I need help as my head is spinning

Wyndham

Please can someone help me with my mortgage. I'm good at Maths, but I've been looking at this all day and can't work out what to do, so I thought it worth asking on here.

Just coming to the end of a three year deal at 0.01% below BoE rate. This is with Abbey, and we started off at £212,000 and now owe about £198,000.

Rang Abbey yesterday and asked what I could get. They offered the same deal for another two years with an arrangement fee of £499. I also asked about offset, and they offered a rate of 5.99 (BoE + 0.49) for the term of the mortgage, at an arrangement fee of £599.

We have £20,000 in savings, so just over 10% of the mortgage, but that's lower than it has been of late as the car went kaput, and we plan to build them up again and save around £700 a month on average. Most of the money is in ISAs, earning 5.15% in one and 5.3% in another.

The question is, while I can see that the offset mortgage does work out cheaper, and will give us a much earlier repayment date and mean we pay much less interest, it will also mean we lose out on the savings interest. And I'm trying to put everything together to see if it is worth it or not, and struggling a bit.

I do want to get rid of the mortgage as soon as I can, but I also don't want to do something that seems like a good deal and actually isn't because of lost interest.

Can anyone help?

P.S. I did look through the very long sticky on offset mortgages, but it's so long and much of it so old, I didn't feel any wiser once I'd done so!

homer_j_3

The key to your question is what interest are you being charged on your mortgage. If your mortgage is charging 6% and your savings are only earning 5.15 & 5.3 then your money will work harder against your mortgage than it would sat where it is.

You will have to accept that you wont see your money growing by the rough £1000 per year that you will see in your savings but you will save yourself £1000's in interest.

JoeK_3

May I suggest that you transfer your cash ISA's as you can get more than 6% with other banks and building societies.

JoeK

Wyndham

JoeK wrote: »

May I suggest that you transfer your cash ISA's as you can get more than 6% with other banks and building societies.

JoeK

Yes. Thought about it, but they were good when we took them out, and I dind't want to move until I know what we're doing about the mortgage.....

But thank you!

missile

The advantage of an offset mortgage is the money you would normally have in your current account is "offset" against your mortgage. Your salary is paid in on day one and spent over the month. So if your monthly expenses are say £2,000 the effect is to "offset" circa £1,000 off your mortgage.

Offset is not so attractive now when several banks and building societies have started offering good rate of interest on their current accounts.

guy999

I understood offset generally related to off setting mortgage with savings account, so when deduct savings from mortgage means your mort reduces so you pay less interest .
When current accounts are also used to offset along with savings believed these were called current account mortgages, something like one account which is expensive
Although IF do offset current account and just call it an offset, confusing

lizzo

wyndham, did you go to the last couple of pages of the "Offset" posts? only, I put a question on there yesterday, and have just had a very detailed reply back from jamesd, which you might be able to adjust to your needs, just a thought.

JoeK_3

Wyndham wrote: »

Yes. Thought about it, but they were good when we took them out, and I dind't want to move until I know what we're doing about the mortgage.....

But thank you!

You should review your ISA's on an annual basis, similar to your mortgage.

I would not consider en-cashing your cash ISA's to invest in an offset mortgage situation as they will be more valuable to you for a longer period than the mortgage.

JoeK

Wyndham

lizzo wrote: »

wyndham, did you go to the last couple of pages of the "Offset" posts? only, I put a question on there yesterday, and have just had a very detailed reply back from jamesd, which you might be able to adjust to your needs, just a thought.

Thanks for this - it's new since I looked. The thread is too long and I got rather lost in the middle of it on advice I thought might be out of date, but the reply from jamesd is very good - though like you I need time to digest it!

Wyndham

JoeK wrote: »

I would not consider en-cashing your cash ISA's to invest in an offset mortgage situation as they will be more valuable to you for a longer period than the mortgage.

JoeK

HI JoeK. Can you expand on this a bit as I'm not sure why you say this. They are cash ISAs, and I see them very much as a way to save cash at a good rate, nothing more. What's the long term value?

My problem is that I want to pay my mortgage off as quickly as possible, and there seems to be some sense in putting as much as I can into it, especially if it's still 'savings' so I can get it out if I need to. I think this is the attraction of offsets for me.

I looked at CAMs as well, but they seem to have higher rates, and I'm not sure it's what I want to do. So I'm looking at offset mortgage, just with a savings account.

homer_j_3

If you have no intention or need to get the money you want to offset, I would ask that you consider leaving enough savings of a few months salary in your savings for the rainy day or unexpected boiler failure fund and then remortgage for your current mortgage less the savings you have to pay against it.

You then need to work out what the most you can pay comfortable each month and reduce your term to meet that amount. If you feel that you can still overpay over and above this amount then choosing a lender with a 10% overpayment facility may allow you the freedom to do so.

By doing this, you will be likely to secure lower interest rates, have choice of more products and know exactly where you are.

Just a thought anyway.