Reply to: mortage overpayments?

[Lumiere]

I am now thinking of overpaying the mortgage by the amount I will not need in the foreseeable future, so keeping all available money in the offset saving account till the end of the mortgage may not be a good idea(if my assumptions are correct, of course - I will be speaking to my bank about this soon)

And they were not, I missed the point that at the end of the offset mortgage term you will have your house paid off and all savings still sitting nicely in the bank account, thus higher monthly repayment figure - you are also paying capital on the offset part of the mortgage. Interest only payments are the same for both mortgages, so I was rather over-paranoid about the whole thing.

[wantacontract]

reading your thread, am I correct in understanding you will have 30k warchest.

In which case i would pay off 10k mortgage and keep 20k in warchest....assuming for 20k can last you 6-8 months without work.

[MarillionFan]

cheers MF, I recall the IFA mentioned self employed a few times and I failed to correct her.

I'd rep you but I need to spread it around first

Why thanks. But considering all my rep for weeks has been red!

[FiveTimes]

You can only link a business account if you are self employed. You cannot link a LTD company account to your offset, they are seperate entities.

cheers MF, I recall the IFA mentioned self employed a few times and I failed to correct her.

I'd rep you but I need to spread it around first

[MarillionFan]

I spoke to an IFA yesterday afternoon about switching over to an offset. They mentioned that you can have a product where you can link all different types of accounts to the mortgage account.
They mentioned that you can link savings, current account and also business accounts ?

They are all treated as individual entities but have a link to the mortgage account and all go towards offsetting.

I know this has been mentioned before, but I find it hard to believe that you can link a business account to a personal mortgage account.

You can only link a business account if you are self employed. You cannot link a LTD company account to your offset, they are seperate entities.

[FiveTimes]

I spoke to an IFA yesterday afternoon about switching over to an offset. They mentioned that you can have a product where you can link all different types of accounts to the mortgage account.
They mentioned that you can link savings, current account and also business accounts ?

They are all treated as individual entities but have a link to the mortgage account and all go towards offsetting.

I know this has been mentioned before, but I find it hard to believe that you can link a business account to a personal mortgage account.

[Scrag Meister]

1. Moved house last November
2. Flexible Tracker Mortgage 1 at .99% is 3x as big as, 3 Yr Fixed Mortgage 2 at 3.79% on my place in Devon that I used for the deposit.
3. Over the last year we have paid 12k off mortgage 1, and 3k off mortgage 2.

I am just about to extract the money paid off on Mortgage 1 to pay a lump off Mortgage 2, and save £26 a month interest in the process without increasing the overall debt.

Mortgage 1 payments go up a bit, Mortgage 2 payments go down a bit, but we would have been paying the capital off one or the other, and £26 pops out the other end.

Not life changing but every little helps.

Result.

[TykeMerc]

The big pluses of an offset mortgage to me are:-

• Savings are at a much higher rate of effective interest than any no risk cash investment I'm aware of
• The "income" from the offset savings attracts no tax at any rate and doesn't need to be declared on Tax returns as it's not real it's just reducing the interest from the mortgage
• The cash offset is liquid should it be needed or just wanted for a personal project
• Having a mortgage with regular payments is no bad thing in credit rating terms, but if it's offset heavily or even completely then it's only notional
• Having an offset mortgage helps to protect the cash in the institution in the event of a bank default

It's a significant winner in my book, I can't see any point in having a mortgage that isn't offset.

[kaiser78]

thats the position I want to be in.

Whats your strategy now your technically in credit.

After ISA's i'm looking for other vehicles for investment

Like you cash isas which form part of my offset, then stocks/shares isas and then guaranteed investment scheme / pension.

[downsouth]

thats the position I want to be in.

Whats your strategy now your technically in credit.

After ISA's i'm looking for other vehicles for investment

[kaiser78]

+1 for the offset.

I am fully offset at the moment; ie my savings = mortgage debt. My IFA says I am in effect mortgage free,although nice as it sounds, I don't necessarily agree with this argument as I still have a debt.

Anyway I am also 'overpaying' £700 / month to reduce the mortgage debt and am saving a couple of hundred pounds / month in interest payments, and have reduced the term considerably

Offset is the way to go - I wish I had cottoned onto this years ago...

[downsouth]

another vote for the offset, mines with the oneaccount, just one huge overdraft facility really, no seperate pots/accounts hence the name

You have a standard repayment date as per all mortgages, then you can set up 'plans' for repayment, just 'makes' an overpayment into the mortgage repayment plan. just put all your income into the account every month and jobs a good un

Best mortgage product for me showing a current 'repayment' date of Feb 2011, so 5 years from start, but wont be paying it off as i'll be keeping the cash available for the official repayment date of 2032

[lukemg]

Another vote for an offset – if you usually have a surplus but might need access to it in the future. With Woolwich you can choose to reduce the monthly payment by the interest saved each month but I just keep the payment the same (set to pay off in 17 years so overpaying already). As it’s a tracker too, mortgage is tumbling nicely and should be all done 15 years after I started it. Balance is also saying I can borrow 50k no questions asked due to amount I have paid off. I don’t need it but nice if I did.
This needs discipline though, if any balance tends to burn a hole until you spend it, then might not be the best choice, especially with availability to borrow extra you could be paying this off forever !

[Sysman]

I am now thinking of overpaying the mortgage by the amount I will not need in the foreseeable future, so keeping all available money in the offset saving account till the end of the mortgage may not be a good idea(if my assumptions are correct, of course - I will be speaking to my bank about this soon)

Another point I recall from when I had overpaid was that the building society would have been quite willing to let me reduce payments until I got the balance back up to the original amount. In fact they suggested that I went onto a direct debit and they'd do this for me. Nope, I didn't want to do that, but it could have been handy had I needed to reduce my outlay at short notice to cope with some unexpected large expense.

Do speak to the bank and see what your options are, but remember that it is probably in their best interests to keep your mortgage balance high.

[Lumiere]

Offset mortgages is the way for contractors. Just keep your warchest in your offset account until you have enough money to get rid of the mortgage competely.

That was my understanding, but I did some calculations recently and it does not look so straight-forward any more.

E.g. if I have a £100K offset mortgage (25 years, 5%) and £50K offset warchest:

monthly repayment on £100K mortgage = £590
monthly interest on £50K savings @ 5% = £210
------------
payable to bank monthly £380

but if I transferred £50K from savings to mortgage account I would be paying £295 pcm

this is on a tiny £50K debt, the bigger is the net mortgage the bigger is the difference you "lose" every month

I am now thinking of overpaying the mortgage by the amount I will not need in the foreseeable future, so keeping all available money in the offset saving account till the end of the mortgage may not be a good idea(if my assumptions are correct, of course - I will be speaking to my bank about this soon)