Offset Mortgages -- the Numbers

_dave__4

Scottish_Miser wrote: »

... Is there a calculator out there which will compare like with like? ...

Have you tried this one? :-

http://calc-calc-calc.net/get/calc/Mortgage-Overpayment/

.

franky1981

Bit of a daft question.

Is it better to pay a lump sum off an offset mortgage or keep that lump sum as savings offsetting the interest? I know you lose the flexibility if you do the former but I am more interested in saving money.

Any help much appreciated.

Franky

getmore4less

franky1981 wrote: »

Bit of a daft question.

Is it better to pay a lump sum off an offset mortgage or keep that lump sum as savings offsetting the interest? I know you lose the flexibility if you do the former but I am more interested in saving money.

Any help much appreciated.

Franky

no better.

getmore4less

Scottish_Miser wrote: »

Hi All, we're looking to remortgage to an offset account.

I'm a higher rate taxpayer and we have a healthy amount in cash (25% of the mortgage) at the moment so it looks to be worthwhile.

I've used the "amazing mortgage shrinker" tool on the One Account website which said we could take the mortgage from our 13 year period down to 6 years and 9 months. Assumption included 1% increase in payments per year and a balance/savings increasing by £600 every month.

Looking at the First Direct calculator it's not so rosy. From our current SVR (3.5%) and going to a First Direct Offset (3.98%) with 25% of the mortgage offset using savings would only save us a small amount over the life of the mortgage. In otherwords our saving don't appear to be working as hard for us.

Is there a calculator out there which will compare like with like?

The One account looks great and the First Direct not so, given that they are similar I find this strange!

Offset funds don't save that much, overpaying is what does it.

One account calculator can case you to not realise you are overpaying more money that you have so you think it is better than it is.

What did you say you had left at the end of the month?
Thats your overpayment to use in the other calculators.

Daichip

we overpaid our offset mortgage and owe 3k with 12 years left. the thing is we have that money in a reserve account £111k so we are able to write a cheque whenever we want to. The bank told us to just keep it in the bank as it was offset anyway. But if any of the banks went belly up I would perfer the money to have been paid off the mortgage rather than go through the process of claiming it back.

getmore4less

Daichip wrote: »

we overpaid our offset mortgage and owe 3k with 12 years left. the thing is we have that money in a reserve account £111k so we are able to write a cheque whenever we want to. The bank told us to just keep it in the bank as it was offset anyway. But if any of the banks went belly up I would perfer the money to have been paid off the mortgage rather than go through the process of claiming it back.

If the bank goes belly up the saving will offset the debt.

If it is a Barclays reserve account then it has been paid off the mortgage it is just a large overdraft on the reserve account that gives access to the money.

Scottish_Miser

getmore4less wrote: »

Offset funds don't save that much, overpaying is what does it.

One account calculator can case you to not realise you are overpaying more money that you have so you think it is better than it is.

What did you say you had left at the end of the month?
Thats your overpayment to use in the other calculators.

We have about 25% of the mortgage amount as savings so in 7 years are debt should equal our savings (assuming we keep on saving at the current rate (Woolwich Calculator)) which I think would be an ok position to be in.

As for payment date for mortgage payment on an offset is it better to have the payment made later in the month as the money will sit there reducing your mortgage until it's paid later in the month or does it not really matter?

jamesd

Scottish_Miser wrote: »

Looking at the First Direct calculator it's not so rosy. From our current SVR (3.5%) and going to a First Direct Offset (3.98%) with 25% of the mortgage offset using savings would only save us a small amount over the life of the mortgage. In otherwords our saving don't appear to be working as hard for us.

Is there a calculator out there which will compare like with like?

The One account looks great and the First Direct not so, given that they are similar I find this strange!

Use the First Direct calculator for both. Or anything but the One Account one.

The One Account calculator assumes that any sign of unallocated money is going to be used to pay down the mortgage while others don't assume that all spare cash is being used for that, just using the part you tell them you want to use. If you tell the One Account calculator that you have say 500 left at the end of the month, that'll be taken to be a 500 extra mortgage payment every month.

S6Si

Hi newbie here!

I am also looking at the One Account or First Direct offset. Can someone please explain in black and white if your savings are working harder for you in the One Account?
The One Account looks to good to be true and is always assuming your left over money each month is paying off the Mortgage. It is slightly deceiving but basic all the same.
I have been a long standing FD customer and have no problems with them at all. I just want my money to work harder for me. I have a HSBC business account which I intend to move money from to my FD offset or OA and back again on a regular basis. I understand that money going to a OA from HSBC could take as long as 3 working days to clear!! Any advice?

I have 30K+ in cash ISAs which I am about to cash in and pay 15K off when I remortgage and have 15K as an offset. The ISAs are getting no return, am I mad to do this or?

Thx
S6Si

gil13

S6Si wrote: »

Hi newbie here!

I am also looking at the One Account or First Direct offset. Can someone please explain in black and white if your savings are working harder for you in the One Account?
The One Account looks to good to be true and is always assuming your left over money each month is paying off the Mortgage. It is slightly deceiving but basic all the same.
I have been a long standing FD customer and have no problems with them at all. I just want my money to work harder for me. I have a HSBC business account which I intend to move money from to my FD offset or OA and back again on a regular basis. I understand that money going to a OA from HSBC could take as long as 3 working days to clear!! Any advice?

I have 30K+ in cash ISAs which I am about to cash in and pay 15K off when I remortgage and have 15K as an offset. The ISAs are getting no return, am I mad to do this or?

Thx
S6Si

Not sure on the ONE account vs FD offset, I am sure someone will have experience of both. As for the idea of cashing in ISA's it really depends on whether you want to lose the tax free status of 30K and the interest compounded. Interest rates will eventually go back up but in current climate it is unlikely that ISA's give much of a return. It would have taken a good few years to build 30k in cash ISA (although the levels are increasing so this is not such a major bug from next year) Perhaps leave some ISA monies retained and only cash in a portion? For us one of the good things about the offset arrangement is that when interest rates are low we just put the money that was going into ISA's into the offset, if and when ISA rates go above our mortgage rate we might then go back to ISA's. Offsets if used intelligently I think are really good, we managed to get a 10 year fix last year which has so far worked well for us. Good luck in whatever you decide.