Offset Mortgages -- the Numbers

Pernah

Must say I'm much more in favour of the Flexible mortgage product where you can overpay to reduce your mortgage debt and withdraw when funds required - just keep enough in current account to keep the DD's going and paying off CC bills. This way your reducing your monthly mortgage payments and giving the option of whether you want to earn interest on Savings without having to involve complicated calculations... just my thoughts and its helped me save ££££'s to date

getmore4less

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

When the saving rate is better than the mortgage rate stick it in savings

it's that simple.

getmore4less

Pernah wrote: »

Must say I'm much more in favour of the Flexible mortgage product where you can overpay to reduce your mortgage debt and withdraw when funds required - just keep enough in current account to keep the DD's going and paying off CC bills. This way your reducing your monthly mortgage payments and giving the option of whether you want to earn interest on Savings without having to involve complicated calculations... just my thoughts and its helped me save ££££'s to date

No complicated calculation, the current account is offset as well for that extra little bit.

No risk they change their mind on letting you have overpayments back.

sweetdaisy

Just wondering if I can have some advice? I have a diary on the 'Mortgage Free Wannabe' section and hope to reduce my mortgage by 4 years.

I have an Offset Mortgage with Natwest and have been making regular overpayments - paid directly to the mortgage. I can pay as much as I like as there are no penalties and I can have any overpayments paid back to me (should I need to).

I have now started saving my 'overpayments' in my Offset Savings account instead of paying it directly to the mortgage. As my savings account is linked to the mortgage - the balance is begin offset.

In terms of reducing my mortgage as quickly as possible - does it make a difference if I save up my Overpayment money and pay a lump sum every so often (i.e. a few times a year) or is it better to directly overpay on the mortgage regularly i.e. weekly?

OverlandLandy

sweetdaisy wrote: »

In terms of reducing my mortgage as quickly as possible - does it make a difference if I save up my Overpayment money and pay a lump sum every so often (i.e. a few times a year) or is it better to directly overpay on the mortgage regularly i.e. weekly?

No difference...however I would put the cash into the offset savings account - up to the point where the savings = the outstanding mortgage. Then start paying it off (all or in part).

I was very badly caught out when Barclays did not allow me to get back my overpayment's on my offset... I was only allowed the savings pot I had and was able to transfer ONLY the outstanding Mortgage (It was portable) at the prevailing rate (0.23%).

This change of 'rules' was not communicated and it cost me around £10k in additional mortgage interest on my new mortgage and i ended up having to go to the Ombisman... I lost! Basically they could not understand the complexity of the issues... and as Barclay's supplied 'no evidence' they could not rule against them! Unreal...

anyway - keep the savings accessible as its more flexible... and if your mortgage is portable it may be be more cost effective to move it with a higher balance than to take out a new one (possibly).

sweetdaisy

OverlandLandy wrote: »

No difference...however I would put the cash into the offset savings account - up to the point where the savings = the outstanding mortgage. Then start paying it off (all or in part).

I was very badly caught out when Barclays did not allow me to get back my overpayment's on my offset... I was only allowed the savings pot I had and was able to transfer ONLY the outstanding Mortgage (It was portable) at the prevailing rate (0.23%).

This change of 'rules' was not communicated and it cost me around £10k in additional mortgage interest on my new mortgage and i ended up having to go to the Ombisman... I lost! Basically they could not understand the complexity of the issues... and as Barclay's supplied 'no evidence' they could not rule against them! Unreal...

anyway - keep the savings accessible as its more flexible... and if your mortgage is portable it may be be more cost effective to move it with a higher balance than to take out a new one (possibly).

Thanks for the advice . I am not sure if my mortgage is portable but I do intend on keeping it until it is paid off as I bank with Natwest and as it is offset against one current account and 3 savings accounts I am happy with this.

Your suggestion of keeping my 'mortgage overpayment pot' of money in my savings account - rather than directly overpaying seems good, as I have a spreadsheet of what we have in savings and this 'pot' is seperate from my normal savings so that I am not tempted to use it. Hopefully this will see our monthly interest amount reduce as our Savings Offset account balance increases.

getmore4less

OverlandLandy wrote: »

No difference...however I would put the cash into the offset savings account - up to the point where the savings = the outstanding mortgage. Then start paying it off (all or in part).

I was very badly caught out when Barclays did not allow me to get back my overpayment's on my offset... I was only allowed the savings pot I had and was able to transfer ONLY the outstanding Mortgage (It was portable) at the prevailing rate (0.23%).

This change of 'rules' was not communicated and it cost me around £10k in additional mortgage interest on my new mortgage and i ended up having to go to the Ombisman... I lost! Basically they could not understand the complexity of the issues... and as Barclay's supplied 'no evidence' they could not rule against them! Unreal...

anyway - keep the savings accessible as its more flexible... and if your mortgage is portable it may be be more cost effective to move it with a higher balance than to take out a new one (possibly).

I don't think Barclays ever included terms in the mortgage agreements that allowed return of overpayments so there never was a need to notify.

They did accumulate them and savings due to offsetting in the mortgage current account as an increasing OD limit that could be borrowed at the mortgage rate. You would have to check if tha OD on the mortgage cuurent account was ever portable, I don't recall it's been a while since I read the T&C's on that part of the deal.

Darry

I'm thinking of getting an offset mortgage. Looking at FD v Woolwich. Some q's:

First off do mortgage brokers earn commission from the above two lenders as I'd rather go through a broker as I'm not a great number cruncher!

From what I gather the pros of going with FD is a slightly lower interest rate and they offer a fix.

The pros of Woolwich is they offset ISA savings (which would account for 10%+ of the mortgage debt) and I already bank with Barclays so I guess there's a bit less inconvenience for me to go with Woolwich over FD. But they don't offer a fix.

Any other big differences between the two?

I'm trying to work out whether it's worth having the ISA's offset but paying a slightly higher interest rate with Woolwich over FD?

Many thanks

getmore4less

Offsetting ISA makes a tiny difference usualy. does depend on rates and it is not an easy long(ger than mortgage) term calculation

The main advantage is you can keep using your cash ISA allowance an still have that money in a tax free account later, even transfer to Stocks and shares ISA.

With Barclays offset ISA you can move the money in/out of offsetting so bring in outside ISA money or move money out to take advantage of beter rates.

Also with Barclays all the accounts are in the onlune banking including the mortgage one.

Not done the comparisnn recently but most times in the last few FD came out on top for rates fees.

(disclosure : we have Barclays offset and banking but also bank with FD).

mattk35

Coming from a happy FD customer,
Customer service is top rate, think there still doing the £100 offer if you move over to them, and again customer service is top rate.:D