Offset Mortgages -- the Numbers

MarkyMarkD

You are completely mad to have an offset in your current position - you don't have anything at all to offset!

Ask FD what products you can switch to - get a sensible fixed or discounted rate, without any offset nonsense.

They won't underwrite a product switch, so your lack of equity/other debts shouldn't stop you getting one. (Unless they have a policy of not allowing switches whilst borrowers are in arrears - you'd have to check this with them).

And you'll reduce your payments by a fair bit, which will enable you to sort out your arrears and other loans.

I don't understand your wording that "the offset is so expensive because it incurred additional borrowing that turned out to be very expensive". An offset doesn't incur additional borrowing - that would be you who incurred additional borrowing, surely?

jamesd

stuckonyou, yes, those calculations can be right but remember that a standard flexible mortgage will let you make overpayments and may have a lower interest rate, letting you save even more.

stuckonyou

Jamesd, thanks a lot! Really appreciate yr views.
Our prob tho is to lose 1850 per month payments asap - as well as dropping overall interest paid if poss.
Our rate's probably rather high - we were banking with HSBC cos their customer service is so fab, so we have everything with them. They must love nutters like us!
Odd thing seems to happen on offset calculators. If you put in an overpayment it saves you a moderate amount of interest and leaves payments not that much different, gradually creeping down.
But if we split the bonus to 1100 per month rather than one lump sum yearly, the interest saved soars and payments start to plummet quickly. Errrr, no idea why?!?!?!

k1mmie

Sorry if I confused you - I'm confused too lol. The original offset mortgage monthly payment is around £1500, however FD said that when they gave us further borrowing there was insufficient equity to cover it and therefore incurred that as additional borrowing which means that they charge us seperately with a different account number and different amount - which is currently an additional approx £650. This arrangement came into place in September 2006. When we approached them to ask if they could offer us a different mortgage that may benefit the circumstances we were told no - that is it or go elsewhere. My husband said but we are struggling and was told pay up arrears or we commence legal proceedings. I even sent an income and expenditure and it showed that more was going out than coming in - but they said we want additional payments for arrears. So we are struggling to pay for other necessities (like food and kids school fares) on a monthly basis.

Not sure what to do now> Thanks for your advice.

Joto_2

Hi Guys
I'd just like to say a huge thank you to everyone who has posted on this thread. I've been slowly ploughing through during the day and I think I've finally answered my own questions regarding whether a tracker or off set mortgage would be best for us.
At the moment It's looking like a re mortgage with C&G, our mortgage is 48K but we have been advised if we raise it to 50K we will get free valuation and legal fees. The rate is +0.17 tracker @5.92%. This looks to be a rate available through the mortgage broker since it's not available online. There is a fee of £99 to set it up. No redemption fees and we can pay as much extra a month as we choose.

2 questions - is there a better deal out there?

I think I have also answered my second question but It was our intention to pay a much as we could over and above or monthly dd but after reading on here I believe I should be paying it into an Isa first ( if the saving rate is above 5.92%) Can someone just confirm? Thanks

MarkyMarkD

k1mmie wrote: »

Sorry if I confused you - I'm confused too lol. The original offset mortgage monthly payment is around £1500, however FD said that when they gave us further borrowing there was insufficient equity to cover it and therefore incurred that as additional borrowing which means that they charge us seperately with a different account number and different amount - which is currently an additional approx £650. This arrangement came into place in September 2006. When we approached them to ask if they could offer us a different mortgage that may benefit the circumstances we were told no - that is it or go elsewhere. My husband said but we are struggling and was told pay up arrears or we commence legal proceedings. I even sent an income and expenditure and it showed that more was going out than coming in - but they said we want additional payments for arrears. So we are struggling to pay for other necessities (like food and kids school fares) on a monthly basis.

Not sure what to do now> Thanks for your advice.

Sorry, k1mmie, I didn't see this reply or I'd have responded.

Am I right that you are paying £650 in repayments on merely the extra bit you borrowed off FD?

Is that on a shorter term than the main mortgage? If not, alter the term to reduce your payments.

llydaw

could I also ask a question:-
Our current 2 year deal runs out in October (First Active and allows 10% overapyments). We are looking to re-mortgage and I'm unsure if an offset with IF or The One account would be better than a normal mortgage that allows overpayments.

Our mortgage is 113,500 with 22 years left. We can afford to overpay £1kpcm and I'm stoozing £10k (3k in an isa and 7k in a 6.05% savings account). I have a feeling that I'd be better with a standard mortgage that allows overpayments. Any thoughts?

all advice greatly appreciated - tx

llydaw

Can I also ask a question:-

Our current mortgage deal is coming to an end and we're considering an offset with IF or the one account (we're looking to clear the mortgage as soon as possible).

Mortgage is £113,500, we can afford to overpay £1kpcm and I'm stoozing £10k (3 in an Isa and 7 in a 6.05% savings account). I think we're better off with a variable mortgage that allows overpayments. Any thoughts greatly appreciated as my maths isn't great!.

tx

llydaw

I'm not going mad. Computer crashed and my first post didn't appear, so I re-typed it. Sorry guys.

MarkyMarkD

You'd be better off having a normal mortgage and overpaying, as long as it allows limit-free overpayments and lets you draw them down when you need the money back.