Offset Mortgages -- the Numbers

Gambler

lilacrose wrote: »

existing deal with the abbey coming to an end i september and they're not offering any good deals to me. am considering an offset account, but worrry about payments in the future when interest rates rise againg. do any providers do fixed or capped rates for offset accounts? i have ltv 45% and 10 years remaining on my term.

First direct do fixed.

lilacrose

I have found a 5 year fixed rate offset mortgage with the Yorkshire, 4.99% fees £500. has anyone had any experience with this lender?

splatt30

lilacrose wrote: »

I have found a 5 year fixed rate offset mortgage with the Yorkshire, 4.99% fees £500. has anyone had any experience with this lender?

Yorkshire Bank or Yorkshire Building Society?

I had my very first mortgage with Yorkshire BS. No probs at all with them as a mortgage leander. However, when I looked to change to an offset with them I found they didn't have a good online banking service so it was going to be very difficult for me to make the most of the offseting. Now that was 3 years ago so it might have changed.

I've an offset with first direct and couldn't recommend more highly, not sure what their current offers are though.

freddieclaude

My deal with the Woolwich is at 3.49% capped at 5.99%. I can offset as many savings accounts as I want including the childrens (which I am doing seeing as it's me who gives them money every month and noone else) and all my ISAs. This to me was the big bonus, the fact that I can offset them all without losing my tax free status. I believe the Woolwich is the only bank to do this or it was 2 months ago. The snag is that the fee is quite hefty at £995, I know I nearly fell off my chair but my intention is to have the amount offset in a few years time without using the childrens money and retaining my ISAs.

eaustin

post moved to a new thread

Isleman

I am absolutely puzzled by Standard Life offset feature . It seems to me as it's a big rip off.
My property was £130000 two years ago and I still got around 111000 to pay for 23 years. Obviously I am stuck with Standard Life as the property today is around £110000 .
I am trying to find a way to get away from them either by overpaying or offset my mortgage.
I was playing with their online offset calculator http://www.freestylemortgages.com/2.4.html?myfreestyle=true
and I can't believe how bad the figures are.
If I open an offset account with them and overpay £200 a month for 23 years , and choose to reduce the term and pay the same amount (£697.98) for the whole mortgage life they are claiming I will save £ 31,819.43 and I will cut 3 years and 8 months off my mortgage.
If I put this money in a saving account or better in an ISA I will get ( £200 x 276 months )£55200 without any interest .If I add the interest ( only 3% )the sum will go to around £79000 .
It gets even more interesting if I choose to reduce payments .
The saving this time is only £30487 and the term is still 23 years and the payments are the same .
So basically you give them an extra £200 a month which they are using ,you don't get any interest , and they shave only £30000.
If you keep the money under matress and you are still better off.
I was playing also with their overpayment calculator http://www.freestylemortgages.com/2.5.html?myfreestyle=true
By overpaying them you save more than by doing an offset .
If I am overpaying £200 a month and choose to reduce the term then I save £31819 and cut the term by 8 years .
If I choose to reduce the payments than I save £20270 in interest and cut the term by 1 year and nine months.
Probably I am mising something but who in his own mind will go for an offset with Standard life when you save more by overpaying ?
You even have to pay £99 for the "privilege" of having an offset account open .:rotfl:

midlandsjack

'I have found a 5 year fixed rate offset mortgage with the Yorkshire, 4.99% fees £500. has anyone had any experience with this lender?'

Abbey do a straight 5 year fix @ 4.99% with no fees what so ever.

OverlandLandy

Isleman wrote: »

If I open an offset account with them and overpay £200 a month for 23 years , and choose to reduce the term and pay the same amount (£697.98) for the whole mortgage life they are claiming I will save £ 31,819.43 and I will cut 3 years and 8 months off my mortgage.
If I put this money in a saving account or better in an ISA I will get ( £200 x 276 months )£55200 without any interest .If I add the interest ( only 3% )the sum will go to around £79000 .
It gets even more interesting if I choose to reduce payments .
The saving this time is only £30487 and the term is still 23 years and the payments are the same .
So basically you give them an extra £200 a month which they are using ,you don't get any interest , and they shave only £30000.
If you keep the money under matress and you are still better off.

Almost - but not quite...
you also need to factor in that you will also not have to pay the Mortgage for 3 years 8 Months and that you can save/invest that money....
ie Saving of £30487 + (44 months x £697.98) = £61198.12
The sums also depend on the rate that you are paying for your mortgage?

Isleman

OverlandLandy wrote: »

Almost - but not quite...
you also need to factor in that you will also not have to pay the Mortgage for 3 years 8 Months and that you can save/invest that money....
ie Saving of £30487 + (44 months x £697.98) = £61198.12
The sums also depend on the rate that you are paying for your mortgage?

You are partially right .
1. £697 in will probably worth less than half in 20 years time.
2. This calculation is valid only if you stay with Standard Life for 20 years which is highly unlikely . As soon as you are near to 40-50 % LTV ( after 10 years or less) you can get really good deals and you can pay off your mortgage sooner.
I can't see anybody to stay on an offset with them for 20 years so they can benefit of their "terrific" deals.

jrs101

Hi,

I'm looking at first directs offset 3y fixed deal at 4.09%

I have never had an offset - are they really that good on a practical basis? What are the pitfalls? is it purely there to reduce the term of years of the mortgage? How realisitcally benefical are these type of accounts?

FD told me that youd have to earn 4.71% aer on savings elsewhere for this not to be beneficial. I have about 30k in savings which I could offset I guess.

Any thoughts/advice are much appreciated,