Calculating the effect of an offset mortgage?

[eltax91]

Hi guys

Just got into a new offset mortgage. It has a fixed rate of 1.89% for 2 years, then jumps to standard variable.

I have £142k total loaned, and I have just over £50k sat in the offset as capital. Mortgage monthly payment is £918 a month.

At the moment, the online system shows a mortgage benefit of £53 a month and currently zero affect in terms of "term reduction".

When we signed up, our IFA suggested to us that as savers, an offset could significantly affect our terms and put us in a sound financial position with regards the mortgage. I've also generally always been led to believe that "most" of a monthly mortgage payment is in servicing interest and that your debt only reduces slightly each month. So, i'm questioning the figures really. With over 1/3 of the total mortgage in the offset, should I be seeing a significant "benefit" in the term reduction? Any way I can calculate what the benefit should be manually to cross check the figures?

Thanks

[eltax91]

Sarnie said:

eltax91 said:

Hi guys

Just got into a new offset mortgage. It has a fixed rate of 1.89% for 2 years, then jumps to standard variable.

I have £142k total loaned, and I have just over £50k sat in the offset as capital. Mortgage monthly payment is £918 a month.

At the moment, the online system shows a mortgage benefit of £53 a month and currently zero affect in terms of "term reduction".

When we signed up, our IFA suggested to us that as savers, an offset could significantly affect our terms and put us in a sound financial position with regards the mortgage. I've also generally always been led to believe that "most" of a monthly mortgage payment is in servicing interest and that your debt only reduces slightly each month. So, i'm questioning the figures really. With over 1/3 of the total mortgage in the offset, should I be seeing a significant "benefit" in the term reduction? Any way I can calculate what the benefit should be manually to cross check the figures?

Thanks

What has the lender said?

Nothing yet! I'm asking the internet of geniuses first. Also I'm a man, I don't like actually talking to people.

[eltax91]

Thanks for the reply. And for helping with calculations. When we got into the mortgage, we said we wanted to pay the same fixed monthly payment and any variation was to go into the capital each month and pay extra off the mortgage.

I will give it a couple of weeks more and then contact them if the numbers don't change. I've only had one payment so far, the £53k has been there since day 3 (it took 3 days to transfer it all across due to transfer limits)