Offset mortgages

jen_fpb

I'm currently on a 2 year fixed 1.14% mortgage, which expires at the end of the year.

Looking to fix again for either 2 or 5 years. 2 year deal is around 5.89%

I'm currently on maternity leave, will be going back but unsure of if full time or reduced hours.

Mortgage Broker has suggested am offset mortgage. I'd not really heard of them. We will have around £70,000 on the mortgage when we remortgage and current term is 14 years.

Savings of £40,000 currently in a 1.5% ISA as I've not got round to moving it. Haven't wanted to spend it as wanting for a just in case fund, especially bow we've a little one.

We are tempted by the idea of offset mortgages, any tips, things to look out for or words of wisdom?!

housebuyer143

I'm not too sure it's worth it. Offset comes with higher fees and a higher rate than non offset so that £30k will be attracting more interest than normal. Have you worked out the difference between the two, non offset and offset in terms of price? 

If you moved your savings, which you really should you can get almost 6% at the moment in a fixed for 1 year and it's likely to rise again, so you will probably achieve more in a normal savings account.

If you are not going to move your money though to get a good rate then offset would probably be a better choice. 

Really go and move your money though as it takes minutes to set up and will make you 3xs more on your savings a month at a minimum.

jlfrs01

I think housebuyer143 is right. I'm in a 5 year offset fix with Accord Mortages (part of Yorkshire B.S) at 2.12. According to L&C's mortgage finder, Accord is still currently offering the best fixed product at a staggering 7.99% so considerably more than the going rate, that is unless your broker or lender has access to other products.

silvercar

jlfrs01 said:

I think housebuyer143 is right. I'm in a 5 year offset fix with Accord Mortages (part of Yorkshire B.S) at 2.12. According to L&C's mortgage finder, Accord is still currently offering the best fixed product at a staggering 7.99% so considerably more than the going rate, that is unless your broker or lender has access to other products.

Your mortgage finder should look harder, Coventry have a 5 year fix at 6.03% and a 2 year fix at 6.28%.

simon_or

jen_fpb said:

I'm currently on a 2 year fixed 1.14% mortgage, which expires at the end of the year.

Looking to fix again for either 2 or 5 years. 2 year deal is around 5.89%

I'm currently on maternity leave, will be going back but unsure of if full time or reduced hours.

Mortgage Broker has suggested am offset mortgage. I'd not really heard of them. We will have around £70,000 on the mortgage when we remortgage and current term is 14 years.

Savings of £40,000 currently in a 1.5% ISA as I've not got round to moving it. Haven't wanted to spend it as wanting for a just in case fund, especially bow we've a little one.

We are tempted by the idea of offset mortgages, any tips, things to look out for or words of wisdom?!

70k mortgage, 40k cash sitting in an ISA, an offset sounds like a good option to hedge your bets and retain access to the savings. Any further savings can keep getting pumped into the offset without worrying about losing access to the cash, makes saving decisions and actions much simpler.

If keeping the cash within the ISA wrapper is important to you, then there are ways to do that as well while still offsetting 40k of the mortgage for almost all of the year.

jen_fpb

@simon_or interesting you go again the others.

- ISA interest currently low as my fix expired and I've not got round to sorting
- when I di fix its always instant access (latest was instant access, three withdrawals a year?
- offset therefore seems a good compromise 

All of this does depend on what the broker finds as they are going to look at normal fixed deals and offset.

To us, paying interest on 20k is better than on 70k. Our mortgage currently has 14 years left, ideally we'd like to pay it off in no more than 10.

Unsure what we would do with extra savings - add to the 40k or overpay mortgage.

As I said all depends on what the broker finds, we hadn't heard of this type of mortgage until now 

jen_fpb

Would people's answers be different if the savings amount was higher?

housebuyer143

jen_fpb said:

Would people's answers be different if the savings amount was higher?

As I said previously, yes, savings rates being higher negate any benefit of offset, but you actually need to move your money to a high interest account. 
Ford money are great and are keeping up with the increases at 4.3% instant access, but there are more named brands circling that also at instant access. 
If you wanted to tie it up for 6 months you can get almost 6%. 

I had this choice and opted not to take the offset with the higher fee and rate and just put the savings into high interest accounts which then negate the mortgage interest. It's working for me.

jen_fpb

@housebuyer143 sorry more meant if our savings were 50k or more rather then 40k. I'd rather put savings in an account I can access so would likely be lower interest than mortgage

IAMIAM

Why has first direct stopped them?

housebuyer143

jen_fpb said:

Would people's answers be different if the savings amount was higher?

If you were offsetting 100% then I would actually probably go for offset because the higher rate than standard makes no difference to you. 
When I get to 100% I'll jump on the offset bandwagon tbh. 

So much depends on a lot of things such as tax status etc. A 40% tax payer is going to favour an offset just because of the tax savings.

Do you think you will be able to offset 100% relatively quickly into the mortgage?