Just joined up. Question about 'after offsetting'.

drewwa

Don't see how I missed this site for years, but glad I found it! Also pleased to discover I've figured out some of the money saving tips independently - but do expect to discover some more.

I have an offset mortgage with the woolwich around 180k at the moment (started from 202k in 2005).

Currently I'm paying the standard monthly amount and then contributing the same again into a linked savings account. I figure the account and the outstanding balance on the mortgage should be the same around 2014 (not MF, but interest free atleast).

So here's the question:

What would you do at that point?

a. Pay the outstanding mortgage off with the savings.
b. Keep the savings offset, and continue with standard mortgage payments, thus reducing the mortgage, and invest the monthly savings somewhere else.
c. Pay both into the mortgage and clear it asap.

Cheers,

Drew.

Martinslovechild

Hiya Drewwa and welcome to MSE

If I've read your message correctly, your offset account balance in 2014 will equal your outstanding mortgage balance.

If this is the case, why would you not want to close your mortgage account (i.e. option A) ?

I suppose it depends on whether you would want to buy another property or remortgage for any reason with the same bank at some point in the future perhaps (i.e. so that a history is maintained).

If you don't wish to buy another property or remortgage, then personally I would simply pay it off. However, this is a personal decision and only you can decide this.

drewwa

As far as I can calculate, my rising savings account and decreasing mortgage should overlap at £65k.

I guess I'm wondering at this point whether it's best to to slowly pay the mortgage off bit by bit and reduce the offset savings in line to keep it interest free (taking the extra out and investing it - with the knowledge I could be MF at any point), rather than paying off the mortgage in one hit (Got the house, but no savings at all)

Numerically I guess it makes no difference, but I think the idea of having cash easily to hand in a serious pinch might be better.

What do you think?

Cheers,

Drew.

Trying_to_be_good

I've been reading some other posts today, and Barclays allow you to offset cash ISAs, so you could be putting the first £3,000 (£3,600 from 08/09) into a Barclays ISA, and then you have it in a tax-free wrapper for when your savings meet your mortgage liability, so you'll still be able to have tax-free interest. Then you'll have more options when the time comes!

Martinslovechild

drewwa wrote: »

As far as I can calculate, my rising savings account and decreasing mortgage should overlap at £65k.

I guess I'm wondering at this point whether it's best to to slowly pay the mortgage off bit by bit and reduce the offset savings in line to keep it interest free (taking the extra out and investing it - with the knowledge I could be MF at any point), rather than paying off the mortgage in one hit (Got the house, but no savings at all)

Numerically I guess it makes no difference, but I think the idea of having cash easily to hand in a serious pinch might be better.

What do you think?

Cheers,

Drew.

If you're worried about not having a rainy-day fund for any eventualities, then why not close down your mortgage when your outstanding balance equals your overpayment fund AND you have additional cash in Cash ISAs.

If you open a Cash ISA now with £3000 then deposit a further £3600 next month (for the new tax year), wait until your mortgage balance equals your overpayment fund then close it down at that point - you'll be left with a pot of £6600 (plus interest earned) to fall back on.

Whilst it will obviously take an extra few months to accrue £6600 on top of balancing your overpayment/mortgage, it will potentially give you the flexibility you're looking for.

Cheers.

drewwa

Sounds like a plan - I like that. Will be clicking the 'thanks' button!

Cheers,

Drew.