Off Set Or Pay Off.

Grz.26

Hello All.

I was wondering if you guys and girls could shed some light on whether to pay 10% off a 81k interest only mortgage, or wait and set up a offset account once im up for renewal. My mortgage is up for renew in Dec 08 and was going over to repayments. I am willing to pay upto 1800pm into the mortgage to get it down once ive started the new mortgage deal. So what i am asking really is:

1) Should I hold off paying 10% (8.1k) - allowed in contract without incurring any extra costs, or place it in offset account when i renewal in Dec '08

2) When i renewal my mortgage for repayments. shall I offset my mortgage with finances, or pay off approx 1800pm to get capital down.

Thank you.

Regards

Richard

Martinslovechild

Firstly, I am deducing from what you've said that you are swapping your mortgage lender in December (for a provider offering an offset facility), rather than simply starting a new deal with the same provider.

If this is the case and the new mortgage provider charges a fee based on the size of the mortgage, then pay the 10% off your mortgage before December, the arrangement fee will be 10% less as a result.

I always made overpayments into the overpayment fund rather than against capital. This way, I could always ask for a drawdown (a full or partial repayment of any overpayments) at any point in the future; if overpayments are made directly against capital, this facility is unavailable.