Offset Mortgage Query

gregbbb

Hi

Using example figures here...

I've got an offset mortgage for a loan of £100k at 5%. There's currently £30k in the savings account linked to the offset mortgage. The idea here is that £30k is deducted from the £100k and I'm therefore only charged interest on £70k.

My question is whether it would it make any difference if I took say £20k of the £30k in the offset and made a single overpayment on the mortgage, reducing it to £80k and leaving £10k in the offset savings account. I'm thinking there's no difference? Interest is still only charged on £70k.

Similarly, would it make any difference if I made regular monthly overpayments of say £100 or would it be just as beneficial to drip that £100 into the offset savings account?

Thanks in advance for responses.

Hoenir

The only immediate benefit to overpaying the mortgage account is the self imposed discipline. In that you are unable to access the money and spend it elsewhere.  

housebuyer143

If you do that you might as well not have an offset mortgage as there is no benefit to actually paying it off like this. You may as well just got a cheaper repayment mortgage 🤷‍♂️

Hoenir

housebuyer143 said:

If you do that you might as well not have an offset mortgage as there is no benefit to actually paying it off like this. You may as well just got a cheaper repayment mortgage 🤷‍♂️

Depending on the interest rate charged on the mortgage. The offset account can be beneficial. There being no tax on the interst earnt. My final mortgage was an offset when base rate was 5.50%. Was a usefull emergency savings account. 

tetrarch

I would retain your offset intact as you never know what you might need it for. There is no economic benefit to change as it is

Regards

Tet

Veteransaver

You may have early repayment charges if it's a fixed mortgage and you pay a chunk down. Leaving it offset would trigger any charges.

gregbbb

Thanks all for your comments. It's only a 2 year fix so I'll plan to leave it as is and pay into the offset savings account as and when I can. Just short of the 2 years I'll pay a lump sum off and then remortgage elsewhere, with or without an offset, depending on the circumstances.

Flugelhorn

I had a full offset mortgage for a couple of years and just left it like that - no payments due and the amount in savings matched the mortgage - money was still available to me if needed and the interest rates were v low in savings accounts so not missing out there either