Offset Mortgage Problems

honestjoe1

Hi,

This is my first time posting here so i hope Im doing ti right! I'm in the process of (finally) trying to get both my business and personal finances in order. I'm really bad with money and have what I call 'ostrich syndrome' - the clue's in the name!

So my questions centre around my Woolwich (now part of Barclays) offset mortgage. I took the mortgage out around 12 years ago thinking, because I worked for myself and had chunks of money going into my accoun,t it would pay off. And it did... for about a year! Fast forward to today and I'm in a pretty bad situation... I think!!

My mortgage was for £214k (I think!) but I have now dipped into the reserve to the tune of £95k!!!!! So effectively I don't think I've paid off any of the mortgage itself (well maybe a tiny bit) and have, in effect, been paying interest only for 12 years. :-(. A few years ago i also asked them to bring the rate down to it's minimum monthly value. In doing this (I think) they increased the terms another 5 years. Suffice to say all the above is not good. At least I don't think it is. Confusion!!!

Here are my numbers from Jan 2018 and below these are my questions. If anyone can help and give me clarity I would be super grateful as this has been a weight around my neck for years for something I really don't understand. Thank you :-)

Here are my approx numbers...

• Mortgage account debit balance: £112,000
• Reserve: £94,000
• Offset mortgage rate: 1.09% (so 0.59% above base variable - which is good apparently

!)

And my questions...

1. Is my analysis above correct? i.e. have I only effectively been paying interest only (and maybe a few grand of repayment) for 12 years?
2. Will my reserve be at a different rate than the mortgage itself?
3. Because I'm not good with money, or haven't been traditionally, should I look at remortgaging? Otherwise I may start dipping into the reserve even more.
4. Or should I in fact start over-paying? If so will this bring my rate down quicker than if I overpaid with a normal repayment mortgage?
5. How do I get out of this mess - or am I making it feel worse than it is?

Any help HUGELY appreciated. Thank you!

dimbo61

Well that is a GREAT mortgage rate for a start.
Why have Woolwich/Barclays allowed you to do this ?
You owe £206,000 OUCH
However how much has your property increased in value over the last 12 years ?
I think the Woolwich/Barclays will not allow you to DIP into the reserve any more.
I very much doubt you would EVER get a mortgage of 1.09% so why remortgage ?
Start making big mortgage payments each month or you will have to sell up and move to a cheaper property or rent when your mortgage ends.
If you give details of Age, and when the mortgage ends we might be able to give you an idea

getmore4less

Standard Barclays offset with reserve.
Reserve is same rate as mortgage with offsets
The reserve is a secured overdraft facility.

The only sensible solution is increased payments.
Throw money at the reserve account first.

On your statements it will have the date the full term ends that will determine how big the payment needs to be.

Remortgage won't help.
You could ask Barclays to capitalise the reserve and remove it then return the mortgage to repayment keeping the offset.

If you need help budgeting then debtfreewannabe is a good place.

As the reserve is reduced you can get Barclays to reduce the OD limit so you can't borrow it back.

RedFraggle

dimbo61 wrote: »

Why have Woolwich/Barclays allowed you to do this ?

It was a standard feature on their mortgage products for a time. You can borrow back, at the existing mortgage rate, most of what you'd paid. They removed it from all existing mortgages except offsets some time ago. There was a reason legally why they couldn't remove it from the existing offset products without the borrowers agreement. On the offset they have been progressively dropping down the amount you could pull back to try to stop this situation happening to people.I got a letter annually saying what they would be reducing it to unless I objected. I objected every time as I liked the comfort factor and wasn't misusing it. We used it to buy a car and a trailer tent as it was cheaper than a loan but always paid it back at £250 to £1000 a month. The problem comes as the OP knows now when you don't pay it back as you have essentially turned your repayment mortgage into an interest only product.

minimike2

The biggest point not yet mentioned is that the reserve is payable in full on maturity of the mortgage.

When is the mortgage due to end?

You need to be making payments off the RESERVE account and nothing extra at all to the main mortgage other than the agreed payment, as if you end the main mortgage early, the reserve will have to be paid in one go.