Am I doing the right thing? Offset mortgage.

AdrianHi

formerchamp wrote: »

Hi Stellabgh

no expert but just thought you would be interested in a little more feedback from someone who has been running an "open plan" mortgage with the woolwich for a couple of years. It's great, no really it is.

I also do most of my banking with Barclays, when I am online I can see all of my accounts, for me the mortgage is just a HUGE overdraft but the great thing is because the interest is calculated daily you know the amount is going down all the time. Not only does my current account balance count but also our joint account, OH single account and joint savings are in there too. This means most of our money is effectively earning a great interest rate and it's tax free because whatever our mortgage rate is we effectively get on our savings.

It has an added effect too, I call it the OH effect. My OH thinks god pays our bills, the regular question of "have we paid ...?" drives me nuts since he wouldn't know how to set up a DD to save his life, but he does like seeing the mortgage going down, he loves the letter we get every month saying you saved £x amount in interest this month and £y so far keep this up and you will repay in z numbers of years. He has become the new messiah of saving money and keeping moeny in our account as long as poss'. He pays for everything on his cc now and pays it off once a month just because he gets the interest against our mortgage for those extra days.

Enough, sorry to witter on, bye and good luck.

This is such a brilliant way to do it. I was working in the financial services industry a few years ago (doing IT systems) where the people there calculated that the average family with £1000 worth of monthly expenses that could go on a credit card, balance cleared on payment day, could knock 18 months off their mortgage just by doing this. Add on everything else you can offset even if it is for just a few days in the month and it obviously gets better still.

stellabgh

Thanks again. We have applied for Egg Money mastercards and get 1% cashback with that, and all our spending will go on there so that we have the max possible amount in our account at all times. Plus earning an extra 1% too. Nice

Sosh

I've had a one account for nearly 4 years now and we've managed to cut an extra 5 years off our mortgage. We should beable to pay it off 10 years early.

I'm all for them.

wheredoesallthetimego

I don't think the virgin/natwest one account is a good idea due to the rate.
You can do better by getting a cheaper mortgage and deling sensibly with you money. It's only really any good for people who otherwise wouild just spend the money - often just leaving the money in a current account would be a better option depending on the amounts let alone putting it in a high interest account or paying lump sums of the mortgage.

I quite like the first direct one though because the rate is pretty good. The gamble here is on the fixed period.

starlet10

stellabgh wrote: »

Thanks again. We have applied for Egg Money mastercards and get 1% cashback with that, and all our spending will go on there so that we have the max possible amount in our account at all times. Plus earning an extra 1% too. Nice

We had an offset mortgage with FD which was very easy to manage online. We did exactly the same as stellabgh, leaving as much money in the account for as long as possible and using our Egg Money card for everything else to earn 1% cashback. We also made full use of 0% credit cards, which was a great way of keeping a large sum of money offset againt your mortgage to save on mortgage interest. In our case, having an offset mortgage definitely helped as become mortgage-free.:cool:

OverlandLandy

wheredoesallthetimego wrote: »

I don't think the virgin/natwest one account is a good idea due to the rate.
You can do better by getting a cheaper mortgage and deling sensibly with you money. It's only really any good for people who otherwise wouild just spend the money - often just leaving the money in a current account would be a better option depending on the amounts let alone putting it in a high interest account or paying lump sums of the mortgage.

I quite like the first direct one though because the rate is pretty good. The gamble here is on the fixed period.

You need to also factor in the tax advantage so its not as simple as it appears at first.

I have an offset with the Woolwich/Barclays and it works for me.
I have no savings (but I do keep a 'savings pot') so I do not pay any tax. In effect this is better than an ISA.

I find it keeps me disciplined and I have now set myself 'Targets' to achieve in my accounts...ie any 'excess' in my current account I will transfer to my savings pot each month....then when I build up >£500 above my set level in my savings pot I make a part redemption/capital repayment against my mortgage.

My offset is calculated daily so i avoid using the Debit card a much as possible and put things on my Egg or AMEX then pay it off in full each month. Thus earning more offset + cashback.