Have I Done the right thing?

I desperately wanted to be mortgage free by the age of 40.

I saved into Isa's every year and then sold a second property when it had achieved enough equity to pay off my own mortgage.

Unfortunately, I did not have the courage to pay off my mortgage in full as when it came to acually handing over the money I just couldn't do it. I therefore opted for the Woolwich Offset Account.

I now offset the full amount of my mortgage for the remaining ten years (interest only). I therefore make no monthly payments and have been using the amount that I was paying on the mortgage for fun things like holidays and weekends away with the kids. (Now that the novelty of not paying the monthly payments has worn off, I'll also look at a regular savings account for this money).

At any point I can pay off my mortgage in full with the offset amount or I can chip away say £5000 per year, etc.

I'm sorry to drone on but I really don't know if I was mad not to pay off the mortgage when I could. I do have my Isa Savings and enough set aside for a rainy day so what is my problem????
I have a young family and have recently hit 40 so I could realistically achieve my goal, I just haven't got the bottle to hand over the dosh!

Has anyone else offset instead of paying off or am I nuts ?

Replies

  • roswellroswell Forumite
    2.4K Posts
    My mortgage is very small but i have run it as 100% offset for about 2 years now, I have now realised that while my mortgage has decreased my offset savings havent increased (because its offset)((Yes i fully understood this at the time of taking it i just didnt think much about the effects)) , Im now thinking of moving all the money out the offset as the debt will be reducing naturaly (repayment mortgage) and the savings can increase by around 6% which I believe is a better setup than not getting any growth for years.
    If it doesnt pay rent sell it.
    Mortgage - £2,000
    Updated - November 2012
  • busy_bbusy_b Forumite
    126 Posts
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    Our mortgage is just 36k now and fully offset but we were advised to place it on an Interest only. (As we didn't want to pay anything monthly).

    I just don't know if we should have paid the whole thing off and have done. I just feel a bit more secure knowing that I can dip into the offset savings if I want to or re-mortgage if I ever had to (not that I would at this point).

    It's good to read that someone else has offset 100% too.
  • effectively you are mortgage free though aren't you? and if for any unforeseen reason you desperately needed the money you have access to it immediately. So, personally I wouldn't worry about it - it's this kind of flexibility that makes me a big fan of offset mortgages.

    I know there are some people who keep a small amount running on the mortgage as it's cheaper than paying redemption fees and then having to pay the bank to store your deeds, so I guess there's quite a few people around who are technically mortgage free but still have mortgages (if that makes sense)
    weaving through the chaos...
  • Trying_to_be_goodTrying_to_be_good Forumite
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    Well done on having effectively paid off your mortgages, busy b and roswell!

    I think it's really sensible to keep some of the money accessible, should you need it. But £36k is quite a lot! Perhapd there's a half-way house of keeping, say £10k as an interest only mortgage (wholly offset) and paying off the other £26k?

    Deeds are now stored electronically by the Land Registry so you don't need to keep the paper ones safe anywhere - it's just the end-of-mortgage fee you'll have to pay to go wholly mortgage-free!
    Mortgage Free thanks to ill-health retirement
  • dimbo61dimbo61 Forumite
    13.3K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
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    as you have in effect paid off your mortgage ( WELL DONE )start thinking long term and
    start saving the money you would have paid out on the mortgage each month into ISA,s for both of you. ie 2x£3000 before april and 2x £3600 after april.If you already have an ISA from last TAX year you could pay that and
    £6600 into the 6.5% lloydstsb fixed for one year ISA ( you need £9000+ to get 6.5% ). how much interest are you paying on your offset mortgage?
    think about increasing your pension contributions 20/40% tax relief.
    be smart with your money and invest for your kids education/ first house
    and your retirement !! GOOD LUCK
  • busy_bbusy_b Forumite
    126 Posts
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    Many thanks for your responses, I know many people must think I'm mad (wishing to be mortgage free and then not technically becoming mortgage free, when I could) but I'd hate to pay it all off and then kick myself for handing over a huge chunk of hard earned savings.

    Dimbo61, I have just checked the paperwork and apparrantly from the 16/01/08 the interest rate is 6.39% (0.89% above their base), which would mean that I would pay £194.00 approx per month. (However as I offset 100%, I actually pay nothing every month.)

    I'm not great with Interest rates and this is where I get confused as to whether I've done the right thing offsetting.

    I wouldn't be great at monitoring the Savings interest if it wasn't being offset and I'm sure we'd be worse off as the Savings would then be taxed (Is that right?) At the moment I don't receive interest on my savings and they don't charge it on the mortgage so am I right in thinking that it's more Tax efficient to offset too?

    We used our Isa allowances with Barclays for this year but have been looking at the Lloyds TSB one for April.

    Thanks again for any responses and if anyone could clarify the effects of any drastic interest changes, I'd appreciate it. (This is the bit that puzzles me, ie: when it would be better to just pay if off or stop offsetting).
  • MK_2020MK_2020 Forumite
    6 Posts
    Part of the Furniture Combo Breaker Mortgage-free Glee!
    Forumite
    Hi Busy B.
    I'm also offsetting 100%. Most people say that the golden rule is 'Is the amount you're saving in interest through offsetting greater than the amount you could make in interest(after tax) from a savings account?'.

    Regarding paying it off now or not, I don't see it makes much difference and it comes down to personal preference.

    From my point of view it's just a case of making sure that my offset savings account always has the exact amount of the balance of my mortgage so any extra money I have is getting some interest.
  • dimbo61dimbo61 Forumite
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    hi busy b if you are paying 6.39% on your mortgage it would be harder to
    get a better rate from an ISA. clear some of the mortgage if you can say £10,000/£16,000. this will still leave you with a quite large offset amount
    if you needed it.
    the main thing to do now is build up your savings in cash ISA,s which give you a good rate of return. try and save £7200 a year ( if you can ) your next challange ?? IF you have a large amount in an offset account and get made redundant/ lose you job you are expected to live off this money BEFORE income support will help so I WOULD CONSIDER VERY CAREFULLY getting rid of your DEBT and saving for the future. GOOD LUCK
  • busy_bbusy_b Forumite
    126 Posts
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    We always use our 3k per year Cash Isa allowances but have been vary wary about placing the remaining 4k allowance anywhere as we lost a lot in Technology Isa's a few years back and I still haven't got over our stupidity!:o
    I'm in the process of tracing all our cash Isa's and their values and then I'll probably opt for the Lloyds TSB one's for next year. I had originally thought we had to open new Isa's every year and just placed our money in the best ones every April :o We've ended up with a load of mediocre savings Isa's all over the place- we live and learn ! One day I'll be financially savvy!
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