Chelsea BS offset mortgage options

tasty_snacks

In September we managed to complete on our first property, and now have an offset mortgage with Chelsea BS.

CBS offer three types of offset;


1. Reduced current payments
2. Reduced payments in future years
3. Reduced term


In all three interest in charged and compounded daily. With option 3. the payment remains fixed, which naturally reduces the term of the loan. For various reasons I'm not interested in doing that, which leaves options 1 & 2.


From what I can fathom, options 1 & 2 are identical in that they reduce the monthly payments each year (assuming a positive offset balance), but in different ways.


Option 1 appears to be a fixed amount for the duration of the term, which is essentially a 'new' conventional mortgage reset each year at the Recalculation Date (although confusingly it talks about this payment being adjusted upwards over time???).


Option 2 seems trickier but is the default selection. It suggests that the mortgage payments are front loaded, so that they decline each year for the duration of the term, to the point that at the back end they are cheaper than the fixed payment in option 1. But I don't understand how this might be calculated, and obviously I want to so that I'm sure I'm making the right call!


I was wondering if anyone has a Chelsea BS offset, and how they came to decision over which offset type to plump for.


Also an online calculator that deals with option 2 would be helpful if anyone knows where I could find one!


Cheers

EDIT - Having called CBS for the 3rd time, more in hope than anything, and having spoken to an extraordinarily helpful lady called Gemma, it's now blindingly obvious - the only difference is that under option 1 if you were to place, or withdraw, a large amount from the account, the impact would be immediate in that your next monthly payment would be reduced. With option 2, the offset is calculated annually, as opposed to right now. Either way, one still benefits from reduced interest. Pish - easy when you know.

getmore4less

I think you are overthinking to some extent.

What matters is the interest is based the daily net debt, the payment and term are not that relevant to the cost of running the mortgage.

As long as the payment is enough to cover the interest and at least some of the capital then it will just work all three options ensure that.
If on a repayment schedule then you are sure of repaying the debt.
If the payments are lower(options 1 and 2) you just stick the reduction in the offset.

I suspect that(guess from the short line not seeing the full text)

1. The payment taken each month is set to just keep the mortgage on track

2. They fix the payment each month and only recalculate annually

3. They fix the payment for the term.

in all cases if the payment needs to go up eg. interest rate rises then the payment will go up, in option 3 it only goes up and never down unless you change the chosen method.

edit : just read your edit you got it.

the advantage of option 1 is you pay the smallest amount off the debt and can max out the offset which you have access too.

option two might be easier if you like to have regular payments from your accounts.

With my Barclays I went for the equivalent of option 3. but with them any overpayments are recoverable.