Remortgage... Repayment Vs Offset.....

BusyBee12

Hi. We're after switching our current deal with Halifax of 3.99% variable to a better deal. We've heard of Offset Mortgages where your savings are used to offset the Interest part of the mortgage, hence lower payments.

Has anyone got this mortgage? What do you think?

dimbo61

We have had an offset mortgage for the last 9 years and have made Normal mortgage payments while offsetting our savings against the mortgage debt.
This has saved us a lot in Interest and means we will be mortgage free much earlier than a normal mortgage.
Having said that we had a large saving pot and overpaid every month.
Getting a good long term fix may save you more money.

egoode

It really depends how much money you keep in the offset as to whether it will work out better for you or not. I'm about to get an offset mortgage as I'm self employed and often keep large sums of cash for periods when I'm not working and also I put money aside to pay my tax bill each year. I'm also planning to do some work on the place at some point so will be saving the money for that in the offset account.

So for me it works out as I need to have fairly easy access to the money and it means at least my interest paid on the mortgage is reduced. However if you are only going to have a small amount in the offset account it most likely won't be worth it.

Mortgage_Mark_2

I think you've got a bit confused, Offset isn't a repayment method like repayment or interest only; it's a way of calculating interest on the mortgage.

Most residential offset mortgages are still repayment, but you can shorten your mortgage (or save money) dramatically by keeping funds offset against the mortgage. In essence, making it the opposite of interest only, and a sort of 'capital only'.

sebtomato

Mortgage_Mark wrote: »

Most residential offset mortgages are still repayment

I believe First Direct has been a big provider of offset mortgages for a while, and those are interest only. The customer can choose to repay as much or as little (or nothing) per month, on top of the interests charged per month, and calculated daily based on outstanding mortgage value minus savings and other balances.

Apart from the reduction of interests paid (due to the offset), the nice thing about such mortgage is that you can stop the repayment any time you want (e.g. redundancy) and also increase repayment any time you want (or just keep the money in a connected savings account, achieving the same result). Contractually, there is no repayment amount agreed per month, so full flexibility.

getmore4less

Woolwich/Barclays offsets allthough repayment put the capital part as potential drawdown in the reserve, essentialy you could borrow back any capital you paid off.

The side effect of this is you could convert the mortgage into a big OD and and not have savings handy if you needed benifits.