Offset mortgage - disadvantages?

Gangaweed

If you can maintain savings greater than the break even amount, are there any disadvantages of an offset mortgage?

Thrugelmir

The balance in the offset account cannot exceed the balance owing on the mortgage.

Gangaweed

Thrugelmir wrote: »

The balance in the offset account cannot exceed the balance owing on the mortgage.

That would be a nice problem to have!

Thrugelmir

Gangaweed wrote: »

That would be a nice problem to have!

I thought that was your question?

If you can maintain savings greater than the break even amount,

Gangaweed

Thrugelmir wrote: »

I thought that was your question?

There's a big range between the mortgage amount and the break-even amount!

Thrugelmir

Gangaweed wrote: »

There's a big range between the mortgage amount and the break-even amount!

Perhaps you could clarify your question then.

stator

Mortgage rates tend to be higher on off-set.
If the property market tanked you would lose access to some of your savings, since they won't let you withdraw money if it takes your equity below a certain amount.

Spidernick

I get the impression that you need to be a lot more disciplined with an offset mortgage to ensure your level of borrowing is going down. I've never had one but I'd imagine that the temptation is to spend (more) money on things like holidays (for example) that you wouldn't otherwise if you were aware of your net funds available each month through a 'normal' mortgage. However, not knowing 100% how they work I could be entirely wrong about that.

getmore4less

stator wrote: »

Mortgage rates tend to be higher on off-set.
If the property market tanked you would lose access to some of your savings, since they won't let you withdraw money if it takes your equity below a certain amount.

They don't work like that your savings are separate and can be withdrawn at any time.

You may be thinking of a different type of mortgage like the One Account.

getmore4less

Offsets are not the cheapest so if you need/want the flexibility you pay a bit, not much in a lot of lenders.

If the lender goes bust they could use setoff to use up you savings to pay down the loan.

The breakeven can be quite low.

I put the calculation on the big offset thread, ratio of interest rate differences.

getmore4less

Spidernick wrote: »

I get the impression that you need to be a lot more disciplined with an offset mortgage to ensure your level of borrowing is going down. I've never had one but I'd imagine that the temptation is to spend (more) money on things like holidays (for example) that you wouldn't otherwise if you were aware of your net funds available each month through a 'normal' mortgage. However, not knowing 100% how they work I could be entirely wrong about that.

Depends on lender how easy it is to manage.

With Barclays/Woolwich they just run the mortgage as a standard repayment one if you want so will be paid off on the scheduled term.

The offset accounts just reduce the interest charge each month completely separate.

They do offer a drawdown on overpayment in a separate account so you have to be careful if you use that.


Some run there offsets on an interest only basis or a single overdraft type account so you have to be more careful.