Fixed Rate Vs Off-Set and Savings

simm31

Hello, Very new to the forum and I'm sure I'm posting a topic that's been covered before; but I'm after some specific advice for my peronsal circumstances:

I have a fixed rate mortgage with A&L and this expires in April 2009 (NINE), by then I hope to have around £20k in savings and investments (I'm only 34yr!!! have twins and a non-working wife!!!)

The house is worth around £400K (and that's a low estimate to factor in the doom and gloom mungers)

We have a repayment mortage of £184k over 28 years and pay just over £1000 p/m month which is well within our means.

I like the idea of off-setting and wonder if it will work for me as I save between £500-£1500 p/m depending on commission (Sales man) and typically do not go overdrawn.

I also want access to cheap money "just in case" and want to get rid of my mortgage ASAP - hence I know I need to reduce the 28yr piece; (we extended the loan period to do a £40k loft and knew that come April 09 we need to make some changes but did not want any 6-month penalities to break our fixed rate agreement)

Does the whole off-set thing work?

I've heard of the cookie-jar syndrom (i.e you have access to quiet a lot of cheap cash as needed)

Are the OneAccount calc's accurate as right now it says we;ll be done in ~15yrs!

All advice welcome and very greatfully received.

Many thanks

Simon
Essex-Man

KiKi

I have an offset mortgage with the Abbey, which I just love. I have a mortgage of £160K (left) and savings of about £40K.

The way the Abbey one works (I don't know if they're all the same) is that the Savings Pot that sits alongside your mortgage acts as a tax-free savings account. So the interest that you save each month (ie, the interest that you're not paying on your mortgage) is credited to the savings account and not taxed.

I overpay my mortgage, and the overpayments go into that Savings Pot. Each month, the interest I don't pay on £40K of my mortgage (because it's offset against my savings) gets credited. So the savings build up very quickly.

I also have access to the money, so I've recently taken out £3600 for this year's ISA (as my ISA rate is still higher than the mortgage interest rate) - a simple BACS transfer.

My current mortgage length is just over 8 years (down from 30, since I offset), but I'll be overpaying more each year, and then use my ISA savings, too, so I should get it down to about 4.5 years in total.

It works really, really well for me...I don't touch the savings because I don't think to, and yet I can get at the money if I want it. Plus, it's a tax-free savings account that you can put more in than an ISA!

I don't know if they all operate in the same way as the Abbey one, but it works for me.

HTH you - sorry I can't be specific about the technical details you refer to; this is just from my personal experience.
KiKi

Gorgeous_George

The most important thing is the interest rate (assuming fees are similar).

I calculate that you have something like a 5% fix at the moment. If you have told the mortgage shrinker that you can save £500 per month, this should reduce your term to 14 years at approximately 6.5%. BUT, when the mortgage is paid off you will not have any savings

GG