Offset Mortgage

Rosie_D

Hi there

We have an offset mortgage which we haven't really made the most of over the years, now we find ourselves in a position of being able to save some money each month into it, £700 pm. We are on interest only & have been for quite a while, we don't feel like we want to go back onto repayment, but by putting our savings in the offset each month this hopefully should have the same effect.

Does anyone have any experience of doing this please? I want us to eventually have enough saved to be able to pay it off in full, that's the plan anyway.

Thanks

Rosie D

Thrugelmir

What's your plan for repaying the mortgage?

Rosie_D

We are going to work out what the repayment amount would be and put that into our offset account too, this should have the same effect as paying it direct to the mortgage, we don't have an ATM card for that account so we won't get tempted to go to the cash machine.

PBA

So all you need to go is go on a website that lets you calculate mortgage repayments (I use Karls Mortgage Calculator app) and work out how much the monthly payment would be for a repayment mortgage. Then deduct your interest only payment, and make sure you pay at least the difference into the savings pot each month. If you keep that up it effectively becomes a repayment mortgage but with the flexibility of being able to go back to interest only if needed.

amnblog

The effect should be as you describe Rosie.

Put as much as you can each month into the offset account.

It will still be there if you need it.

warmsnow

Hi Rosie - the advice above is spot on and good on you for being able to save something.

In terms of what I can add, on my last house I had an interest only offset that I was able to pay down. You are right not to switch to repayment though, in order to keep your flexibility. As long as you save as much you would have paid under a repayment mortgage then you are ok.

Interest only mortgages are no longer available so if you ever move it won't be an option any longer.

It mostly sounds like you know what you are doing to be honest - but if you needed confirmation from someone who's done it before, then yes, your plan is sound. Do note though that you need to save more now to make up for the years where you weren't saving.

Rosie_D

Thanks for the replies everyone, I'm taking on board what you've all said.

I totally get where you're coming from warm snow & we will be trying to put more in the offset account on top of the £700 pm when we can, every little helps as they say lol.

We have been in this house for almost 15 years and don't have any plans to move in the foreseeable future, we want to aim for paying the mortgage off by 2026 as this will put us back to the 25 year term we originally started with (when we had our first child we changed to an interest only mortgage & extended the term too so I could give up work). It would however be lovely to pay it off before then lol

chappers

Well £700 is a fair start, maybe your position will improve again in the future allowing you to catch up.

Rosie_D

I'm hoping so chappers, I'm hoping to get a little part time job next year when the youngest starts full ti me school, so I want to put all that wage straight into the mortgage too. We don't have the part time wage now & are managing to put the £700 pm away so hopefully we shouldn't need it. Just want to catch up on the last 8 years now!

Jameseeharve

I have an offset mortgage too. In today's age with interest rates being so low there is definitely no better way to make use of your savings. And getting your mortgage paid off sooner
Would recommend to anybody with savings a little bit of savvy