Off Set Mortgage

parkinc

I have an offset mortgage which is interest only of £210,000
My husband is 61 and I am 56 our income is from house rentals and a holiday let. Our mortgage is up in 2027 at which time we would have to have paid any outstanding off.

I can afford to pay an extra £1000 per month off the capital but that then leaves us with little saving.

Which is better should I put the £1000 into the offset savings account (this gives us some money security as it would be accessible) assuming the I would not touch it and then use the savings to pay off the mortgage.
Should I pay off £1000 off the capital and then cope with paying off what ever is left at the end.

My simple calculations seem to show that the first option is better financially but I am aware that the calculations are actually very complicated.

I would remortgage but with neither of us working mortgage companies do not like out income source and don't seem to want to use this to base a remortgage application on so I am stuck with higher interest rates than I would like.

I would appreciate any comment/feedback anyone can provide.

Browntoa

Who's the offset with ? , on mine you could always access the overpayment as long as you did not breach your total loan facility

An overpayment is equivalent to getting a return of your mortgage rate on your "savings"

Thrugelmir

parkinc wrote: »

I can afford to pay an extra £1000 per month off the capital but that then leaves us with little saving.

Why not save into the offset until such time as you have a sufficient savings buffer. After which you start paying down the capital owed.

Perhaps you need to review your financial plans for the future and start planning your retirement years. Obviously the more you can find from your income to repay the capital balance owed on the mortgage the easier life will be.

SavingSteve

Is there a difference? Other than losing access to the cash (and depending on you will power and other needs that could be a good or bad thing) there should be no difference in cost to you of paying into the savings vs paying down the capital.

Also, £1k per month will not pay down £210k by 2027. Is there another plan? Sell one of the rentals at that time?

getmore4less

parkinc wrote: »

I have an offset mortgage which is interest only of £210,000
My husband is 61 and I am 56 our income is from house rentals and a holiday let. Our mortgage is up in 2027 at which time we would have to have paid any outstanding off.

I can afford to pay an extra £1000 per month off the capital but that then leaves us with little saving.

Which is better should I put the £1000 into the offset savings account (this gives us some money security as it would be accessible) assuming the I would not touch it and then use the savings to pay off the mortgage.
Should I pay off £1000 off the capital and then cope with paying off what ever is left at the end.

My simple calculations seem to show that the first option is better financially but I am aware that the calculations are actually very complicated.

your calculations are wrong

I would remortgage but with neither of us working mortgage companies do not like out income source and don't seem to want to use this to base a remortgage application on so I am stuck with higher interest rates than I would like.

I would appreciate any comment/feedback anyone can provide.

The two options you describe should result in exactly the same end result if you have a proper offset.

depends on your rate, but you will be close to £100k short

you need a proper review of your assets and debts

zagubov

I suspect you need to pay double what you're paying now. I would think you'll be able to access any money that's in your offset savings and also in your mortgage account but that might vary from lender to lender.

I suspect that if you need to have your assets taken into account for assessing, say, benefits, the offset savings and mortgage accounts might be treated differently but I don't know and someone could surely let you know what's the situation, depending on your lender.

parkinc

our offset is with the Clydesdale

parkinc

I know that if I either saved or paid off that the calculations should be the same, however I was factoring in that I would continue to pay the same interest regardless of the actual balance.

parkinc

Selling one of the rental properties is an option but with capital gains there is a cost to that. We feel that the government keeps moving the goal posts for us, our pension plan was for the rental properties,but with the new tax laws coming in we may be hit by higher taxes, our income will be on the boundary of it costing more with the 40% tax rules for rental properties.

We had our planning set for me retiring at 60 and husband at 65 both at the same time, that changed to 64 for me and then finally to 66 for both of us, so the whole thing is really totally messed up.

It seems we are caught between the devil and the deep blue sea.

parkinc

I have assumed that I would keep paying the same payment even though the actual capital is reducing thus actually paying off capital while saving into the off set account although this only works I know if I don't use the cash for anything. Not easy to do.

Thrugelmir

Capital gains tax is nothing new. Was always going to be a cost in selling a rental property. Though you've still made a sizeable gain. So really haven't grounds for complaint on that score.

If you've still mortgages on the rental properties. At some point you are going to have to address this issue as well.

In the meantime personally I'd pay as much as I could into reducing the residential mortgage.