confused over offsett -help

rjm2k1

Bit confused where this £435 is coming from, assuming that's the capital repayment it would still be going on the mortgage, you just wouldn't be paying interest too. With mine, an amount goes out of my current account and I transfer the same amount out of the offset account back into my current account so effectively the mortgage and offset both decrease over time with money going from one to the other. Having the mortgage offset doesn't stop the repayment, it either reduces the payment amount (because you aren't paying interest) or it reduces the term (because you are paying the same amount as you would have done if you were paying interest).

MortgagesInc

Can you pay the £435 from the offset account - therefore the balances will be reducing at the same rate?

busy_b

No matter how many times I speak to Abbey and ask them about the repayment part of the mortgage (ie: the £435 per month), I am told that payments are not necessary as the mortgage is cleared as long as the same amount of savings offset against the mortgage. They then advise me to set up some other saving vehicle to place the £435.00 per month in and when it equals the £36,000. I have my savings back again!!!

You would not believe the conversations I have had with them. At every stage, I am told that the offset works just like the one you state (rjm2kl) and then when I try to take it out and get throught to the actual people that arrange the Flexible Plus Mortgage, I am told that I am wrong and I need a separate savings account for the £435 !!!! As in their eyes the actual mortgage is cleared! (Even though I would still have access to the savings, should I need them and then I would pay interest on what is left outstanding. i cannot pay them the £435 as nothing is due to them!).

As for using the savings to pay it off, they have stated that they would need to look at it as a special case for some reason. As their system is setup to clear the mortgage as soon as it reaches the same level as the savings.

So effectively, as I have 9yrs 5 mths left to pay, if I stay as I am, I could actually offset my savings for that time - pay no interest and receive none
but always have access to them. (Whilst at the same time putting £435 per month into a high interest saving account & then ACTUALLY paying off the mortgage when it reaches 36K).

Is this a better way or am I losing out? I cannot get my head around it at all.
PS: Thanks for staying interested...I need as much advise as I can get before seeing Abbey next week and making a decision.

rjm2k1

It would be unusual for the offset to actually reduce the capital part of the repayments as well as interest part since it means you are no longer heading for the 9years 5 months deadline, it effectively means the mortgage has no fixed end date, it's normally only the term or the interest part of the monthly payment which is affected. I suspect that the abbey people simply don't understand the concept, but even if the scenario you mention above is correct and you put the £435 in another account, it makes no difference really, you are still benefiting from not paying interest on the mortgage. What you should do is ask for an illustration of what the payments would be over the term if you had 36k deposited in your offset account, I suspect you will still see a straight diagonal line showing the balance reduce by £435 per month, suggesting that you need to make that payment despite what they say.

busy_b

Abbey are sticking to what they say, however, I have spoke to a brilliant advisor at Barclays/Woolwich who has made it really clear. (Thanks to the person who suggested them). He states that you basically choose Interest only or Repayment, their rate is .89 below base at the moment. (However, this is irrelevent at the moment, if I offset everything and don't draw off the 36k).

If I offset all of the 36k then that's it, I owe them nothing, I then chose a term, say 10 years and during this time, I can either choose to pay nothing and still owe them 36k and after 10 yrs they will just take the savings OR I can choose to pay it off in full at anytime within the 10 yrs OR I can basically pay off the 36k at £360.00 per month. (I can pay more or less than this amount and it will just alter the term respectively)

In a long winded, roundabout way, I have realised that I could pay off my mortgage in 6 years, if I upped my monthly repayments to £500 per month and offset all my savings, probably saving 20k in interest along the way. (I know I could pay off my mortgage today, as one person suggested but then that's it, in my eyes the 36k has gone forever).

I will be moving from Abbey after 15yrs for the sheer fact that I have wasted a whole week trying to arrange what should be a simple offset mortgage and being told 5 different ways of doing it, which all conflicted!