Offset Mortgages -- the Numbers

mortgagenomore_2

Thanks Thrugelmir again for your help :cool:

nofuse

I have an Abbey flexible mortgage which is 0.49% above the base rate.

My mortgage is for £130,000 over 15 years I have around £35,000 in savings but don't know whether its better to place in my mortgage savings pot to reduce interest on the loan and pay the mortgage off early or put in an interest account of say 3% for the term.

I know interest rates are likely to rise but being a higher rate I'm confused after using the woolwich offset calculator, which reckoned I would pay off may mortgage after 10yrs 9mths and save over £6000 in tax, I would have to use the £35000 to pay off the mortgage early. If I then saved my payment of £778 per month for 51 months thise would total £39678, but I calculated if i put my £35000 in a 3% savings account now (less 40% tax so say 1.8%) it would be £45738 after 15yrs so I'm nearly £6000 worse off.

Am I doing this right or not, I think as long as my savings rate after tax is move than my mortgage rate I better off putting the money in a savings account, right?

Gambler

I have a fixed offset with first direct with 3 years to run. 5.29% with £2800 ERC. Just noticed in the paper they are doing a variable base rate tracker currently 2.29% which would save me £4K per year interest using the fix or ditch calculator.

I have £90K offset against the mortgage so I'm trying to work out whether I should ditch my fix??

Any thoughts please?

getmore4less

Gambler wrote: »

I have a fixed offset with first direct with 3 years to run. 5.29% with £2800 ERC. Just noticed in the paper they are doing a variable base rate tracker currently 2.29% which would save me £4K per year interest using the fix or ditch calculator.

I have £90K offset against the mortgage so I'm trying to work out whether I should ditch my fix??

Any thoughts please?

Mortgage size and follow on rate?

To save £4k per year with £90k offset it would need to be over £223k.
(unless you can get a good rate on the savings and pay low tax)


NOTE : FD might not let you switch

humphrey1

Hi. I've been posting at forums.moneysavingexpert.com/showthread.php?t=2596683 but realise this is probably where I should be.

To my mind, it makes sense for me to move to an offset mortgage and would be interested in the views of people here who have (had) an offset. At present I'm in a position to overpay, but am mindful that family and/or job circumstances could very well change perhaps during the next five years so am attracted by the flexibility an offest appears to offer.

From looking around the current providers seem to be Barclays/Woolwich, NatWest, RBS, YorkshireBS, firstdirect, oneaccount - are there others I should be considering?

Loughton_Monkey

I can't speak too highly of Offset Mortgages. I took mine out with First Direct 2003 at 1% above base (then much higher than now, but 1.5% currently). My original intention was (a) to bung in extra money while working abroad, since offsetting the mortgage was the highest 'interest' I could receive, and (b) possibly borrow it all back again to buy a second property when I retired.

Just after the recent crash, I put 2nd property on hold, but had every penny of the mortgage 'offset'.

So what am I doing now? Over a year ago, I borrowed the whole lot back (1.5%) and put it in 2 year bonds (3.85%). Although I am laughing all the way to the bank, surely this is the wrong way round? I'm doing what banks do! Borrowing in at a low rate, and lending it out at a higher rate. I should get a bonus. Actually... er... I reckon I am!

Don't know how long this can last. Bonds due to mature soon, and interest rates may 'turn'. But I can still get up to 3% in mixture of short bonds/notice accounts etc. This goes some way to offsetting the miserable interest I get on other savings.

michmar72

Hi I am offsetting and recently I moved all my savings nearly £6000 and have my monthly wages paid £1500 each month and OH's £500.00,into our current account that is offstting against out mortgage, thought I had done all this for the best but now reading all this i think i haven't done the best thing with my dosh!

Thanks alot,this is very helpful

hackster

First Direct - are offering V competitive tracker off sets, which I would move to if my fixed rate penalty wasnt so high.

gadgetmind

It's a shame the First Direct tracker doesn't let you offset ISAs. The Barclays one does, but the rate is higher and the up-front fees are HUGE.

I'll be having some lump sums coming in, which I can use to offset, but I'd prefer these to be in ISAs. My plan (mad?) is that I build up loads of cash ISAs that are busy offsetting, use my pension 25% tax free lump sum in seven years to pay off the mortgage, and then have the cash in cash ISAs, some of which can move to S&S ISAs. Yes, pensions are great, but ISAs are more tax efficient.

Is the above sane? Is the post-retirement flexibility of having the ISAs worth the higher interest and fees?

BTW, I'd be getting a mortgage against a mortgage free residential to buy a Furnished Holiday Let with the STRONG intention that the rent covers mortgage interest etc.

Ian

getmore4less

you will have to do the calculations, I got into Barclays when fees were zero(switch and save) and base+0.95% those a bit later got base+0.17%