first direct 5.15% 10 year fix offset question

allan673

hi, seriously looking at going for the 5.15% 10 year fix with first direct - but know little about the offset mortgage.my present fixed rate finishes next month.
i owe £57,000 on the house and am looking at a 15 year mortgage in total.

can i just use first directs offset mortgage like a traditional repayment mortgage, and set up a monthly standing order into the account? basically im just wanting a low fixed rate so is this suitable for me.
any help is most appreciated, cheers

george_jetson

Yes you can.

You can pay as much or as little as you wish into the mortgage account along as you clear it on the due date.

I got a fd offset mortgage a few years ago and it has to be one of the best things financially I've ever done (that and cashing in my endowment ). You'll love seeing your interest bill drop month on month.

allan673

thankyou, i think i will go for the first direct 10 year fix at 5.15%, i just wanted info if i can use it as a repayment mortgage.
and that i wouldnt be any worse off than if i had a repayment type mortgage.
hopefully i will also be able to pay more in the next few years and reduce the term of the mortgage.

lisyloo

You could also look at their 5 year deal for 4.99%.
You'd have to weigh up the fees against the rate difference.

You would need to compare whether 0.16% over 5 years is greater of less that the fees that you would most likely incurr by remortgaging 5 years time.
Of course the security of a 10 year deal might appeal to you, in which case go for it.

They are both great deals.

allan673

but am i right in saying that the first direct offset @ 5.15% works like a standard repayment mortgage (providing i obviously pay the capital and interest payment via standing order)

just new to this ofsetting - be patient lol

i like the idea of a 10 year fixed rate, i am taking it out on a 15 year term but hope to be able to make overpayments later on, so that when the 10 year fixed rate finishes i have a relatively small amount owing.

thanks

lisyloo

As far as I know it works as a standard repayment mortgage.

The advantage of the offset is that you can save money at a tax free rate of 5.15%.
All of us can get a better rate in a cash ISAs at the moment, but after you've used your ISA allowance then you have to pay income tax at 20% or 40% on your interest.

If you have a non-working spouse you can give the money to them and they would be able to find a better rate at the moment (this may change as interest rates fall).

However if you are single or you both work, then the income tax situation means that you are better off putting the money in an offset rather than paying 20% or 40% tax on your interest elsewhere.

Of course you could consider putting some spare money into a pension, but that's a more complicated issue. There are good tax breaks on pensions but the downside is that you can't get at the money until you retire, so it's locked up for a long time.

But one thing is for sure and that these are cracking deals.

allan673

thanks, i already have a good final salary works pension,and my girlfriend works full time.and i wont really be putting any savings into it.

i just dont know what new mortgage to go for, i owe £57k and want a 15 year mortgage around £460 per month.
ive been offered 5.99% no fees by my current lender for 3 or 5 years, but the first direct 5.15% 10 year fix looks good???

basically i just want a repayment mortgage, probably wont make many overpayments, maybe £500 per year? and want to know if the first direct product is suitable.

any pros and cons??? thankyou

lisyloo

Direct Line is cheaper by approx £500 per year.
The fees are approx £700 but bear in mind that's over 10 years.
You won't be able to make overpayments but you can offset (no difference really).

I can't really see any advantages of staying with your current lender apart from the fact that you won't have to find the fees in the immediate term.
It more expensive and you'll have to remortgage again in 3-5 years.
The only slight advantages are that it's probably slightly easy (no valuation etc.) and you don't ahve to find the fees, but long term it's more expensive.

gil13

you can make the FD offset act just like a normal repayment mortgage, I think they will probably have a direct debit to take the monthly interest payment and then set up a standing order to cover the capital part, once up and running you shouldnt have any problems with it. it is also a pretty flexible way of doing it and allows you if you wanted one month to go interest only. just so long as you know that at the end of the term the advance needs repaying - but as long as you set up the payment from the frist direct 1 account, it will be just like a normal repayment mortgage. it is called an offset account but in fact you need not as far as i can see offset anything additional apart from monies each month to pay the interest only bit and the repayment bit and any other over payment you want to arrange. but if you have some savings would not be a bad idea to put it in the offset, once you have saved into ISA's.

allan673

cheers, after the 10 year fixed rate period ends i will probably owe £20k?
what happens then, it doesnt have to be repaid does it, as it says after the agreed term it must be paid in full? or can i just remortgage elsewhere if i want depending who has the best deal.

thanks for your patience lol

JonnyBravo

allan673 wrote: »

after the 10 year fixed rate period ends i will probably owe £20k?
what happens then, it doesnt have to be repaid does it, as it says after the agreed term it must be paid in full?

dont confuse the fixed rate period (10 yrs) with the term (variable depending on what you specify eg typically start at 25 yrs)