Let the mortgage see the offset

mortgage_meltdown

So - a shiny new diary!

I have posted previously under a new name, but with a new challenge, I wanted a fresh start!

So... a bit about me. I have a OH - we got married just about a year ago and have been together for 10 years. Oh and we have three cats. Some are nice and one is a brat who is only there for the food!!

It is too long a story really but in brief, a few years ago we successfully paid off around £50k of personal debt.

Since then, we started to pay off the mortgage but then OH started his own company and so things have been a bit different!

So by way of a starting point, we are literally about to receive our shiny new offset mortgage. I am THRILLED to have this. Having something where I can see that every penny counts is exciting to me. I am employed but we have a little ebay business (declared of course to the tax man!) so every sale will go into the pot. The plan is to run the offset savings as our current account. We are good with money so it doesn't matter if our savings are sloshed in with general money etc. The balance in there is not a temptation... I hope!

And now the figures. You might be shocked. But we do live in the South East and this isn’t even a big mortgage by most people here’s standards!

When it (eventually) comes through it will be....

£244,682 plus £1,545 fees – total of £246,227

Rate is 3.14% which is ruddy marvellous I think.

So what are my aims? At the moment I think I am going to revel in trying to shove up the savings balance and therefore the net mortgage down.

Goals thereafter are:

1. Get daily interest down to under £20.
2. Net mortgage to below £225k
3. Monthly goals to follow.

Any words of wisdom?

We are an odd financial couple in the sense that money ebbs and flows and this is why I thought the offset would work well for us. Sometimes we have loads of cash, sometimes we find things tough depending on how business is.

I have read loads of diaries – I love reading about how others are getting on and find it really motivating! Hopefully few people might be reading mine

GemDoll

:oWhat is an offset mortgage ? <thick emotion>

mortgage_meltdown

Hi Gemdoll - thanks for posting!

Basically its like a normal mortgage but you get an account attached to it called the "offset savings account". Which is basically just a normal account!

Then the magic starts - the money in the savings account is set against the mortgage and you pay interest on the difference.

So, if our mortgage is £250k, and we have £10k in the offset account, we only pay interest on £240k. Geddit?

Its a brilliant concept, albeit not as well known about as it could be!

Its a really flexible way to repay your mortgage as I see it. We need access to cash (just in case) but I do want to start repaying the mortgage. This is the best way to do it for us as I would be scared to just repay the mortgage but this is same effect. Kind of

tootoo

Hello and welcome.
Well done on paying off your debt!!

MallyGirl

Hi there - I am another offset mortgage fan, living in the South East. My setup is a little different in that we don't actually have separate accounts at all - we just have a massive overdraft on our current account. Anything we don't spend offsets mortgage interest so I stooze on 0% and put everything on cards till the last possible moment before paying off if it would incur interest. We paid off our last mortgage this way - it is the equivalent of getting 3.9% net interest on any savings and we can just spend again up to our facility at any point.
We still have around £60k left to pay on our building project but I have £23k of shares from a sharesave scheme to cash in when they get back to the value I saw them at in the summer (but couldn't sell then). Our mortgage is IO and we have 2 single and one joint endowment to pay out in 2016. Worth nothing like what was promised when we took them out of course. After that we will know what is left to do.

mortgage_meltdown

Hi Mallygirl, thanks for posting. Talk to me more about what you do....We have access to scary amounts of 0% credit cards (about £50k...) and I have been trying to weigh up in my mind if I think its worth stoozing? our mortgage is 3.14% so effective savings rate of 5.23%. The credit card balance transfer fees are 3.9% I think (which I accidently repay to a card with no balance and then ask them to send back to my current account - oops ) and the interest free period is around 14-16 months I think. I'm not sure if this would just be overcomplicating things for the sake of a few pence, or if i'm being an idiot for not doing this right away!

MallyGirl

In the old days it was easier - there used to be lots of cards that let you balance transfer to a current account for zero or very low, capped BT fee. Egg was great - they gave each of us £15k/20k limits so we just stuck the lot in the mortgage till it was time to pay it back, just making min payments each month. Now that sort of transaction is called a Super Balance Transfer on here and there aren't many decent rates going.
For now I am going for the slow stooze so spending absolutely everything on a 0% purchase card with 1% min monthly repayment (some are as high as 2.5%). This will quickly reach the limit on the card at which point I will get another, or OH will. We have a lot of purchases related to the building project and then there is Christmas. We have closed all dormant cards to ensure this will be possible. Once the 0% is nearly up I will apply for a 0% card with a low BT fee (I saw some around 0.8% fee with 26 months at 0%) and move the debt there. Eventually it will need repaying but all the while I can keep it 0% I will.
It is the few pence here and there that add up to make this work.

GemDoll

mortgage_meltdown wrote: »

Hi Gemdoll - thanks for posting!

Basically its like a normal mortgage but you get an account attached to it called the "offset savings account". Which is basically just a normal account!

Then the magic starts - the money in the savings account is set against the mortgage and you pay interest on the difference.

So, if our mortgage is £250k, and we have £10k in the offset account, we only pay interest on £240k. Geddit?

Its a brilliant concept, albeit not as well known about as it could be!

Its a really flexible way to repay your mortgage as I see it. We need access to cash (just in case) but I do want to start repaying the mortgage. This is the best way to do it for us as I would be scared to just repay the mortgage but this is same effect. Kind of

Gosh that sounds fab, I wish we had one of those!
Good luck and looking forward to reading you diary!

mortgage_meltdown

So - finally, I'm in! Let the mortgage meltdown begin!!

I'm having a few teething problems with my various accounts. I want to run the savings account as my current account (so ALL of our money is offsetting the mortgage) but I'm having to rethink some of this. Transfers into the savings account are slow and I'm not sure who is causing it (bank account in, or the mortgage savings account). It makes me worried about moving money OUT in case I need it. So i'm slowly filtering funds in. We are currently offsetting £9k which is good but does not reach any of my goals. I am only a week in though so perhaps should be more patient!

Stats for today:
Daily interest: £20.42
Total mortgage: £246,394.19
Net mortgage: £237,394.19

EchoDelta

Good luck MM!!

Our fixed rate is up in June so maybe an offset would be the way to go...

alenbeck

mortgage_meltdown wrote: »

So - finally, I'm in! Let the mortgage meltdown begin!!

I'm having a few teething problems with my various accounts. I want to run the savings account as my current account (so ALL of our money is offsetting the mortgage) but I'm having to rethink some of this. Transfers into the savings account are slow and I'm not sure who is causing it (bank account in, or the mortgage savings account). It makes me worried about moving money OUT in case I need it. So i'm slowly filtering funds in. We are currently offsetting £9k which is good but does not reach any of my goals. I am only a week in though so perhaps should be more patient!

Stats for today:
Daily interest: £20.42
Total mortgage: £246,394.19
Net mortgage: £237,394.19

How about transferring equity mortgage to another bank or to any mortgage brokers. I think there are several mortgage brokers like Butler Mortgage who does these transfers usually for negative equity mortgages, so that you could repay at the rate for which yo could afford. If am I wrong please let me know.