ContractorMoney 'FLEXIMORTGAGE' OFFER: Tax efficient Offset mortgages for contractors

[d000hg]

Offset mortgages do have a condition they can refuse to let you draw down if they choose don't they though, a "cover their own arse" policy?

[ratewhore]

CM weren't competitive when I got my offset, I went direct to FirstDirect and they wanted 2 years of accounts. They then worked out what they would lend based on net profit + salary. If you expense the hell out of your Ltd that may drastically change the offer...

[northernladuk]

Offset mortgages do have a condition they can refuse to let you draw down if they choose don't they though, a "cover their own arse" policy?

No, you have your mortgage which is say £1000 a month. They link accounts to the mortgage and just take that money off the total of the mortgage without you having to actually move the money anywhere or commit it to the mortgage. You still have to pay the £1000 a month but more of it goes to capital as the interest is lower due to you paying against a smaller mortgage (=Mortgage - savings). All that happens is you pay off your mortgage early. The payments are not reduced. You are paying worst case as standard, the extra you have in the accounts just reduce the interest. Most offsets you don't need to move the money anywhere, just leave it sitting in your account as if it was your normal money which leaves you free to do with it what you wish.

[Jennifer@CMME]

Offset Mortgages - Further Info

Interesting comments regarding offset mortgages! I've read up on this myself and think that a lot of your questions can be answered here: Offset Mortgages - Contractor Mortgages Made Easy

One of my colleagues put this article together for our website and it reflects the offset options in the marketplace today. I hope this proves useful.

[No2politics]

ContractorMoney 'FLEXIMORTGAGE' OFFER: Tax efficient Offset mortgages for contractors

I found this spreadsheet invaluable when comparing mortgages
http://forums.moneysavingexpert.com/....php?t=1157173

Helps u compare mortgages with different repayment periods and fee structures.

[d000hg]

I've seen First Direct mentioned a few times, what is the deal they have which is so good? CM were able to find 3.2% fixed for 2 years, which doesn't seem too bad.

[northernladuk]

I've seen First Direct mentioned a few times, what is the deal they have which is so good? CM were able to find 3.2% fixed for 2 years, which doesn't seem too bad.

Have a look at an offset calculator like this. It gives you an 'equivalent rate' to demonstrate what rate you need on a normal account to match the situation you are in. I put in the value of my mortgage at 4% rate along with a £20k lump some offset and it comes out an an equivalent of 3.3%. If I then put a £100 a month saving in it drops to 2.9%

http://www.natwest.com/personal/mort...fset-calc.ashx

The obvious things to watch is you may not keep that lump sum in for the entire duration of the mortgage, and you would never normally keep a mortgage for the entire duration so equivalents for the lifetime can be misleading... but anyway, shows that a bit of spare cash can help.

Didn't reduce the monthly cost of the mortgage but years start dropping off the end.

[Moscow Mule]

Looking a First Direct, they don't offer an offset with repayment - it's interest only. Which means you have to have the faff of an endowment or similar.

I'm with the woolwich at the moment, and I'll probably stick with them when our fix runs out in the summer.

[No2politics]

ContractorMoney 'FLEXIMORTGAGE' OFFER: Tax efficient Offset mortgages for contractors

The obvious things to watch is you may not keep that lump sum in for the entire duration of the mortgage, and you would never normally keep a mortgage for the entire duration so equivalents for the lifetime can be misleading... but anyway, shows that a bit of spare cash can help.

.

Absolutely, I don't think it's right to compare across the lifetime of the mortgage. To compare mortgages It helps to assume that at the end of the mortgage period you will look for a new deal, rather than revert into the standard rate. So u only compare deals over the relevant mortgage periods, essentially ignoring what the mortgage will revert to.

Naturally it is much easier to compare two mortgages of the same period. Ie a 2yr offset vs 2 year fix. (Note in that spreadsheet it is possible to include how the cash in your offset account will decrease over time, using the "mortgage 1 monthly repayment" worksheet.)

When comparing a 2 year and a 3 year you have to include the fees in your comparison. Over a six year period you would pay fees 3 times for a 2yr and only twice for a 3yr.

Should I have a fee free mortgage with a higher interest rate or a higher fee with a lower interest rate? Many people compare the monthly repayment and use that to see which comes out cheaper. However that is only part of it. The other thing u should ask is how much capital will I have outstanding at the end of the period? I metric that I use, is per pound of monthly repayment how much does my capital decrease by? To compare deals on a truly like for like basis you want to ensure that the monthly repayments are the same (tweak the over payments to do this).

That spreadsheet allows you to add in changes in interest rates over time, in case you want to do some different scenarios.

When I was getting my mortgage last year I was trying to get around my head around how to compare mortgages. When I mentioned the above to the broker I spoke with, his eyes glazed over. Didn't have a clue, which probably goes for 99.9 percent of people who have ever bought a mortgage.

Make u think that if so few people can get to the bottom of a mortgage comparison, how many people truly understand all the complex financial products that are traded today.

[Olly]

Looking a First Direct, they don't offer an offset with repayment - it's interest only.

nah, they do
For me what made First Direct the cheapest was the no fee bit since I plan to offset virtually all the loan