Offset Mortgage

pauline_t_2

We have always overpaid our Offset mortgage and have been told that if we wanted to drawdown 25k, it would be paid off within the original term of our mortgage (9 years to go) and our monthly payment amount will stay the same (because of the over payment). We can fully offset the 25k from savings and I guess I'm wondering if it's worth accessing this line of interest free borrowing even though we don't need it just at the moment? (maybe next year we will though when obviously the payback time will be shorter).
Any thoughts/suggestions please?[

Thrugelmir

What not just use your cash savings?

To drawdown the money will incur fees. So not cost free.

pauline_t_2

Hi,
Thanks for your response. I guess we're thinking that as we get older and have less time to repay a loan before retirement, our options to arrange one if needed, would become pretty limited and the chance to access 25k now and know that we will be able to repay it for the same amount we currently pay per month gives us a bit of liquidity.

The thinking is to offset the full amount of borrowing with some of our savings, so it would be the equivalent of an interest free loan and then with the borrowed money we'd just stick it in an account to make up for the interest we won't be getting on the existing savings we've offset, until we decide to spend it!

Bit longwinded and that's why I'm wondering if what I'm considering is worth it!.

Thrugelmir

Does your mortgage product allow for the withdrawl of overpayments?

You could always reduce your monthly payment to repay your mortgage over the original term. If freeing up some cash is your aim.

pauline_t_2

yes it does..hadn't thought of that! Thanks for your input..think I might need to have a rethink!

getmore4less

If you draw down the overpayments and offset them then the net position is the same just you have a bigger offset pot to access.

The one advantage of this is that the lender could turn round and withdraw the ability to draw down overpayments.

THere is no interest free money here.

if you take it out of the mortgage/offset pool you get charged more interest on the new higher net borrowings.

What's the mortgage rate thats the key to offsetting or moving it elsewhere.


I guess we're thinking that as we get older and have less time to repay a loan before retirement

Why do you need a loan?
You have an offset mortgage so thats there to manage cash flow.
As long as you are on target to be paid off on time then use that.

If your payments have stayed the same so you are overpaying by default. Just keep saving extra in the offset/savings(depending on best rate) till you are 100% offset then you free up the full payment.