Offset Mortgages -- the Numbers

8Sefton

eldaniel wrote: »

Sefton u r wrong. I thought the same, but now i have got exactly that. Offset mortgage and regular saver from the same bank. Best solution at the moment especially with 8% interest. Go ahead then. You can have asmany savings as u like with the same bank. Only current account is connected to your offset I believe. Hope that helps.

Helps massively! Thanks.

eldaniel

No problem. I started my mortgage fixed for 5 years (biggest financial mistake of my life) at 5.99% as this was cheapest at the time for my LTV. Then after 3 years I changed to offset 2.09% + BOE interest rate, paying approx. 2500!! in charges for leaving my first lender, but because of the difference in % I still saved on that move around 500 pounds in the first 2 years after change and now I keep saving more. So getting offset was definitely my best decision so far especially if you work overtime and have some spare money every month. Overpay everything you can save and you will repay your mortgage in no time.

hugo15

Can I just check I've got my logic right?

I have an offset mortgage and have managed to get myself to the position where my saving offset is equal to my outstanding mortgage value. I don't wish to surrender all the savings to pay off the mortgage just yet, so I am planning to withdraw an amount from the saving account every month equal to the value of my monthly mortgage payment and sticking it in an account where it will earn some interest. I'm not missing anything am I?

ViolaLass

hugo15 wrote: »

Can I just check I've got my logic right?

I have an offset mortgage and have managed to get myself to the position where my saving offset is equal to my outstanding mortgage value. I don't wish to surrender all the savings to pay off the mortgage just yet, so I am planning to withdraw an amount from the saving account every month equal to the value of my monthly mortgage payment and sticking it in an account where it will earn some interest. I'm not missing anything am I?

Can you make the payment directly from the offset savings? That would save you having to move any money around.

hugo15

ViolaLass wrote: »

Can you make the payment directly from the offset savings? That would save you having to move any money around.

Ah, hadn't thought of that. Will ask to see if it's possible when I go in to shift the payment at the beginning of October.

eldaniel

hugo15 wrote: »

Ah, hadn't thought of that. Will ask to see if it's possible when I go in to shift the payment at the beginning of October.[/QUOTE

I am not sure if I understood your question correctly Hugo. If you have flexible mortgage (i.e. you can overpay as much as you like) then you can move moeny whenever you like, wherever you like. I can pay in as much as I want in my mortgage. So lets say my ISA matured, next day I transfer it into my offset mortgage, if I would not be able to find better deal elswhere (i.e. another ISA which would pay more than I pay on mortgage interests).
Hope that helps.

lijaloo

eldaniel wrote: »

Sefton u r wrong. I thought the same, but now i have got exactly that. Offset mortgage and regular saver from the same bank. Best solution at the moment especially with 8% interest. Go ahead then. You can have asmany savings as u like with the same bank. Only current account is connected to your offset I believe. Hope that helps.

Have had an offset mortgage with FD for many years. 1% above base rate. Have several accounts offsetting mortgage. Once savings equaled the amount outstanding on the mortgage FD wrote and informed us and suggested we took our higher rate savings account out of the offset which we did. We've now got a 8% savings account as well so when I make a mortgage repayment the amount needed to offset is reduced, so £300 is paid into the 8% account and the rest into the higher interest account.

leecar

The offset mortgage should be applied by lenders to commercial finance too. One of the best ways to reduce debt tax efficiently.

jrs101

eldaniel wrote: »

Sefton u r wrong. I thought the same, but now i have got exactly that. Offset mortgage and regular saver from the same bank. Best solution at the moment especially with 8% interest. Go ahead then. You can have asmany savings as u like with the same bank. Only current account is connected to your offset I believe. Hope that helps.

Hi

I have an FD offset mortgage at 2.49%

I see you can get 8% aer for 12 mths with their regular savings a/c.

My question is how does one work out if its best to leave the savings I have that are offset against the mortgage or to pay £300 per month (from my savings that are offset against the mtg) for 12 months and get 8% aer ??

many thanks

eldaniel

jrs101 wrote: »

Hi

I have an FD offset mortgage at 2.49%

I see you can get 8% aer for 12 mths with their regular savings a/c.

My question is how does one work out if its best to leave the savings I have that are offset against the mortgage or to pay £300 per month (from my savings that are offset against the mtg) for 12 months and get 8% aer ??

many thanks

You are much better off with filling up regular saver first. 8% is 6.4% after tax. On £100 you earn £6.40. If you decide to overpay instead, then you earn £2.49 in saved interest on your mortgage. If you have enough money to put aside, then your partner can open regular saver too even if you have a joint mortgage! Then in the last month you earn 6.4% net on £7200 if you top it up to maximum! Basically the general rule would be that any saving over 2.5% net will save you more money than overpaying. Then if you still have some money left, overpay. When your regular saver will mature then put all that money in mortgage account or leave in offset current account and start another round of regular savers! If you need some money, simply redraw from what you overpaid already.
I think this FD products is one of the best if not the best on the market. Incredibly flexible! Hope that helps!