Offset Mortgage

Craig_1988

Hello,

Our fixed rate mortgage expires in February. We'll have an outstanding balance of £113k and term of 13 years. 

We are fortunate enough to have more than that in savings but I feel uneasy (I don't know why?!) about just paying off the mortgage and considering getting an Offset and offsetting the full amount.

Looking at First Direct and they stipulate a minimum loan amount of £30k. I'm not sure if that means the mortgage balance must be £30k or the portion you're actually loaning (ie. The bit you're paying interest on/not offsetting) must be £30k. 

So does anyone know if it is possible to offset 100% of the mortgage?

Many thanks.

Snookie12cat

Craig_1988 said:

Hello,

Our fixed rate mortgage expires in February. We'll have an outstanding balance of £113k and term of 13 years. 

We are fortunate enough to have more than that in savings but I feel uneasy (I don't know why?!) about just paying off the mortgage and considering getting an Offset and offsetting the full amount.

Looking at First Direct and they stipulate a minimum loan amount of £30k. I'm not sure if that means the mortgage balance must be £30k or the portion you're actually loaning (ie. The bit you're paying interest on/not offsetting) must be £30k. 

So does anyone know if it is possible to offset 100% of the mortgage?

Many thanks.

You need to read all the small print but it normally means that the minimum loan is £30k but you are still able to offset 100% of the loan. 

I feel exactly how you do about tying money up in the house but have enough to offset the entire mortgage. I'll be signing up to an offset in the next few weeks. 

johnbhoy70

Yes it's possible. We do this and for last few years have just got the cheapest fee free rate every 2 years and repeat again. Very approx we have 11k still to pay on a facility that allows up to 50k and we have 25k in savings between our current account and kids savings offsetting against it. If i cleared all our other debt, 0% credit cards really, our overall position would probably be we would owe about 5/6k. 

With 2 kids and one just started at Uni and the other still only 11 it's quite a handy safety net. We pay no interest on anything but are well aware we're getting 0% on our savings too. If savings rate start to climb we'll probably stick some of them into the best account we can find. Have about 10 years left on the mortgage and will probably let it run the term unless we win the lottery!!

ps- i think the qualifying criteria would rule out quite a few people. They changed it years ago after we started with them and i'm sure i saw it was 50k min wage for a single applicant. Don't know what joint application is. We wouldn't qualify now

housebuyer143

johnbhoy70 said:

Yes it's possible. We do this and for last few years have just got the cheapest fee free rate every 2 years and repeat again. Very approx we have 11k still to pay on a facility that allows up to 50k and we have 25k in saving between our current account and kids savings offsetting against it. If i cleared all our other debt, 0% credit cards really, our overall position would probably be we would owe about 5/6k. 

With 2 kids and one just started at Uni and the other still only 11 it's quite a handy safety net. We pay no interest on anything but are well aware we're getting 0% on our savings too. If savings rate start to climb we'll probably stick some of them into the best account we can find. Have about 10 years left on the mortgage and will probably let it run the term unless we win the lottery!!

ps- i think the qualifying criteria would rule out quite a few people. They changed it years ago after we started with them and i'm sure i saw it was 50k min wage for a single applicant. Don't know what joint application is. We wouldn't qualify now

That is true at First Direct, £50k or £75k joint, but a few other people do offset also, such as YBS, Barclays, Clydesdale, Scottish Widows with no such income requirement. 

johnbhoy70

housebuyer143 said:

johnbhoy70 said:

Yes it's possible. We do this and for last few years have just got the cheapest fee free rate every 2 years and repeat again. Very approx we have 11k still to pay on a facility that allows up to 50k and we have 25k in saving between our current account and kids savings offsetting against it. If i cleared all our other debt, 0% credit cards really, our overall position would probably be we would owe about 5/6k. 

With 2 kids and one just started at Uni and the other still only 11 it's quite a handy safety net. We pay no interest on anything but are well aware we're getting 0% on our savings too. If savings rate start to climb we'll probably stick some of them into the best account we can find. Have about 10 years left on the mortgage and will probably let it run the term unless we win the lottery!!

ps- i think the qualifying criteria would rule out quite a few people. They changed it years ago after we started with them and i'm sure i saw it was 50k min wage for a single applicant. Don't know what joint application is. We wouldn't qualify now

That is true at First Direct, £50k or £75k joint, but a few other people do offset also, such as YBS, Barclays, Clydesdale, Scottish Widows with no such income requirement. 

Yes indeed. We actually looked at YBS at the time we went offset as we were with them anyway but for some reason went with FD. Cant remember why tbh and it was a long time ago. Only mentioned FD as the OP specifically mentioned them in his post. 

What i would say is that with 12/13 years dealing with them i can't recall one problem i've ever had with them. Excellent bank to deal with imo. I don't work for them by the way or have any other interest!!

johnbhoy70

Another point to note is that if you have any MPPI policies or similar morgage cover then watch their terms when fully offsetting. I have a redundancy only policy with Paymentshield which covers mortgage and other associated costs and when i claimed on it in the past i had to show evidence of paying monthly into the mortgage before they paid out. That is why i manually pay in a cash amount into my mortgage account from our 1st Account (current account) at the start of every month so there's a history of monthly mortgage payments.

Craig_1988

Thanks for all the responses. Banked with First Direct for about 13 years and always been great so will give them a call tomorrow to discuss. I did also look at YBS but they don't seem to offer free legals whereas FD do. FD have a Tracker Offset with no fix which I haven't seen anywhere else and quite like the idea of not been tied in and if offsetting the full amount the interest rates rising is really irrelevant.

Thanks again.

johnbhoy70

Craig_1988 said:

Thanks for all the responses. Banked with First Direct for about 13 years and always been great so will give them a call tomorrow to discuss. I did also look at YBS but they don't seem to offer free legals whereas FD do. FD have a Tracker Offset with no fix which I haven't seen anywhere else and quite like the idea of not been tied in and if offsetting the full amount the interest rates rising is really irrelevant.

Thanks again.

Luckily i got a 2 year fixed at 1.99% i think it is (shocking i don't actualy know without looking it up) at the start of the year. I had this rate booked for 6 months in advance and started it when i saw the way things were starting to head. I've always had rates booked early before my fixes end just for belt and braces. Quite often i've discarded them if i didn't fancy them later.

The rate is obviously only relevant if you hit bad times and because of that put you in a position of not fully offsetting.

Craig_1988

You did well. I fixed in Feb 2021 for 2 years and had the option of the same rate for 5 years. Really wish I'd taken it but had a little one on the way and wanted to keep options open.

Fortunately we won't be impacted by the crazy rate rise forecasts cos we can pay it off or offset it all, but would have been nice to finally get a decent return on savings. Hey ho, there's worse positions to be in in our early 30s.

johnbhoy70

Craig_1988 said:

You did well. I fixed in Feb 2021 for 2 years and had the option of the same rate for 5 years. Really wish I'd taken it but had a little one on the way and wanted to keep options open.

Fortunately we won't be impacted by the crazy rate rise forecasts cos we can pay it off or offset it all, but would have been nice to finally get a decent return on savings. Hey ho, there's worse positions to be in in our early 30s.

It was luck more than anything to be honest but i try to  hedge  and minimise risk by pre-booking deals. Doesn't cost anything as we've always taken the FD fee free options and you're not obliged to take them up. 

Yes, you certainly seem to be in a fairly strong position for someone of your age, in fact across a lot of age groups to be honest.