Offset Mortgages -- the Numbers

Iaaan

New to this - and confused already. If I describe my situation, can anyone help?
I have a First Direct off-set mortgage (104000 when taken out two years ago), I pay £650 a month (slightly more than the minimum) and I have no savings. I play the 0% rate tart game with increasingly large amounts of credit card debt. Am I paying too much? Exactly what benefit does the 'off-set' element of my mortgage give me. Should I be being much, much smarter? Can't seem to form any clear answers for myself..... be very grateful for help...

Newbird

Iaaan, the point of off-set mortgages is to off-set savings against your mortgage debt.
No point having an OS if you don't have any savings!

OK do the credit card thing, but the money you get in stoozing from the CCs - are you putting this into your offset account? or maybe it is earning you more somewhere else?

Trying to keep this simple for you - the thread was originally to do the maths to see if the higher rate charged for an offset Mortgage is worth taking on.

Basically the higher savings ratio to morgtgage debt you have the better it will be. The savings need to be in an offset account to get the benefit of it.

HTH

beefster

According to the financil section of the Mail on Sunday. centre pages last week.

For a £100,000 mortgage at the best rates currently available.
Top tax payers would need to offset £10000 and lower tax payers £20000 to make it pay off / viable.

Bit of a generalisation but its in the ball park.

Sina_2

On the subject of costs involved the WOOLWICH have just publised that they will be putting up their Final Repayment Charge from £195 to £275 (effective from 1 Dec 05. Having asked the Woolwich they said the last time this fee was increased - wait for it - was 15 March 2004 when it went up from £150 to £195.

To me that smells of a scandle ...

gallygirl

I can't praise offset mortgages enough - I love the flexibility they give. We have one with Egg @ 5.49% - not the cheapest, but we overpay £200 every month, and have been able to use the overpayment as the deposit on a house in Spain - without the hassle of remortgaging.

The Egg account is great as you can use it at will - although it's not linked to a current account. We have buy-to-let properties and transfer all rent payments electronically to Egg, then transfer out at end of month to pay their mortgages.

The best thing I ever did was set up a spreadsheet calculating interest daily. I input all payments in & out, and can calculate the pay-off date - it makes us even keener to keep on top of transferring funds! After recent purchase are back up to December 15 but will work on it.........

MyUserNamesTaken

Hmm...OK, answer me this. What's the best way to go.


£23K mortgage currently being overpaid at 100% the monthly repayments, but the mortgage interest is calculated yearly.

£10K sitting in a savings account.

Overpaying by paying double the monthly repayments right now.

Don't want to knock a lump sum off, so opting for an offset tracker (0.59% above BoE base rates for the term of the mortgage, which is 23 years). I'll continue paying £300 when the monthly rate is only £141, as well as having my savings offset against the mortgage. 5.09% doesn't seem that bad to me considering my current mortgage is 1.4% below Natwest's SVR and coming to an end at the end of January. Reckon the tracker offset is the way to go? Interest calculated daily on the new offset mortgage, too. I should add that I recently became self employed, so moving mortgages is not the easiest thing for me to do right now. I'm also able to save between £500-£1k a month.

Newbird

MYUNT..First up - why overpay your mortgage each month if your interest is calculated annually?

I used to save my overpayment portion in the highest interest savings account I had, then pay it as a lump sum just before the mortgage interest caluculation date, mine was end of year in Dec. Hence I gained the interest on the overpayment, not them and still had my capital lowered by making the payment just before the interest calculation date.

I actually also do this with all annual bills, so I get the interest, not the companies who love you to pay by DD each month, so they do! If you don't have to, don't pay monthly.

I'm now on offset and caluculated daily, which is much more useful. Also look at making a lump sum payment, if you have no good reason not to. Put your monthly savings into the Offset too - every little helps!

MyUserNamesTaken

Newbird wrote:

MYUNT..First up - why overpay your mortgage each month if your interest is calculated annually?

I used to save my overpayment portion in the highest interest savings account I had, then pay it as a lump sum just before the mortgage interest caluculation date, mine was end of year in Dec. Hence I gained the interest on the overpayment, not them and still had my capital lowered by making the payment just before the interest calculation date.

I actually also do this with all annual bills, so I get the interest, not the companies who love you to pay by DD each month, so they do! If you don't have to, don't pay monthly.

I'm now on offset and caluculated daily, which is much more useful. Also look at making a lump sum payment, if you have no good reason not to. Put your monthly savings into the Offset too - every little helps!

I was originally told that my mortgage interest was calculated daily! That's the only reason I've been overpaying. You can imagine how peeved I was when they told me that it's actually calculated yearly! This is also one of the reasons I'm moving my mortgage. I've had enough of Natwest!

Newbird

OIC...Ooops! At least you can take satisfaction that you are doing the right thing now.

I'm working hard to get all available benefit from my offset too.

MyUserNamesTaken

Newbird wrote:

OIC...Ooops! At least you can take satisfaction that you are doing the right thing now.

I'm working hard to get all available benefit from my offset too.

I don't pay anything that has interest on monthly dd. I make damn sure I pay bills like insurance, etc, in full to avoid interest!

As for making a lump sum payment, I really don't want to. I feel safer knowing the money is tucked away in a savings account should I need it. Also, with an offset, I'm not paying any interest on that amount anyway. I'm not sure if I should keep on overpaying my new mortgage, or stick it all in savings, though.