offset mortgages

markwye

I'm thinking of switching to an offset mortgages. What are the problems?

MarkyMarkD

The problems are that the rates aren't very good, and the benefits are exaggerated in their advertising and most commentaries suggesting that they are good.

Unless you have a large amount of spare cash, which you are insistent on offsetting rather than just using to reduce the size of your mortgage, it won't save you money offsetting and you would do better to get a best buy mortgage for the minimum possible amount.

Pink.

Hi markwye,

Welcome to mse.

You may get more replies on the Mortgages and Endowments board, so I hope that you don't mind if I move your thread over there.

Pink

Thefunkygibbons

They could be perfect for you or they could safe you nothing compared to the higher rate on them

It depends what other loans you have and how much cash flows through your current account in a month

Following endowments I guess we have all learned that there is no such thing as a financial product that is ideal for everyone

Robert_Sterling_3

What interest rate are you paying at present?
What would the offset rate be?
How much is the current balance outstanding on your mortgage?
How much money have you got available to offset against the mortgage?
This information would all be needed before it is possible to say whether it might be advantageous.

bylromarha

I'd recommend ringing London and country, the most fantastic mortgage broker I have ever used.

0800 953 0304
http://www.lcplc.co.uk/

They will give you the best mortgage deal for you in your circumstances and they access a wide range of products. I thought that an offset was best for me, but the person quickly pointed out why it wasn't. They also ask if you've seen a deal that you think could be for you in the press and they'll check that it is or if they can better it. They also ask if you are happy to pay fees, overpay etc etc etc so the best deals they recommend for you really are the best fit products to precisely what you want.

And to top it all, their service is completely free!

I could offically refer you to them so I get a tree planted in my name, but their service is so good, the referring part isn't that much of an incentive. Their excellent service is good enough to refer them alone!

reddevilled

An offset mortgage has been fantastic for us. We stooze, so have around £10,000 in our stooze pot offsetting against our mortgage which is currently at 4.94%.

We have the ability to overpay (which we do) and take payment holidays (which we try not to!) and are generally very happy with them.

Definately good for us at the moment - we aim to pay off our house in the next 4 years - that'll be a 8 year mortgage then :j

MarkyMarkD

£10,000 really isn't a lot, red, unless your mortgage is very small, to justify paying a rate which is around 0.75% above best buy.

gibbo888

Sorry to hijack this post but i am in the same situation and would like some advice?

Robert_Sterling wrote:

What interest rate are you paying at present?
What would the offset rate be?
How much is the current balance outstanding on your mortgage?
How much money have you got available to offset against the mortgage?
This information would all be needed before it is possible to say whether it might be advantageous.

Rate at moment is 4.05% (ends November) (best buy at moment for me is 4.39%)
Offset rate 5.7% (random pick off net) ( The One account)
Balance on mortgage 93k
offset ammount 65k if ALL my investments are pooled
Wages/incomes £2300 pcm

my intention is to pay the mortgage off as early as possible but i am a bit warey of using all my money at once to do this, as if something happens i cant get it back, whereas in an offset i can?

Overpaying by 6k a year at moment, lenders limit, and i am seeing a drop in term of nearly 24 months every year.

Would offset aid me?

Robert_Sterling_3

Hi Gibbo888

The questions I asked were to get an absolute minimum amount of info before I would plung in so here goes.

1) When your current mortgage agreement comes to an end in November

you could certainly pay off part of the outstanding balance with some of

your £65000. How much you should pay off is for you to decide.

Since borrowing money at a good low rate as a house mortgage is one

of cheapest ways to borrow ( students loans are even better ) you need

be in no particular hurry to repay this type of loan. You can build up money

in minicash ISA's which can give about the same tax free rate of interest as

you might be paying on your mortgage. You could also continue to over pay

your mortgage by £6000 per annum.

This is not a black and white case so there is no one simple answer.

My own inclination would be to pay off a "chunk" of the mortgage in November.

Continue to overpay £6000 per annum.

Sign up for a good 2,3 or 5 year deal

and NOT go for the offset mortgage.

This is not professional advice it is just what I would do.

THe "Chunk" could be for example From £10,000 to £25,000.

You could then have another think at the end of the 2,3 or 5 year period.

One of my own family will be going down this route soon.

gibbo888

That is where i was coming from, different figures but same principal.

I just liked the LOOK of ofset and couldnt get my head around it properly.

thanks for clearing this up.

Mike