Offset mortgage or not?

charlie_d_3

We have a house worth £130,000 and are hoping to buy one for £160,000. We are hoping to redeem savings worth £30,000 in May. We are weighing up the pros and cons of taking an offset mortgage to cover the difference as we are not sure the money will be through in time to purchase the next house. We don't need to use the £30,000 in the forseeable future. We are not sure whether it's worth keeping the £30,000 available (in case we need it?) and paying a mortgage, instead of saving our expendable income. Any thoughts would be much appreciated.

Thanks
Charlie

calleyw

I have an offset mortgage and there are plently are views about it.

But on one board I frequent they suggest that unless you have more 50% to offset it is not worth it as you are paying over the odds in interest rates.

As you can get some very low deals at the moment.

At the moment we are off setting 78% of mortgage and it is not are only savings we have ISA as well.

And before any one goes that is nice for you. We do have a small mortgage. it is bigger than the last one we had. But is still small compared to average house prices.

Also offset was the only way we could afford to buy the house we have bought. As we would have been paying at least another £100 a month of top of the current mortgage which is the same size as the last one and is an over payment only by about £30 a month but will reduce the term from 22years down to 18 years. But we are hoping to get it paid off even quicker.

What part of the offset are you after the offset or the over payment. As a lot now let you over pay by 10% a year before incurring any penalties. Also with an offset you will have access to the money but no interest.

Try the firstdirect offset calculator it will give you an idea of what difference the offset makes.


Yours

Calley

Hobo_2

Charlie, You might want to consider a cam mtg, like the "One Account" does have some subtle diff/ flexibility to other offsets, as mentioned earlier opinion seems to be 45-50% upward offset to better pure discount mtg.

Walletwatch

charlie_d wrote:

We have a house worth £130,000 and are hoping to buy one for £160,000. We are hoping to redeem savings worth £30,000 in May. We are weighing up the pros and cons of taking an offset mortgage to cover the difference as we are not sure the money will be through in time to purchase the next house. We don't need to use the £30,000 in the forseeable future. We are not sure whether it's worth keeping the £30,000 available (in case we need it?) and paying a mortgage, instead of saving our expendable income. Any thoughts would be much appreciated.

Thanks
Charlie

Charlie

I would:

- retain £10000 of the £30000 in a savings account and go for a £140000 non-offset mortgage, without early repayment / foreclosure penalties. This would ensure a decreased loan amount, while still keeping a buffer in savings for unscheduled expenses
- not hurry on the sale of the house just for the sake of foreclosing the new mortgage, ensure that I get a good deal on the sale of hte existing house.
- foreclose the loan, once the sale proceeds come through.

The premium interest rate you pay for having an offset is not worth it in this case, IMHO.

Hobo_2

charlie_d wrote:

We have a house worth £130,000 and are hoping to buy one for £160,000. We are hoping to redeem savings worth £30,000 in May. We are weighing up the pros and cons of taking an offset mortgage to cover the difference as we are not sure the money will be through in time to purchase the next house. We don't need to use the £30,000 in the forseeable future. We are not sure whether it's worth keeping the £30,000 available (in case we need it?) and paying a mortgage, instead of saving our expendable income. Any thoughts would be much appreciated.

Thanks
Charlie

looking at it again charlie does not state what the current mtg is, only home is worth £130,000