Offset mortgages.

Steviewonder1970

Help please, I'm changing mortgages at the end of the year. I will only owe £13k and hope to pay it off in 3 years. Someone has suggested that I get an offset mortgage for £26k and offset £13k. Therefore not paying any interest on the £13k. Is this right?

Any help or suggestions appreciated.

Joe_Bloggs

Why do you have to change at the end of the year ?
What rate are you on now and what is the future rate if you did nothing ?

Mortgage fees at the end of a mortgage and the start of a new one can be very expensive. Taking these costs on may not make financial sense in the short term. What are your interest rates and costs. ?
J_B.

normski_2

I'm with Joe Bloggs on this. Well done for getting your mortgage down to £13K.

If you are thinking of changing mortgages at the end of the year because your current deal has ended and you're reverting back to the SRV then even if the SRV was 1% over the best buy off-set mortgage you'd only be paying an extra £130 per year in interest. As Joe Blogss says you need to think about the cost of switching. Having said that some people i.e. Abbey are picking up the re-mortgage costs at the moment. However they might not want to take on someone for such a short period of time (of course you can always get the mortgage over a longer term i.e. fifteen years and make the overpayments to pay it off in three anyway).

What about asking your existing provider for a better deal? If you can overpay on the SRV then why not credit card tart some money interest free and make a lump sum overpayment?

Probably better people available to answer your questions than me.

All the best

Normski

Smudger99

If you borrow 26k, you pay off your existing mortgage of 13k + title costs exit costs ect.
Your new offset mortgage will be 26k off-set with 13k so you only pay interest on 13k.

However, offset mortgages generally charge a slightly high interest rate, plus a set up charge, solicitors fee, re-valuation ect.
Also some lenders won't be interested in you with such a small amount and the off-set lender will probably charge 100+ to give you your deeds back.

With a 3 year payoff period the whole thing will probably not be cost effective. Just my opinion, I could be wrong. Im not an advisor

Steviewonder1970

I'm currently paying 8.99% (10 year fixed rate). Which has hefty redemption penalties. So 'm waiting till the end of the year when the redemption penalties havepassed. However there will still be 5 years left on the mortgage. I want to reduce this to 3 years by paying more.

Hope this info helps

Walletwatch

Steviewonder1970 wrote:

Help please, I'm changing mortgages at the end of the year. I will only owe £13k and hope to pay it off in 3 years. Someone has suggested that I get an offset mortgage for £26k and offset £13k. Therefore not paying any interest on the £13k. Is this right?

Any help or suggestions appreciated.

I frankly don't see why with such a low amount outstanding you would:

(a) look to switch mortgages and
(b) look at taking on an offset mortgage,

Even if you have valid reasons for these (which might become apparent if you give us further details like the rate you'll move to at the end of the year, etc), I very much doubt any lender will want to advance you such a small amount.

We might be able to help you better, if you provide more details.

Hobo_2

This might fit you needs, offset tracker 5.49% term £199 product fee, legal & val refunded min mtg period 3yrs
You will have to borrow more than £13K then offset/pay back lump sum.
If you can offset 100% & not touch funds it does`nt matter if the mtg is 3,5yr ( no interest)& if let you offset cash ISA`s with them

http://www.if.com/mortgage/offset.aspx

Do your research, maybe closure fees

homersimpson_3

Agreed with above. Most (though not all offset mortgages) require you to take out minimum loan of £25,000 and the costs of switching can range from £75-£400 which can cost more than any amount you save.

Scott

The best advise I can give you is to roll off onto SVR once your product finishes. It'll be cheaper than the rate you're on now and it'll be cheaper than paying all the fees.

However, Natwest are doing a scheme right now where they'll give you £100 if they can't save you money on your remortgage. Might be worth giving them a ring, even if it only nets you £100.

Steviewonder1970

Offset sounds like it's not for me, personally I fancy another fixed rate, maybe 2 or 3 years.

Does anyone have any better ideas. I am considering fee free deals if i move.

Cheers