Offset Mortgages -- the Numbers

jamesd

Dan_Collins, hard to evaluate that without knowing the interest rates and other costs of the two deals and the total monthly payment including overpayment. If she was looking at say the One Account it's really easy to beat it for cases like that.

Dan_Collins_2

jamesd wrote: »

Dan_Collins, hard to evaluate that without knowing the interest rates and other costs of the two deals and the total monthly payment including overpayment. If she was looking at say the One Account it's really easy to beat it for cases like that.

Not so sure, looked at the one account and it was still off. The one account did not meet her requirements as she wanted to fix her rate.

monkeyclipper

my brain hurts! i am coming to the end of a fixed rate offset and looking at options. looking at this posts the offset may not be the clear winner. At the moment i have a 206k mge with 28k offset. I am with YBS - their most attractive deal is the offset at 5.94% for 3 years £795 fee. I am trying to compare eg to a standard mge with Cheshire fixed at 5.64% for 3 years - similar admin fee. Id I moved I would pay off say 20k off YBS Mge and then take out a 186k mge and look to make over payments when i can.

Can anyone work out what the savings (if there are any!) on the standard mge so I can weigh up the loss of flexibility of having the offset 28k for a rainy day?

MANY thanks!

jamesd

What's the property value? Putting some of the offset amount to use to lower the loan to value might get you a lower mortgage interest rate and be a good idea.

monkeyclipper

LTV I dont think is a problem- value £400k

MarkyMarkD

Well, monkeyclipper, you are looking at paying an extra 0.30% on £186k in exchange for flexibility. That's a lot of money: £558 per year at the start.

Unless you're very likely to need the extra £20k during the 3 year term, offset isn't worth having.

BUT you would doubtless save some costs by staying with YBS rather than remortgaging to Cheshire - doesn't that make it worthwhile to stay where you are?

philb3374_2

I'm in need of some help/advice please!

I currently have an offset mortgage with the One Account. They've always served me very well but think there are probably some better deals available. I'm not too worried about keeping an offset but I do like the flexibility of keeping all the money in one place and my savings reducing my mortgage whilst giving me instant access should I need them.

For mortgage purposes my house is valued at £110k, it's now worth around £140k. I have a £73k facility with a balance of £38k (£65.5k 'mortgage', £25 in 'savings' and £2.5k 'current'). My planned repayment date for the mortgage is Sept 2015 but I'm £33k ahead of that plan so reckon it'll be paid off in 4 or 5 years.

Basically what I want to know is is there a better option for me than the One Account - where can I save the most money?

jamesd

philb3374, from the description of the single account it sounds as though you have their current account mortgage, not their offset mortgage; they offer both types.

One thing you could do is ask them for an illustration of the effect of changing from their current account mortgage to their offset mortgage. The offset mortgage has a lower interest rate so if they get the calculation right you should save money by switching. They might refuse, the last time I looked they only offered the offset mortgage via mortgage brokers.

Back to the current account mortgage (CAM, overdraft mortgage), a 73k facility on an original property value of 110k would put you on 66.4% LTV and 6.95% interest rate for the 50.01-75% band. You could reduce that to the 6.85% for up to 50% LTV band by reducing your facility to 55k with your original valuation or to 70k with the 140k current valuation, though you'd have to pay their valuation fee for the second option. Since 0.1% on 38k is only 38 saved in the first year, maybe a total of 100 saved over four years, it's probably not worth paying a valuation fee.

Hinkley & Rugby Building Society do a no setup fees (no lender, valuation, admin, HLC; 145 redemption fee, free legals for remortgages) offset mortgage at 6.34%. For the first year at 38,000 borrowed you'd save 0.61% or about 230 Over five years that would be 650 saved. As it's a standard offset mortgage you'd have a mortgage account, offset savings account and current account and you'd transfer excess money from your current account to the offset account regularly. It's available at up to 80 LTV so it could provide your current facility and more if you wanted that, you'd just ask for a 73k mortgage and immediately deposit 35k into the offset account.

Whether saving 650 is worth it is up to you.

little_miss_messiah

I bought my house for £155k with a £138k offset mortgage 2 1/2 yrs ago - the equity from the old house has been offset against it, with home improvemnts and holidays this has reduced to about £32k (this includes about £15k I took out of cash ISA in the belief I was doing the right thing).

Now with £100 here and there every week or so the mortgage is down to £127k but the interest rate is 6.75% and the repayments are £920 or so.

I've just bought a car (nice £6k saving with drivethedeal.com) but have been refused a loan to pay for it - not a blooming clue why - but they say NOT affordability. Should I use the savings (it's about £14k) and if so should I remortgage elsewhere? - ie non offset

It's just I used to work for First Direct (where the mortgage is) and have a fierce loyalty to their ethos and enjoy being able to plonk money against the mortgage at the click of a mouse. Am I being daft or what?

MarkyMarkD

I don't understand the figures you are quoting. What on earth is the £32k and the £14k you quote?

If you have an offset and you've accumulated enough savings to fund your car purchase, then almost definitely you should use the savings from the offset as you are unlikely to borrow cheaper elsewhere.

If you have an offset without sufficient savings to fund your car purchase, then you should either ask your offset lender for a further advance or remortgage elsewhere.

As an offset cynic, I can't see that any of the benefits of offsetting you've explained so far are not available with a decent flexible mortgage - including the ability to draw down overpayments - but you'd be paying around 1% less on your interest rate. So I'd probably suggest binning the offset and choosing a flexible mortgage in any case.