Offset Plan

charlie792

Hi All,

Just wanted to pick your brains as to our intention with our Offset to check this makes sense, or if anyone has any better ideas or anything I'm missing.



Had our prior mortgage 4 yrs and made approx £32k in overpayments. Always felt a little uncomfortable waiving goodbye to the cash, so now we've just remortgaged to an Offset facility so we can have our cash available but working for us, rather than having to make an actual overpayment.



Approx £83k mortgage balance. 24yr term. Rate 1.99%.



Current offset balance: £15K - On paper could be fully offset in approx 3yrs 10 months.



Account is currently set up to reduce the term but can be switched at any time to reduce the payments instead.


Plan is to front load the account for the bulk of our savings in the short term and as the balance in the offset increases and interest element decreases, will taper off the payments into the offset and instead into other interest paying accounts.

At the point of Offset ask the bank to change the account to reduce the payments instead and then use the Offset balance to pay the monthly capital amount.


At the end of the 5yr term we would remain fully offset and can either leave things as they are, or pay off if we so wish.

Im assuming that going onto to SVR at the end of the 5 years won't have any effect if we're only paying capital payments anyway.



Will be looking to move in the future, but not within the next 5 yrs - only as and when the right place comes up.
No other debts other than student loans and a small balance on a 0% CC.

Have other savings elsewhere being excluded to keep everything 50/50.
I currently pay into a work pension but plan to increase contributions once fully Offset and OH is self employed so has LISA which will be looking to max out yearly allowance also.


Any suggestions or anything I'm missing?

anniecave

Sounds like you're doing well with the savings in offset.


Check you're getting a good rate on any savings not in offset!


I don't know how it would work when your savings offset balance is similar to the mortgage. I assume you can just manage it so that your offset amount is just less than the mortgage so you would only be paying interest on a very small amount? In that case the rate wouldn't really matter as you say.

Thrugelmir

Why the desire to have access to large amounts of cash? Offset mortgages aren't the cheapest in the market. Why not find a cheaper deal and clear the mortgage earlier.