Offset Mortgage - confusion over interest

sweetdaisy

I have had my Offset Mortgage (repayment) for a number of years and I make a £300 direct mortgage overpayment a month and also have one Current Account and three Savings Accounts all offsetting against the mortgage.

Our Mortgage Balance is £62,715 with just under 12 years remaining on the term.

My monthly interest has been added to the mortgage today and I now feel really confused about the 'Offset Saving' aspect of the mortgage :think:.

Last month we replaced our cars and funded this using money from the Savings accounts, in total £13,000. The monthly interest last month applied to the mortgage was £157 and today the interest added was £174. So even with taking £13k out of savings our interest charged has only been increased by £17.00?

I may have got this completely wrong, but I was under the impression that the more Savings you have in an Offset, the more interest that you save on the mortgage, but an increase of £17 compared to last month is a lot less than I thought considering so much was taken out of Savings?

So is it just better to keep a set amount Offsetting for Emergencies and then make direct overpayments?

I know that if I phone Natwest, they just tell me to Save the money rather than Overpay and they can't give any advice. I suppose they want people to dip into their Savings so that they gain more interest as it extends the term, as people will take longer to pay back the mortgage.

Any advice is welcome as I can't seem to see the wood for the trees at the moment .

LE3

Everything depends on when/how your interest is calculated, I suspect that the £7 is just a few days of increased interest & that you will notice a big leap this month in your interest charge

sweetdaisy

LE3 wrote: »

Everything depends on when/how your interest is calculated, I suspect that the £7 is just a few days of increased interest & that you will notice a big leap this month in your interest charge

My interest is calculated daily and added to the mortgage around the 24th of each month.

TrickyDicky101

What's the rate of interest being charged on your mortgage?

richbeth

Hi,
if your interest figures are right it's £17 rather than £7 which at 3% would be ca 2 weeks interest on £13k, what is your interest rate ? (it looks to be ca 3%).

I'm with Barclays and get a monthly statement with a line for each day showing mortgage, total in related offset accounts, interest rate and interest charge. Do you have anything like this ?

Richard

sweetdaisy

TrickyDicky101 wrote: »

What's the rate of interest being charged on your mortgage?

4%.

I won't earn any interest on my Savings until I am fully Offset, but with the Mortgage Balance in the £62k's, that's going to take a long time :rotfl:.

sweetdaisy

richbeth wrote: »

Hi,
if your interest figures are right it's £17 rather than £7 which at 3% would be ca 2 weeks interest on £13k, what is your interest rate ? (it looks to be ca 3%).

I'm with Barclays and get a monthly statement with a line for each day showing mortgage, total in related offset accounts, interest rate and interest charge. Do you have anything like this ?

Richard

My mistake, I forgot to add the '1'. It is an increase of £17 compared to last month and not £7 as I originally wrote .

I get a quarterly statement showing how much I have saved in interest, but it doesn't show me the daily amount. On average I save around £203 a quarter through offsetting.

getmore4less

resurrecting,

there are 2 factors, the date the £13k was taken from the account and the number of days in the month for the interest calculation

if this was 24 Feb to 23 March is 28 days, 24Jan to 24Feb is 31days.

dimbo61

You used £13,000 from your savings and not borrowed money with fees on top!
It is costing you 4% so not a bad rate for the "new cars" and you can drive a hard bargain with Cash In Pocket!