Offset Mortgage Question

Freddykrueger69

Genuine question as I am really not clear.

I currently have an offset mortgage via FD.  My question is around what happens when the balance of offset reaches net zero I.e. when my savings balance matches the balance of the mortgage outstanding.

I have been making a real concerted effort to boost my offset savings and wanted to know what options are when I get there apart from using the entire savings pot to pay the remaining balance.

Thanks in advance.

Thrugelmir

Then you'll reach a position of being fully offset. As the mortgage balance reduces there'll be no benefit in holding extra money in the offset account. 

Tomatillo

We are thinking of getting an offset and having it fully offset from the start (particular personal reasons for wanting to keep the cash accessible). I've spoken to the lender we're thinking of (Coventry) and that seems fine. Obviously there'd be no interest and we can set up the mortgage direct debit to come from the offset account so that they carry on balancing against each other. 

silvercar

Tomatillo said:

We are thinking of getting an offset and having it fully offset from the start (particular personal reasons for wanting to keep the cash accessible). I've spoken to the lender we're thinking of (Coventry) and that seems fine. Obviously there'd be no interest and we can set up the mortgage direct debit to come from the offset account so that they carry on balancing against each other. 

That’s generally fine, though I haven’t tried asking the Coventry to take the mortgage DD from the offset, surely that will reduce the offset? Though if there is nothing to take, then it won’t matter where it comes from. Only time to be wary is when the interest rate changes as there seems to be some balancing problem with the offset for that month.

Tomatillo

Yes but if there is no interest to pay then we want the offset to reduce by the same as the mortgage. If e.g. there is a £500 capital payment each month then we want it to come from the offset so that both the offset and the mortgage go down by £500. If it comes from elsewhere then the offset would be £500 'too much' and that money would be sitting there earning nothing. 

Archie_Duke

Tomatillo said:

Yes but if there is no interest to pay then we want the offset to reduce by the same as the mortgage. If e.g. there is a £500 capital payment each month then we want it to come from the offset so that both the offset and the mortgage go down by £500. If it comes from elsewhere then the offset would be £500 'too much' and that money would be sitting there earning nothing. 

So you just need to manually withdraw the excess from the Offset.

silvercar

Ok. Mine is interest only, so we pay nothing and the balance doesn’t go down. It stays perfectly balanced until we decide to pay off the mortgage or have a need for cash from the offset.

Glover1862

Tomatillo said:

Yes but if there is no interest to pay then we want the offset to reduce by the same as the mortgage. If e.g. there is a £500 capital payment each month then we want it to come from the offset so that both the offset and the mortgage go down by £500. If it comes from elsewhere then the offset would be £500 'too much' and that money would be sitting there earning nothing. 

I see what you are trying to do and I’m doing something similar, CBS will happily take the mortgage payments from the linked savings accounts. However in my case I got the offset for the whole term so potential once fully offset I’d have access to the funds for many years, now they only have 5 year fixed offsets with a £999 fee, are you going to get the benefit over a 5 year term with the £999 fee?

Archie_Duke

Glover1862 said:

Tomatillo said:

Yes but if there is no interest to pay then we want the offset to reduce by the same as the mortgage. If e.g. there is a £500 capital payment each month then we want it to come from the offset so that both the offset and the mortgage go down by £500. If it comes from elsewhere then the offset would be £500 'too much' and that money would be sitting there earning nothing. 

I see what you are trying to do and I’m doing something similar, CBS will happily take the mortgage payments from the linked savings accounts. However in my case I got the offset for the whole term so potential once fully offset I’d have access to the funds for many years, now they only have 5 year fixed offsets with a £999 fee, are you going to get the benefit over a 5 year term with the £999 fee?

Do you find that it stays reasonably balanced doing it this way? I’ve seen some discussions on the CBS Myvoice forum discussing some issues about why it doesn’t for some. For instance because the offset calculations are done on the 7th of the month but many, many of us pay our mortgages on the 1st, therefore creating a short period where the offset does not equal the balance https://www.mycbsvoice.co.uk/forum/thread/54001   I must admit it would be easier to have mortgage payments taken from the offset account, I hadn’t twigged that this was an option.

I’ve changed from a 1.79% fixed rate to the Standard Variable Rate this month, having considered a new fixed rate product. I had a long chat with a mortgage advisor last month and confirmed that my mortgage would remain an offset product when I came off the 2 year fix. I’m 100% offset so was expecting (and talked through some calculations that confirmed to me) a matching benefit from the interest rate increase. I have my offset benefit set to reduce my payments, rather than the term, but it hasn’t affected my payment anything like as much as the CBS mortgage advisor explained it would.

I’ll message CBS online tonight and see if I can switch to payments coming straight from the offset and also find out what’s happened to the monthly payment amount. 

Glover1862

Archie_Duke said:

Glover1862 said:

Tomatillo said:

Yes but if there is no interest to pay then we want the offset to reduce by the same as the mortgage. If e.g. there is a £500 capital payment each month then we want it to come from the offset so that both the offset and the mortgage go down by £500. If it comes from elsewhere then the offset would be £500 'too much' and that money would be sitting there earning nothing. 

I see what you are trying to do and I’m doing something similar, CBS will happily take the mortgage payments from the linked savings accounts. However in my case I got the offset for the whole term so potential once fully offset I’d have access to the funds for many years, now they only have 5 year fixed offsets with a £999 fee, are you going to get the benefit over a 5 year term with the £999 fee?

Do you find that it stays reasonably balanced doing it this way? I’ve seen some discussions on the CBS Myvoice forum discussing some issues about why it doesn’t for some. For instance because the offset calculations are done on the 7th of the month but many, many of us pay our mortgages on the 1st, therefore creating a short period where the offset does not equal the balance https://www.mycbsvoice.co.uk/forum/thread/54001   I must admit it would be easier to have mortgage payments taken from the offset account, I hadn’t twigged that this was an option.

I’ve changed from a 1.79% fixed rate to the Standard Variable Rate this month, having considered a new fixed rate product. I had a long chat with a mortgage advisor last month and confirmed that my mortgage would remain an offset product when I came off the 2 year fix. I’m 100% offset so was expecting (and talked through some calculations that confirmed to me) a matching benefit from the interest rate increase. I have my offset benefit set to reduce my payments, rather than the term, but it hasn’t affected my payment anything like as much as the CBS mortgage advisor explained it would.

I’ll message CBS online tonight and see if I can switch to payments coming straight from the offset and also find out what’s happened to the monthly payment amount. 

Thanks for the info, I’ve not actually changed over to take the payments from the saving account, I’ve had a future advance so can’t do it until the 1st payment for that comes out. I’ve also got mine setup for reduced payments rather than term. The further advance option for the flexx offset is excellent as it allows you to borrow at your current rate which no additional charges. 

I assume the payment could be changed to match the offset calculation date, I wouldn’t think the interest payment would be significantly different as it would be a few days interest for the amount you have paid off. My payments are about £1400, id have to try and work out 21 days interest at 2.29%. You could always setup a standing order from the linked saving account to your current account but it would need adjusting every now and then.

You’ve done well to come off a 2 year offset fix and still stay on a offset product, as you are fully offset even a high SRV would make no difference(in theory).

If you don’t mind, How do you setup for the mycbsvoice.co.uk website, I’ve never noticed it before.  

Archie_Duke

Had a reasonable discussion about what’s happened. They were very helpful with my query. Straight through to a mortgage advisor in <2 minutes.

The offset benefit is there, it’s just that there’s a greater delta now between the old payments at the lower interest rate and the new payments based on the higher rate. It was exacerbated by the old one being from a 28 day month and the new one on a 31 day one! Advised that from the end of May my payments should be fully benefiting from the 4.64 %. I just wish the advisor last month had given me something more of a heads-up to expect a couple of higher payments!

I was slightly sceptical that the mortgage would stay offset on reverting to the SVR. It was something I was careful to specifically ask. The original mortgage I took out in 2015 was a 5 year offset one, so it seems that it stays that way. I’m glad I went with my instinct and chose an offset,  my benefits so far total over £5100.

I think I joined the mycbsvoice forum by replying to an invitation to join the Coventry Member Panel, you could try calling and asking about that or email info@mycbsvoice.co.uk .