offset help needed !

moneywolf

Hi I am a newbie to this forum & need a little bit of help.

I have just applied for a newcastle BS offset mortgage currently 6.0%

Loan ammount £132000 term 23 years monthly payment £883

Using their calculator if i put in £10,000 at start & £500 p month into the offset account the mortgage should be clear in 10 years flat.

So in theory after 10 years my offset account should have (10 K + (120 x £500) = £70K in it & the morgage should be clear.

Do i get the £70K savings back at the end? or do the use it as a huge over payment to clear the mortgage in 10 years?

As by my calculation £883 X 120 payments is only £105960 of capital repaid

But there calculator does not say it takes the savings account as capital overpayment at the end.

Any advice is appreciated.

JonnyBravo

Yep if you wanted to clear the mortgage you would need to use your offset money..... alternatively of course you could just go on paying your mortgage whilst paying no interest (also earning none on your "savings" of course).

moneywolf

I wish it was clearer on their calculators, it does not mention using the savings as overpayments at all.

Bit of a con really

jackomdj

I have not reworked your figures but if you do have £70 mortgage o/s at the end of the time it would only take 4 years & a couple of months to pay off the balance & still have £70k + an element of interest in your hand....
(£883+£500)x12X4.2 = £69.7k the £500 is because you could pay it here instead of into your offset pot.
The interest element is because each month you would transfer £1383 out of your offset pot (where it does not earn interest) into an interest bearing account.

Also don't forget, depending upon the offset you would offset the balance in your current account on a daily basis & any other accounts you have. We spend on our credit card & tfr the money from our current account to our savings so we have that as offset money too (only do the tfr so our current account is genuine "current" cash)

Good luck
Nicky