Offset Mortgages -- the Numbers

llydaw

current mortgage only allows 10% p.a. & 200pcm so it's only a small amount knocked off each month, my remaining £800 would have to go into a savings account and then be paid off the mortgage at the end of each year. Is a regular mortgage still the best option?

sorry I'm a bit thick on these things.

MarkyMarkD

Yes, a regular mortgage is still the best option. But not your PRESENT regular mortgage because of the overpayment restrictions.

llydaw

thank you for your advice, I get so confused. Will now investigate the other flexible mortgages.

thanks again.

retrokid1978

Hi folks,

I've been planning to go down the offset route now for a while but would like to run the figures by you to see if you guys think it makes sense, my figures are fairly simple in that i have no other debt other than mortgage debt (managed to clear all those pesky credit cards!)

Savings - 70000 (plus 1k a month ongoing)
mortgage amount - 230000 (term 25 years)
earnings - 3500 per month after tax (i am a higher rate tax payer)

Does this amount in savings make it worthwhile going for one of the standard offset mortgages from IF for example? or are there better ways i could be using my money, any input would be much appreciated

Thanks

jamesd

retrokid1978, I'd be inclined to invest the regular monthly excess and gradually do the same with the current lump sum. Over the long term that's likely to earn significantly more than the mortgage interest rate.

DarT_2

Hey guys,Just lookig for a bit of advise about offset and whther it is of any interest in my position.I have recently completed a 2 year tracker from the Nationwide (have been with them for the duration of my mortgage), and have therefore just dropped onto their BMR at i think 7.24%, and am looking for the best re-mortgaging option from here on, and was wandering whether offsetting would be beneficial to me.I don't have the exact figures to hand at the moment regarding the outstanding amount but i using last years figures as a guide i would expect that the mortgage has approx £60k outstanding and 11 years to completion.My present savings amount to approx £35k, that i would like to keep accesible. the level of savings i suspect will possibly fluctuate over the next 2-3 years, but will remain around the £30k mark.At present the savings are in an account with sainsburys, none of the money is in tax free savings accounts.Would ofsetting be beneficial in my case, if not, i may consider staying with the nationwide on another 2 year tracker deal, as i have been generally happy with them previously. When looking at other possibly better deals elsewhere they seem to give little benefit when you take into account costs associated.Any thoughts would be helpfull.ThanksDarT

jamesd

DarT, it seems likely that a low or no fee (meaning higher interest rate) offset mortgage would work well for you.

Your outstanding mortgage balance and time remaining are low enough that you should strongly consider a lifetime tracker mortgage (life of mortgage) so you won't need to pay mortgage arrangement fees in the future and if you do choose this route, paying a fee now for a lower interest rate would probably be a good idea.

If you're not using your full stocks and shares ISA allowance it's well worth considering doing that, since that can be expected to make you much more than you save in mortgage interest.

If you're not interested in the ups and downs of the investments available in a stocks and shares ISA you might usefully consider an offset mortgage that allows offsetting via a cash ISA account, so that you can build up the cash ISA balance and keep that money in the tax free ISA even after the mortgage is repaid.

cedge

The advantage I see from a lifetime offset tracker is that you never have to remortgage/move your mortgage again therefore you never need to shell out more arrangement fees to the mortgage company. It cost us a £1000 to set up but hopefully that will be the last fee we pay :beer: (completed last week ).

In the end we went for Hinkley & Rugby's BOE + 0.2% offset tracker (capped at 6.2% until Feb 2010). At the time, another rate rise was likely so this product made sense at the time and still does as the +0.2% is a very competitive rate even with non offset trackers. All was arranged through an excellent broker so the whole process was relatively painless.

We wanted the extra flexibility of being able to draw back any savings/overpayments so this was a good product choice.

Our remaining mortgage is £113,000 (down from £120000 less than 2 years ago so it is moving down the right way ), a 25 year term (also down from 28 2 years previous), £5000 savings currently with an addional £800 going into the offset each month.

We are looking to purchase a conservatory (£6k approx) early next year but after that the offset savings will steadily grow and we can then establish whether a balance of overpayment/offset savings will get the mortgage cleared in the shortest time frame whilst maintaing a degree of flexibility (the IF calculator is good for this, unless anyone can suggest a better one?).

No real questions here other than the choice of calculator, just commenting on my move to an offset mortgage and the reasons behind it and chosen not just that the broker suggested it as a possible product to consider. We looked at the details from a variety of lenders and this option and the attractiveness of a lifetime tracker seemed right for us.

Bazzbo

Hello
I would appreciate some advice. My discounted mortgage with Nationwide ends at the end of November. It Stands at £89000 with 15 years to go.The house is worth around £200K. We cannot afford the sudden increase in payments so I am looking to cash in around £40k in shares to use. I thought an offset was the answere but having read this string I am not so sure. I am a higher rate tax payer but have no ISAS. I would like ideally to have access to some of the £40K if possible.

HELP!

jamesd

Bazzbo, do remember that you are not restricted to your original mortgage end date. You could go with another 25 year term and overpay to reduce the term as your funds allow. The shares over the long term are likely to grow in value to allow you to completely clear the mortgage earlier than if you use them at this point, so I wouldn't be inclined to sell them until they can do that.