First Time Buyer, Offset & NISA ?

swebb99

Hello,

I have put off buying property for years, I'm now in my mid 40's and decided that it is time I planted some routes somewhere. I admit to being not totally clear on mortgages even though I've had a bit of a read around the subject.

I am trying to figure out if an offset mortgage is for me

I have some savings in current and savings accounts and fairly large amount currently in a NISA which I had always thought I would cash in prior to buying a property. It looks like it might be possible to use the ISA to offset, I'm not totally clear on that though. In total my saving including ISA are probably within 80-90% of the amount I would need for the kind of first property I would be interesting in buying.

I would like to keep some money aside for a rainy day rather than put the lot in to a mortgage. I am wondering if an Offset mortgage is the way to go. Or if I would be better just having a normal repayment mortgage. I suppose I'm not clear as to whether having a large chunk of cash savings is useful for an offset mortgage.

Thrugelmir

Personally I would put 6 months savings aside in an ISA. Use the remainder to fund the purchase of the property and borrow the remainder. To reduce the amount of interest you pay borrow the money over a term which is affordable and clears the debt as quickly as you can.

swebb99

Basically pay off ASAP then is your advice, that seems reasonable

I was asking the question because I thought there may be some hidden gain with offsets that I wasn't aware of when you have a fair amount of savings. Maybe there isn't.

Thanks for the reply

dimbo61

You sound like a saver and not a spender but you are not a homeowner yet.
If you have already saved 80/90% of the cost of a property how long would it take to save the rest ?
Buying with cash means no mortgage or fees !
I love offsets and we have worked hard at paying off our mortgage quickly with savings and overpaying every month.

stator

There are some potential downsides to offset mortgages, you can't guarantee the money will be available, if your house prices falls that will affect the amount of money you can withdraw from the savings account part.
It's important to have instant access cash reserves. 6 months or 12 months of living expenses. Anything more than that it's a good idea to offset, but make sure you read the small print to understand what you can/can't do.

dimbo61

Might be a good idea to speak to a whole of market mortgage broker and they can look at everything about you!
Age ( most mortgages now run to 67/68 new state retirement age)
Income and job/ job safety/long term planning
Pension and savings
Area and type of property
We have an Offset mortgage with Barclays having moved from an offset mortgage with YBS
We can now offset the ISA money we have but earn NO Interest ( saving Interest at mortgage rate :-) )
If savings rates do Increase above the mortgage rate we could take the money out and put into ISA,s outside the offset account. Did this once when ISA,s paid 6% !!!!!
You could put down a 40% deposit to get the best rates and the rest in the offset savings accounts.
You can dip into the offset when needed and save hard when times are good.
I Love Offset mortgages for the flexability but the rates maybe slightly higher!
YBS charge 0.2% more for say a 5 year fixed offset than a 5 year fix
Firstdirect do Interest Only offsets and Barclays allow you to offset ISA savings

jimjames

swebb99 wrote: »

Basically pay off ASAP then is your advice, that seems reasonable

I was asking the question because I thought there may be some hidden gain with offsets that I wasn't aware of when you have a fair amount of savings. Maybe there isn't.

Thanks for the reply

Personally I've preferred to not pay off the mortgage asap. Instead I put the money into S&S ISAs where it can grow, hopefully at a higher rate than the mortgage costs. When mortgage is 2.29% it's not that difficult. Now means I could more than pay off mortgage if I wished but with still 10 years to go I'm holding fire.