Savings or Mortgage?

Chezell

Just a quick one really;)

Am currently looking into remortgage, but do I use my savings to reduce the amount i need to borrow......... or borrow what what I need and have savings in the bank for a rainy day!!

Thanks any opinions greatly recieved as i am a complete novice at this and I am a big scaredy cat:eek:

JoeK_3

Have you considered an offset mortgage?

How much mortgage and savings do you have?

JoeK

Chezell

Thanks for replying,
Mortgage is at 42K
but i have savings of around 8k
never thought of an offset mortgage as i am unsureof how they work?

JoeK_3

The first offset mortgage was launched in 1997 when the One account was introduced initially to Virgin Direct customers as a joint venture between Virgin Direct and The Royal Bank of Scotland. Various other providers are now offering this facility and an offset or current account mortgage can save a significant amount of money on interest payments during the term of the loan.

Offset accounts usually consolidate mortgage, savings and current account under one provider. While no interest is paid on the credit balances in the savings or current account, the credits are offset against the outstanding mortgage so interest is saved on this amount.

Savings remain accessible but when cash is withdrawn, so the amount on which interest is payable will increase. This can mean that effectively savings can earn significantly higher rates of interest than if left in a traditional savings account. Standard variable interest rates may be a couple of per cent above savings rates. Income tax is also normally payable on savings interest however this does not apply to savings made on the mortgage. For a higher rate taxpayer offsetting savings against a 6% mortgage product is equivalent to earning 10% on savings.

Offset mortgages are very flexible, allowing lump sum overpayments to be made or additional borrowing against overpayments. This can make this type of product ideal for the self-employed or those with unpredictable levels of income.

Some providers can also factor in credit cards and loans under the same interest rate too and while the standard variable rate may be slightly higher than other mortgage providers' rates, the rate will be much lower than that of most loans.

JoeK