offset or other type of mortgage

peterpiper70

Hi all,

It is remortgage time for us and we have at present 117000 outstanding on our First Direct mortgage. We have approximately 22,000 in savings split between two current accounts and two savings accounts.We also have an endowment policy which is valued at 17,000 and two ISA`s which have a combined value of approx 12,000.Between us we put approx 4500 in the accounts monthly and this dwindles away over the course of the month leaving varying amounts to carry over.
Question is should we go for an offset mortgage or a different type.We wish to be mortgage free in 15 years so this is the time scale we wish to stick to.Should we cahs in the ISA`s and/or endowment and pay this off the mortgage or keep them going as they are?
Any help appreciated
Regards
Pete

getmore4less

I think one thing you could look at is where the £4500 goes every month and make sure you are getting value for every spend.

This variable amount in an offset will help but not that much,

Cashing in the ISA means the loss of tax free interest for ever might be best to keep them. There are offset opptions that allow ISA offsetting so you can max out your entitlement for future use, FD might be one of them.

review the endowment options as an investment and then decide what to do.

StuartGMC

Pete
If you put any non-DD or SO spend on the credit card and then pay in full when due, that amount will offset if you have a deal including current account. However, we had to switch from two joint current accounts to just one. Similarly savings need to be in the same arrangement.

If you want to keep separate current and savings accounts then you may immediately eliminate offset anyway?

Run the numbers as getmore4less advises and see where your spend is "uncontrolled". Are you already overpaying the mortgage or, waiting to month end to "see what is left"? I learned very early on once graduated that I didn't save what I should using this princple, but, deciding to save after pay day based on expected costs ahead led to more savings accumulating. Overpaying is a similar stance and will benefit your mortgage position significantly and more so than relying on offset alone.

getmore4less

StuartGMC wrote: »

....
If you want to keep separate current and savings accounts then you may immediately eliminate offset anyway?
......

Barclays offsets allow multiple people with their own accounts, curent, savings or ISA.

setmefree2

Hi

If you do decide to offset - read this thread on the ONE a/c first.

http://forums.moneysavingexpert.com/showthread.html?t=859611&page=8

All the Best

SMF2

peterpiper70

Hi again and thanks for all your replies.
Sorry for the delayed response but for some reason I cant post on here at work as it says my post is too short no matter how long it is!!!
Anyway, I still can`t see how I can lose with an offset so I have decided to lump for the First Direct fixed deal offset.
Only question is how long to fix for but I am tempted to go for the full 10 yrs and reckon I can pay off my mortgage in that time.
Any thoughts?
Regards
Pete

dimbo61

If you hope to be MF in 15 years then a 10year fix might be a good deal
for you if you plan on staying in your home for at least 10/15 years !
you still have £117k owing on the mortgage and unless you can afford serious
overpayments of say £500 a month and offset a large part of the mortgage
it might be to much to clear any earlier than that.
If you have reduced your mortgage by a huge amount you can pay say £10/15 a month till the fix is up ! GOOD LUCK

dimbo61

The one account rates are expensive and as you are already with first direct
who DID have some of the best rates for any kind of mortgage I would check out what they can offer you now.
Only cash in your isa,s or other savings If they are paying less in interest after TAX than your new mortgage rate.
I have an offset mortgage and it works for me

StuartGMC

Pete
Offset works for me but we have a significant proportion of the capital offset and we overpay. In fact the overpayment is probably still the major benefit of the flexibility of an offset arrangement and the one which significantly reduces the term.

You do need to have done a complete budget of all your annual costs and with the income you have coming in each month between you, it may open your eyes to what you know you spend and what is actually left in the bank at month end. The difficulty then is finding the leaks but this is worth the time to review, you may not choose to change your spend patterns but you'll understand them better. However, it's more likely you'll get a kick out of pulling down the interest charged each month etc and thus tackle the spending.

It may be prudent to take out a longer term for now, afterall, offsets are designed for flexibility. This will help if your circumstances change and give a comfort zone in which to work within financially. If you find you generate savings faster than planned it will simply mean you'll pay less interest and can look to reduce the time to be MF :j

I'm more than happy to send you the budgeting spreadsheet I've developed over an extended period if you want to collate data to be certain about your plans, just PM me. A few thoughts are in my thread on how we work the offset to our advantage.

Good luck, and once you've made the decision, keep posting us on your progress!

JoeShmoe_2

We were in the same boat last month but seeing as (IMHO) the equities market is going to test bottoms in the next two months before beginning a slow and prolonged recovery we thought it better to use that money to pay a lump sum off our mortgage. Sure we could save it but we figured the savings on any amoubt would be ouweighed by the interest saved on a mortgage in the long run. Offet savings are of course tax free because you get no interest

We opened a 10yr offset with First Direct with an interest rate of 6%. We will move both mine and my wifes current accounts in there and our savings. FD let you know each month the interest they will take off each month by DD. They then suggest how much capital you should pay down based on your plan but it is up to you to make that paymenbt. The good thing we find is that with the offset we have a minimum capital payment we make at the start of each month and then overpay based on what we have left at the end. This for us is just chipping away slowly but im sure we'll be amazed in 5-10 years just how quickly its come down

Weve found FD to be really good

Of course you can be flixble in choosing not to pay the capital amount for a month or more if you wish if you want the money for other things

Lunar_Eclipse

peterpiper70 wrote: »

Only question is how long to fix for but I am tempted to go for the full 10 yrs and reckon I can pay off my mortgage in that time.

Hello

Depends how much you want to pay it off tbh.

You already have £51k that in theory could be put towards/offset against the mortgage. (Hence it depends how much of a priority it is for you). So personally, I would opt for either the 2 or 5 year fixed rate and not the 10 year since I think you may regret it if you are serious about paying the mortgage off and attack it big time. But only you know how likely this is.

We have the FD offset, coming up to the end of our 2 yr fixed deal in November. Due to their ridiculously high fees for their fixed rate deals, we will probably opt to stay on their SVR, which is motivating us to overpay as much as possible before this time!