Offset Mortgage - Is it for me

AndyH1976

Hi

We are due to remortgage by the end of June from our 2yr fixed of 4.75%. In July I went self employed so I wont be paying tax for 18months. I have built up a large amount of savings in tax money as a result.

Our house is worth around £475K and we owe £320K on the mortgage. I know our repayments are going to go up by a massive amount but can I use my savings/tax money to my advantage?

I have been putting away about £2K per month for tax money and get a bonus of every quater. My idea was to use the tax money to offset against the mortgage and then draw down each time I get a tax bill or just put the money in a savings account to offset.

Advice please.

dimbo61

hi andy I am a huge fan of offset mortgages and it works well for me.
I am not self employed but I think offset works even better for self
employed people ! its a great place to keep your TAX money and other savings. If you can get an offset mortgage then try to build up 9/12 months
worth of income (for quite times at work ) you earn no interest and therefore
pay no tax on your interest.
the amount of money going in and out of your account each month also
helps you pay less interest on your mortgage .
So go for it GOOD LUCK

dimbo61

think long term if you plan to stay in your home for the next few years
think 5 or even 10 year deals. I am fixed for 5 years and so so glad I did.
clearing a big mortgage like that will take a few years so having a long term
offset gives you the chance to reduce the mortgage and therefore increase
your equity in your home

Tiddler_2

Andy,

Does your current mortgage lender do offset mortgages? Or does your partner/wife earn enough for the mortgage company to lend her the full £320k on her salary alone?

The reason I ask is that most lenders will want you to have been self-employed for at least 12 months, so the remortgaging may have come at the wrong time for yourselves to switch to an offset mortgage, unless you hang on until July.

Even if you went self-cert (higher rates) then they would still want 12 months trading history. You may get away with a fast-track mortgage after July, but the broker will still need to see proof of your income if only for their own files to prove that the mortgage is affordable.

Hope that makes sense!

AndyH1976

Yes we would be there for the longterm. My FA will be able to do a self cert (but I guess I will end up with higher rates) or I can provide bank statements and P60 etc.