Offset Mortgages -- the Numbers

Gooner67

Newbie question.

I'm a high-rate taxpayer and I have a 118k mortgage with the abbey flexible tracker.

I offset 100k to start with and so my mortgage is effectively 18k.

I'm now in a position to zero the entire thing...
is this worth doing? I'm very tempted to.


Any advice gratefully received

getmore4less

Gooner67 wrote: »

Newbie question.

I'm a high-rate taxpayer and I have a 118k mortgage with the abbey flexible tracker.

I offset 100k to start with and so my mortgage is effectively 18k.

I'm now in a position to zero the entire thing...
is this worth doing? I'm very tempted to.


Any advice gratefully received

If you want to keep access to the money then continue to offset.
IF you might move(up) having the line of credit could be usefull.

Look for a better places for the money, some of the regular saving accounts pay more even if a HRT payer.

Use your ISA allowances first they are worth more than offsetting in the long run.

Check that if you go 100% offset they don't close the mortgage on you.

Bernie

cb101 wrote: »

Hi

I have an IF offset mortgage and I’m having a bit of a mind block at the minute as to whether I’m using it properly, having recently had another look at the T&Cs. (These show a diagram with the different jars with different interest rates stacked up against the mortgage jar)

I am offsetting my current account and also a savings account and an ISA and I’m currently fully offset and was quite happy with this.

However, since my mortgage rate is now lower than what I can probably get if I move the ISA out I was looking to try and do this and get a fixed ISA for a year with another provider (if there are any left!)

So my question is, with IF does it make any difference which jar the money is in when it’s being used to offset –(current, savings, ISA- which all have different rates if not part of an offset plan) or are they all essentially ‘earning’ the same interest as the mortgage rate when they are used to offset?
(I know they aren’t really earning any interest and you only pay interest on anything outstanding but you know what I mean)

I hope that makes sense, but having looked at the T&C's I'm totally confused

Thanks

C

A couple of years ago I was in the same position, large cash gratuity on leaving the military, large max-ed out his 'n her ISAs and unable to sell our old house but needed a home nearer new civilian employment.

We particularly did not want to cash in our pains-taking accumulated ISAs (getting our life savings ready for real retirement later on and out of Grasping Gordon's reach). We also liked the idea of having a large dollop of cash at our disposal should the need arise.

The IF Offset Mortgage was the answer to our problem. For a £400 arrangement fee, we took out this mortgage and, instead of having to pay cash for our new home and being totally cashed out, we parked the cash pot and ISAs in as offsets from the outset. We have now "replaced" the ISAs with other funds (policies maturing, wife's redundancy etc) and they are now where the interest rates are more competative.

While we had the ISA's in offset, they simply sat there dormant, earning nothing but defraying mortage interest. As we built up cash in the other IF accounts, we were delighted to find that IF prioritise the ISA's for interest - we expected the current and deposit to be their choice. As soon as we had a large enough "surplus", we moved the ISAs out, her's first, mine this year.

We experienced no problems whatsoever in moving, transferring or even opening new ISA with IF when we were in danger of breaching the old FSA protective limits. The IF Offset Mortgage has been very good for us...

:beer:

hdware

Hi All,

I took out an offset with first direct 5.5% and currently have about 40% of the value of the mortgae in savings but the savings rate is down to 3%. Will it be best to borrow say 50K when the rates are at say 3% and pay off the offset (no penalties apply) and have done with it?

Cheers

Jonathan

hdware

Hi,

I have an offset with FD (5.5%) with interest rates tumbling. I have the ability of a short term loan (interest free) to pay off the mortgage and then start again using a much better rate although I will wait a bit longer to see what this rate will be. Can anyone see a problem with doing this as I suspect first direct will not be over the moon at the thought. No tie in applies.

Thanks

HDWARE

Gonzonator

Hello All,

This is my first post here so be gentle...

I took out a 70K Halifax 5% fixed rate mortgage which reverts to SVR of 4.75% in January. I have looked at switching to another fixed rate but the fees seem to outweigh the savings, especially if you have to keep switching every 2 or 3 years, and the credit crunch has hit the fixed rates pretty badly in any case.

I have been tempted by the First Direct offset mortgage, as between current account/ISA's I have about 10K savings, which I add to regularly. The rate is 1.49% over base so at the moment this 3.49%; a far better rate than I can get in any fixed rate out there. With interest rates on my savings at between 2 and 3 % at present it would seem a good all-round solution, which gives me added flexibility in the long term.

The thing I am concerned about is what if interest rates shoot up to the 6 or 7% rate at the other end of the recession? Yes, my current mortgage would shoot up too, but I won't have shelled out the £599 arrangement fee. Is it worth switching now or should I take a pessimistic long view and wait for a better fixed rate deal?

Cheers,
Gonzonator

k1mmie

I am totally confused.

Hubby and I took out a mortgage with FD around 2003. This was sold as a repayment and is linked to the base rate. So not complaining as it is at a good rate now with the drop.

We then borrowed some extra but was told that the loan to value would be exceeded and this had to be taken as a seperate amount and consequently a seperate repayment was set - but this is all set under a mortgage account number linked to the original.

My confusion is as house prices have risen since this was taken out (even with the fall recently) why FD cannot just add the whole amount together and make it one loan. It is so confusing and the additional borrowing is very expensive. When we asked a few years ago about this and turning it all into one payment we were told that they do not operate a repayment mortgage as such and it is now referred to as a tracker with additional borrowing and they could not do this.

We are not in a position to be able to change at the moment to another lender, but was wondering if anybody else has this problem.

Gambler

jamesd wrote: »

bluenose1, as medic1978 said, you're probably going to be best off keeping the ISAs independent. Even people who can offset with ISAs are finding that they make more in ISA interest than they would save in mortgage interest if they put the money into the offset ISA account.

So long as your ISA interest rate is above your mortgage interest rate you'd also generally be better off by putting money into the ISAs instead of the mortgage offset account or overpayments.

That's always been the case for me since I became a homeowner about 5 years ago. My Cash ISA savings rate was always higher than my mortgage.

Until now................I am 6 months into a 5 year fixed offset with First Direct with a rate of 5.29%.

I currently have a large cash isa with a fixed rate of 6.5% with Lloyds TSB that matures in April. They are offering a new fix at 3.75% on maturity.

I calculate I will be £900 worse off unless I close the ISA and move to my FD savings. Unfortunatley I have only recently realised that FD don't allow you to link an ISA to your offset.

Okay maybe long term it is not a good idea to give up the tax shelter I have worked so hard to save but £900 for a year seems like a hell of a difference.

The other idea I had was that I could drip feed back into Cash ISA's by putting the max £7,200 (Me and Mrs. G) this tax year and for the next 4 years whilst I still have the offset.

Any thoughts much appreciated. Thanks

Mr._Nice

k1mmie wrote: »

We are not in a position to be able to change at the moment to another lender, but was wondering if anybody else has this problem.

FD won't automatically revalue your home, which has upsides as well as downsides. If you are confident that a new survey valuation will show that the total amount now owed will give an LTV of <=80%, then consider asking them for a new valuation, which will cost you £200 or so.

sashanut

Hi all
I wonder if anyone can offer advice as to our offset mortgage which was with the Woolwich (now Barclays) about 10-11 yrs ago. It was initially set up as at the time we were (& are) small business owners who had a lot of income so it was thought we could put money in there & offset it. Well, it didn't happen like that & in fact we have not only run up a lot of cc debt but have struggled to pay our way due to lack of funds & of course the offset mortgage has not been suitable & we have also used up the mortgage current reserve as well due to our situation.

It looks as if we might - & I stress MIGHT - be turning the corner with our income & can at last start to chip away at our debt mountain. My DH thinks that the mortgage will have to stay as it is because mortgages are hard to come by but I am thinking that it might be possible to move it ? Also we may be able to park some money at last in the account (saving for tax bills & etc), would this be the best way forward? I can give some figures:

Main mortgage ac: £95,158.89
Mortgage current a/c: £52,228.15

it says offset mortgagre rate on the statement as 3.95%, we pay monthy £1113

The property has lots of equity....not sure exactly how much but before credit crunch I would think it was worth approx £500,000. Next door house sold for £460,000 & it is smaller with less land (we have 1/2 acre). We also have 2 more properties (both rented out), one is is wholly owned by our company (no mortgage) & the other one is a terraced house with a endownment mortgage for £38,000 but was worth £100,000+ before credit crunch.

However, we have a large amount of CC debt & have just about kept our heads above water & paid the bills (min pymnts).

Would be very grateful for any advice re the mortgage or your thoughts on what would be the best thing to do if our income picks up as we hope ..I know to start paying off the most expensive cc first & cut back on all expenses as much as poss. Any thought much appreciated - we are asset-rich but cash poor & paying a lot of interest. We don't have a good credit record so have trouble switching cards etc to 0% deals.

Any thoughts/wisdom much appreciated!