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    • CDB199
    • By CDB199 10th Jul 18, 9:56 PM
    • 44Posts
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    CDB199
    Offset mortgage explanation
    • #1
    • 10th Jul 18, 9:56 PM
    Offset mortgage explanation 10th Jul 18 at 9:56 PM
    Mortgage free but looking to remortgage to raise deposit to purchase a second property. The current home then, once I find new property, be let... covering the monthly mortgage payment and a new small residential mortgage will be sought to pay for new property.

    Have been told to look into offset mortgages as an option.

    Can Someone explain how this works to me?
Page 1
    • amnblog
    • By amnblog 10th Jul 18, 10:17 PM
    • 10,735 Posts
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    amnblog
    • #2
    • 10th Jul 18, 10:17 PM
    • #2
    • 10th Jul 18, 10:17 PM
    Dont see what offset mortgages have to do with this.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • getmore4less
    • By getmore4less 11th Jul 18, 6:50 AM
    • 33,044 Posts
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    getmore4less
    • #3
    • 11th Jul 18, 6:50 AM
    • #3
    • 11th Jul 18, 6:50 AM
    Offset mortgage

    borrowings and savings along side each other and get pooled(savings offset the debt)

    you pay interest on the net amount borrowed.

    There are variations but the essence is you are in practice borrowing less and paying less interest until you borrow the money back gain.

    In most cases the rate of interests is higher than regular borrowing.

    Where they could come in handy for a rental business is if you are planning to build a portfolio, you create a line of credit that only costs when you draw it down.

    You recycle the rental income into the offset pot until there is enough to buy the next place.

    The days of great offset lifetime tracker rates seem to have gone making the financial viability less likely over regular borrowing routes.
    • CDB199
    • By CDB199 11th Jul 18, 12:19 PM
    • 44 Posts
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    CDB199
    • #4
    • 11th Jul 18, 12:19 PM
    • #4
    • 11th Jul 18, 12:19 PM
    Q: How does offset come in to this?

    A: I haven't yet found the new property to purchase. was told if i remortgaged now using an offset, the "depsoit" money would sit in savings account and discount the interest paid until find new place. I potentially can add savings to this in the meantime.

    then when i find a new place, can switch/flex mortgage to suit situation. would have to get permission to let etc.

    I would then get a new mortgage to make additional borrowing on the new residential property.

    is this my best option or is "let to buy" the king here?
    Last edited by CDB199; 11-07-2018 at 12:19 PM. Reason: grammar
    • Thrugelmir
    • By Thrugelmir 11th Jul 18, 1:06 PM
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    Thrugelmir
    • #5
    • 11th Jul 18, 1:06 PM
    • #5
    • 11th Jul 18, 1:06 PM
    Seems as if you are looking to find a lender(s) willing to advance 100% of the purchase price of the new property. Suggest you speak to a broker. As some lenders might not like the scenario.

    While rent covers the mortgage payment. The pessimistic view is that with no rental income, for whatever reason. Not only only do you have a mortgage to fund. But you have all the ongoing costs of a second property.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • CDB199
    • By CDB199 11th Jul 18, 4:07 PM
    • 44 Posts
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    CDB199
    • #6
    • 11th Jul 18, 4:07 PM
    • #6
    • 11th Jul 18, 4:07 PM
    Seems as if you are looking to find a lender(s) willing to advance 100% of the purchase price of the new property. Suggest you speak to a broker. As some lenders might not like the scenario.

    While rent covers the mortgage payment. The pessimistic view is that with no rental income, for whatever reason. Not only only do you have a mortgage to fund. But you have all the ongoing costs of a second property.
    Originally posted by Thrugelmir
    Not quite 100% as the money released be remortgaging will be around 50% of the new purchase price. Were talking in the region of 80%; which isnt far off many house purchasers.
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