Offset Mortgage Advice

Thrugelmir

callmemonks wrote: »

So if that is the case and I'm paying interest on £0, why is it that on some online mortgage calculators the monthly payment changes when selecting different rates. It shouldn't matter what rates are selected.

Think of the mortgage and offset savings as two different pots.

Every month you'll repay your mortgage in the normal way. As you would on a standard repayment mortgage account.

The interest earnt on the offset savings is credited to the mortgage account every month. Thereby reducing the mortgage debt. This then reduces the interest charged on the mortgage account in subsequent months.

The net result being that you would clear the mortgage over a shorter term than would be the case.

Whenever there's a change of interest rate your standard monthly payment would be adjusted so as to clear the remaining mortgage balance over the remaining term.

Your offset savings balance cannot exceed the balance owed on the mortgage account.

getmore4less

Thrugelmir wrote: »

Think of the mortgage and offset savings as two different pots.

Every month you'll repay your mortgage in the normal way. As you would on a standard repayment mortgage account.

The interest earnt on the offset savings is credited to the mortgage account every month. Thereby reducing the mortgage debt. This then reduces the interest charged on the mortgage account in subsequent months.

The net result being that you would clear the mortgage over a shorter term than would be the case.

Whenever there's a change of interest rate your standard monthly payment would be adjusted so as to clear the remaining mortgage balance over the remaining term.

Your offset savings balance cannot exceed the balance owed on the mortgage account.

That is why people get messed up trying to understanding offsets as that is not how offsets work.


If they did there would be a tax bill.

JimmyTheWig

callmemonks wrote: »

I'm borrowing from friends and family.

Why?
So you can earn (or save, as the case may be) interest on the money rather than them?

White_Rose_Tight_ThaKnows

I'm after some advice and/or further understanding about my offset mortgage. Am I ok to continue this conversation or should I start a new one?

getmore4less

best to start a new one.

White_Rose_Tight_ThaKnows

Thank. I'll gather my thoughts and figures this evening.