Is looking for an offset mortage or no fee early payment mortgage a bad idea?

jackomdj

I don’t know if they still do them (as we have had it a long time) but we can use other peoples bank accounts to offset our mortgage.

Thrugelmir

Grumpy_chap said:

For the OP, is the £100k from the OP's Dad over-and-above the £130k deposit?  If so, it might be an option to take the mortgage ignoring the £100k (whether gift or loan) and then make a partial repayment into the mortgage account, particularly if the mortgage is one that allows over-payments to be drawn down again.

I have an off-set mortgage and find the flexibility very useful, particularly as income is variable (like the OP describes).  It does mean that I can not make a nett payment sometimes, but that does not record as a skipped payment, so good for the credit file.  Working out the costs is difficult, especially as we put all our savings in (so no tax on interest earned) and then draw back out, e.g. for car purchase.  Overall, I think the costs work favourably, partly because my interest rate is very competitive but also because savings are earning the borrowing rate plus I can borrow at mortgage rate for any purchases required.

The main thing with the offset mortgage is that there must be a strong discipline.  What the banks want you to do is see you can borrow back your mortgage and do so for a new car, or home improvements, or whatever.  I have set a discipline that, at the end of the year, the remaining mortgage balance must be lower than at the start of the year and monitor that target to ensure it is achieved.

Some of the offset products just work like one big account, which is always overdrawn - I would find that very depressing.  My offset mortgage (First Direct) allows current account and savings to be in separate accounts to the mortgage loan account.

Offsets are now savings based. Where the second account earns interest at the mortgage rate and the interest is then used to reduce the mortgage debt owed. Now longer flexible overdraft arrangements. 

Grumpy_chap

Thrugelmir said:

Grumpy_chap said:

For the OP, is the £100k from the OP's Dad over-and-above the £130k deposit?  If so, it might be an option to take the mortgage ignoring the £100k (whether gift or loan) and then make a partial repayment into the mortgage account, particularly if the mortgage is one that allows over-payments to be drawn down again.

I have an off-set mortgage and find the flexibility very useful, particularly as income is variable (like the OP describes).  It does mean that I can not make a nett payment sometimes, but that does not record as a skipped payment, so good for the credit file.  Working out the costs is difficult, especially as we put all our savings in (so no tax on interest earned) and then draw back out, e.g. for car purchase.  Overall, I think the costs work favourably, partly because my interest rate is very competitive but also because savings are earning the borrowing rate plus I can borrow at mortgage rate for any purchases required.

The main thing with the offset mortgage is that there must be a strong discipline.  What the banks want you to do is see you can borrow back your mortgage and do so for a new car, or home improvements, or whatever.  I have set a discipline that, at the end of the year, the remaining mortgage balance must be lower than at the start of the year and monitor that target to ensure it is achieved.

Some of the offset products just work like one big account, which is always overdrawn - I would find that very depressing.  My offset mortgage (First Direct) allows current account and savings to be in separate accounts to the mortgage loan account.

Offsets are now savings based. Where the second account earns interest at the mortgage rate and the interest is then used to reduce the mortgage debt owed. Now longer flexible overdraft arrangements. 

That's exactly how ours works.  There are (or were) some that worked differently which, as you say, may be no longer.  Our offset mortgage is from 2005 and things evolve with time - we stayed with it because we never found any better product.  Would definitely get an offset again, but current rates are not as keen as our rate.

getmore4less

jackomdj said:

I don’t know if they still do them (as we have had it a long time) but we can use other peoples bank accounts to offset our mortgage.

I think Barclays withdrew that option that they used to have with their(open plan/woolwich) mortgages..

YBS still has family&friends offsetting with their Offset Plus product.
https://www.ybs.co.uk/mortgages/offset-mortgages/offset-plus-for-borrowers/index.html
https://www.ybs.co.uk/mortgages/offset-mortgages/offset-plus-for-savers/index.html

Thrugelmir said:

Offsets are now savings based. Where the second account earns interest at the mortgage rate and the interest is then used to reduce the mortgage debt owed. Now longer flexible overdraft arrangements. 

NO offset lender should be paying interest on offset savings accounts as that is taxable income.
They should be pooling the accounts and charging interest on the net borrowings.


The big  CAM lender was the One Account  also Virgin One   now seems to be part of RBS 

No one should have that anymore it was a very poor product with high rates and everything it offered coul;d be done with a regular offset except include a CC in the pooling.   

BArclays also allowed you to operate your mortgage as a CAM with their mortgage cuurent account, over time you could transfer the debt from the mortgage to an overdraft in the current account.
Handy if you wanted to hide savings when claiming benefits

dimbo61

I am a huge fan of offset mortgages and you will also find many people on the mortgage free board who also have one.
Now YBS have offset mortgages with friends and family accounts so Dad can open an account offsetting your mortgage with his £100K and you save interest each month.
You can also open a number of offset acconts ( holidays) ( car ) ( business ) and build up funds to pay big bills like Tax or new car/kitchen/holidays while having the money Offset the mortgage debt.
They only do repayment mortgages but if you build up large overpayments you can have a ( mortgage holiday ) if your 6/7 months ahead in your payments.