409.73

Comments

  • geralddlp
    geralddlp Posts: 31 Forumite
    I think you are correct, though how much you pay per month maybe variable depending on your provider, or you may be able to choose depending on your provider.

    For example if.com have 3 settings, one of which minimises your monthly payments and two very similar ones which shorten your repayment period.
    I'm lucky enough to have fully offset what I owe now, and I get a little bit of interest on what is over my mortgage (though you can get better rates elsewhere so check before using this as a method of saving), and then I pay normally, and intead of it being half interest and half repayment, its all repayment. once you get to this position, you do wonder whether it's better to just pay the minum, since that gives you the most flexibility, in terms of being able to draw money if you need it. Effectively then you have no debt but a big and cheap overdraft facility,

    Its very much a personal thing as to how what you want to do with your mortgage at that point,

    Cheers G
  • silvercar
    silvercar Posts: 49,554 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    50k in offset and 50k in mortgage.

    Either pay nothing each month and effectively you are mortgage free, with the bonus of 50k available to you as and when,

    or continue making monthly payments, all of which will go to reducing that 50k mortgage balance. eventually you will have no mortgage and still have 50k savings.

    check with your lender that both these payment options are available.
    I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
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