Interest only offset mortgage - Too good to believe?

DarkShadow

I recently saw First Direct offering Offset interest only mortgage. I have 60% LTV left and now thinking of taking it. I also (by grace of God) have the remaining 60% in savings. If I put the whole in First direct, that would mean I would have 0 (zero) to pay in mortgage payments. I am aware that would mean I do not touch my savings.

Am I missing anything here?

One more thing, for interest only mortgages, banks usually require some form of repayment plan. Does having the entire savings (equivalent to outstanding) qualify as repayment plan?

AnotherJoe

Possibly you are missing that instead of paying tax (potentially) on the interest on those savings, you'd be getting the equivalent interest rate of your mortgage tax and risk free


My question about having all the savings available to repay as your plan is, if you told them that, might they not give you the mortgage? Slightly conspiratorial I know

JimmyTheWig

DarkShadow wrote: »

Am I missing anything here?

What fees are payable? Would it be better to pay off the mortgage with the savings?

One more thing, for interest only mortgages, banks usually require some form of repayment plan. Does having the entire savings (equivalent to outstanding) qualify as repayment plan?

I'd have certainly thought so, yes.

DarkShadow

Fees is £1000 so its ok. But I have been thinking this the whole night to see if there is a catch or is there a upper limit as to how much i can offset

Yellow_mango

I’m wondering if there’s a chance they see a risk that you withdraw / spend your savings (as presumably there’s nothing to stop you doing so) and so will not accept this as a repayment plan?

getmore4less

Don't make the mistake many do of thinking the relative mortgage rate is 0%.

Don't tell them you plan to offset 100% immediately.

Take the loan for as long as you can as what you are buying is flexibility.

Mortgage rates are lower than some savings rates after tax so you can shuffle the money about or make use of cashflow advantages to max out pentions and ISAs.

savingholmes

My interest only mortgage does not require a repayment plan - not that I think that is a good thing it probably led us astray. Only you know whether you will have the self discipline to protect your capital if you leave it in the offset mortgage. Why do you want to keep a mortgage? How risky are your plans?

DarkShadow

Luckily we have been conservative with our spending so far. I have enough capital to pay off mortgage instantly but we are thinking that part of the capital can be put towards investments that could offer better returns.

We have now taken the plunge and opted for offset with repayment. Let's see how it works