Offset Mortgage Question

Tomatillo

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?

Just seen your reply. For us it's the next 5 years that we want access to a large sum as we'll have children in private secondary for that time and so want to know that we can always reach the funds to keep them to the next exit point - don't want to have to pull them out half way through GCSEs if unexpected financial problem. We'll re-evaluate at the end of the term.  

More generally though, my understanding is that it stays an offset for the whole mortgage term but at the end of the 5 years it goes to SVR rather than the fixed rate. Of course that's not ideal but if it's fully offset then it doesn't really matter what the interest rate is!

getmore4less

You are just borrowing less when you have offset funds, with a drawdown option ie. borrowing more

The concept of benefiting at X% is flawed.

Some people even go as far as relative rate which is nonsense.

Which lenders offsets products revert to normal repayment at the end of fixed terms?

All I have looked at are offset for full term.

Grumpy_chap

Freddykrueger69 said:

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.

This happened to me.

FD send a letter advising this occurred and is breach of the offset terms, so 30 days to resolve (or close the mortgage account).  Worded a bit more friendly though.

Transferred some money to a Barclays savings account and all was well.

Glover1862

getmore4less said:

You are just borrowing less when you have offset funds, with a drawdown option ie. borrowing more

The concept of benefiting at X% is flawed.

Some people even go as far as relative rate which is nonsense.

Which lenders offsets products revert to normal repayment at the end of fixed terms?

All I have looked at are offset for full term.

I didn't know that the CBS fixed offset products stay offset after the initial term just goes to SRV, which is good, particularly if the accounts are near balanced, the CBS calculators seems to suggest they do as well and I've heard others say the offset continues.

I've been looking at the YBS and CBS Intermediary calculators and they are miles apart, the YBS one makes more sense, the CBS one, the payments start off low and then go up considerably in the last years even if the accounts are near balanced.

Offset calculator | the Coventry for intermediaries (coventrybuildingsociety.co.uk)


As an example 

I used Mortgage balance £250k
Term 16 years  
Interest rate 2.24%
Saving balance £200k  

YBS - A reduced monthly repayment of: £1,312 pm 
CBS - 5 yr fix at 2.6% starts off at year £1159 pm then over £1700 in year 16 

I  was trying to work out if a mortgage of £250k and saving of £200k (no more added, and mortgage payments made from the saving account, so that's reducing at a similar rate to the mortgage balance), full term 16 years, how many years the £200k would last. I assuming it should only run out a few years at the end, I'm thinking, is there any point in having the offset balanced, should i just consider the mortgage paid rather than busting a gut to make them balance, might as well use the money now, the YBS calculator is saying adding and further £10k to the savings reduces the payments by at £2 pm, hardly seems worth it.  

getmore4less

If you have £250k borrowing and £200k offset used to pay the mortgage

The interest on the £50k will eat into your money.

Higher rate the more it eats.

In effect your offset pot goes down faster than the mortgage and you start borrowing more than £50k if you don't top it up so more interest.

Depends what calculations they use and how they deal with the difference in a regular payment for a repayment and a nominal payment to meet the term.

You need £1302pm to pay off £250k in 16years at 0%