DJC said:
This is what I currently do, I've a standard repayment mortgage (albeit with an overpayment limit), I overpay as much as I can within that limit and put any additional into a savings account which I will use to pay off a chunk of the mortgage come remortgage time.
Remortgaging to another repayment mortgage is of course is one option, but the reasons I preferred the Offset option are:
1) Whilst I could take out a repayment over 5 years with a high standard monthly payment which would be affordable, there is no flexibility should one month I need to save less. This has yet to happen in several years, but you never know. I don't want to find myself in a situation where I cannot afford the self-imposed high standard monthly payment for whatever reason.
2) My savings are split between 'Long term' savings (approx 90%), i.e. my mortgage repayment vehicle (which will then, in part, become my retirement vehicle following mortgage completion) and 'Short term' savings (approx 10%) which I put aside for ringfenced specifics such as car maintenance, holidays, building maintenance, etc. Offset allows me to keep this 10% as available funds should they be needed (they will be, due to their nature) but whilst taking advantage of not being charged mortgage interest for the value of these short-term savings funds from one month to next.
Essentially I am attracted to the flexibility of the Offset mortgage, but perhaps not for the exact same reasons that most people are. However, I'm far from an expert so will listen to other options that'd work well too.
You're correct in that I want to clear the mortgage as soon as possible as a priority.
I'll admit my personal finances are needlessly complex, but I am particularly anal about budgets, funds, cashflow, etc.
We've been on an offset mortgage for the last 7 years and it has been ideal. It is especially worthwhile if you are self-employed or have a savings pot.
After studying mortgage figures, it became apparent that we would repay around 400k over 25 years for an inital mortgage of 200k.
Offsetting will give you maximum in repaying off your mortgage. The aim is to max out you linked savings as quick as possible to reduce your interest payments to virtually nil. Of course, if life takes an unexpected turn you still have the option to release some savings - think unemployment/ill health. With straightforward repayment you lose control of the capital you hand over.
I see it as a cheap 25 year loan....
Of course you will need to repay capital at some point, and if things go well hopefully you will be in profit.
