Offset vs Standard Mortgage

badgersky

Hi Folks,

Long time reader, finally registered an account.

We're coming up to the end of our fixed rate and we're trying to figure out whether get an offset mortgage or go with a 'standard' mortgage (with lump sum overpaynent). I think we're trying to figure out "how much cash" we'd realistically need when we move house in 2-3 years time and which product will really suit us better.

Scenario:

House value: ~£400,000
Outstanding mortgage: ~£89,000
Present cash savings: £52,000
Monthly net income: £6,400

Potential move to a different part of the country in about 2-3 years time.

1. Swith our product with our current lender to ~1.4% tracker & lump sum overpayment of 40k. (i.e. 10k savings remaining). Continue overpaying & saving

2. Remortgage to an offset mortgage (offset ~50k initially and overpay the mortgage each month.

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House move (larger) costs:

1. Stamp duty XK - fine, accounted for.

2. Deposit - now I understand that our potential future buyer's deposit would pass up the chain. I assume we would only have an issue if we were buying a more expensive house and we didn't add anything from our cash savings to that deposit being passed up. Unless the vendor accepted a lower % deposit on exchange.


Am I correct in thinking this? Any other people with offsets?

getmore4less

You need to know the saving rate the offset rate and the regular rate to decide if the offset works.

simple ratio of the rates and amounts.

M : mortgage debt
S : standard rate
O : offset rate

C : savings capital
N : net savings rate

C/M == (O-S)/(O-N)