confused over offsett -help

busy_b

I have a £36000 Tracker mortgage at a rate of 6.75% with no tie ins and no penalties for paying off early, etc.
I have £45,000 in savings and £20,000 in ISA's.

I have just called my mortgage company to open up an Offset Mortgage Account in which I believed that I could place £36,000 (to offset my mortgage) and although I would not receive any interest on my savings at the same time I would not be charged any interest on my mortgage. (Which is set to run for approx 12 more years at approx £435.00 per month).

I was told by the mortgage advisor that he had never heard of such an account and that if I placed the equivalent amount against my mortgage, I was just paying it off and the account would be closed. I explained that I wanted access to my savings and that I believed a could just then continue to make my repayments and reduce the term but apparantly I have got my facts wrong!

I am totally confused. Please help as either I have my facts totally wrong or he was an incompetent advisor!
Can I place £36,000 savings against £36,000 mortgage and still have access to my savings without paying or receiving interest whilst continuing to pay off my mortgage but substantially earlier ?

silvercar

Course you can, that is a very good use of an offset mortgage.

Depending how you set up your payments, you could either pay no mortgage interest each month and leave the total outstanding mortgage mirrored by an indentical amount in the offset or continue making mortgage payments as if you had no offset savings and reduce the capital owed each month as well as keeping your savings safe.

MortgagesInc

It does depend on who your provider is though, as not all lenders have offset facilities

busy_b

Thank you - I thought I was going mad - this is a Major lender we are talking about and their advisor did not have a clue what I was on about. I have a good mind to move my mortgage to someone else and have started to look for better rates already. I am still a bit confused on where to put the rest of my savings as we're self employed and always needs instant access to them. I'd heard about offsetting our Isa's but will seek advise on that too. Thanks again.

MortgagesInc

No problem. Just so you know - Intelligent Finance and Woolwich both let you offset your cash ISAs, so you may want to start by looking at them

rjm2k1

There really isn't any point in offsetting your isa since you have more than enough in normal savings. Do you really need a mortgage at all, since paying it off would leave you 9k in normal savings and 20k in isas, more than enough for an emergency fund. The only reason I can think of for doing what you are talking about is if you need to quickly access a large amount of money, say for buying something of high value which you then sell on and re-use the money as offset.

busy_b

We have a couple of buy to let properties and so thought that we may need access to the money to either chip away at the mortgages on these properties, if ever we have trouble letting them or need to sell for any reason and can't. We are super cautious!
Incidently, I have just phoned my mortg co again and they say if the 36k is offset against my mortgage in full it will clear it and use up my savings. They are driving me mad and have stated that I would have to leave a balance outstanding of £1000 approx to do what I want to do and then every couple of months keep on top of it so that the savings don't totally clear this account. Surely this can't be the way to offset it.

MarkyMarkD

silvercar wrote: »

Course you can, that is a very good use of an offset mortgage.

Depending how you set up your payments, you could either pay no mortgage interest each month and leave the total outstanding mortgage mirrored by an indentical amount in the offset or continue making mortgage payments as if you had no offset savings and reduce the capital owed each month as well as keeping your savings safe.

I thought that most lenders required you to make monthly payments on the mortgage element of an offset, irrespective of the fact that it might be partially or fully offset by savings?

MortgagesInc

Different lenders work different ways - Clydesdale for example require you to make your normal monthly payment, whether you have any funds offset or not. Intelligent Finance and Woolwich both give you the option of reducing your payment or reducing your term

busy_b

I have now spoken to 3 different advisors at my current mortgage company who have all stated that the 36k would automatically clear my mortgage therefore leaving me with no savings to access, but clearing my mortgage.

This is not what i want.

They don't seem to grasp the idea that I want to keep on paying my monthly amount, therefore reducing the term and keeping my savings. Their website clearly states that I can offset my savings but their advisors state that they don't think it can be the full amount.

I'm sorry to keep harping on about this but as I'm self employed it would make life easier to stay with my current lender.

I like the idea of having access to my savings but I also like the idea of paying off my mortgage. Is an offset the best way or should I put my savings in an Easy Access high interest account and chip away at the mortgage, as the offset seems even more confusing now!

rjm2k1

Who are you looking at for this at the moment? I know that the barclays/woolwich offset account doesn't work like this, if you offset the full amount your monthly payments are simply repaying the capital, interest free. If it really is the case with your lender and you want to stay with them, why not just stick 35k in the offset account and the other 1 somewhere else? The interest you will pay on the 1 on the mortgage will be minimal and you can make some of that up from the savings account you put it into.