Offset SVR v Fixed

[Babw]

To the mortgage advisors on here, would really appreciate your advice.

First time buyer - 85% LTV

Due to my lack of self employment history only had a handful of options to choose from who offer "Professional" mortgages.

Clydesdale
Coventry building society
Scottish Widows

I'm going through an intermediary specialist to my medical profession so have an agreement in place from Clydesdale.

Want to keep my monthlies low for the time being as I want to keep money aside for further career training.

Clydesdale offer is a 5 year fixed at 4.09% or offset SVR starting out at a discounted 3.19% variable until late 2016 then it goes up to 4.8%. variable. I understand the variable could be anywhere in 2016 so if it starts going downhill I could always fix? They said charges have been waived for change in the past if rates rocket and if not the charge for changing product is £500.

So far I'm favouring a 30 year offset SVR because the low rates are nice, even at the higher rate it's very affordable to us and it allows overpayment/early repayment.

Please advise if I should be considering anything further before making my decision.

[Babw]

Anybody?

[Sarnie]

Do you have funds to 'offset'?

[Babw]

Yeah always have approximately 10% of the loan amount as tax repayment in my account. That'll go up to a certain point and then fall as I pay my tax but will be at a minimum around 8% but mostly 10%.

Will be able to save on top of this figure as well, currently the mortgage repayments are coming to approximately 15% my average monthly income.

Edited by Babw on Wednesday 6th November 18:35

[gibbon]

If your mortgage payments are 15% of your income, then of course go offset, and pay it down.

[gibbon]

If your mortgage payments are 15% of your income, then of course go offset, and pay it down.

[pacoryan]

Take the written advice of your specialist intermediary! No qualifed adviser is going to come on here and advise you specifically, they might give some generic considerations but I think you've got those covered.

[Evo141n]

One thing to be aware with an offset is you're only offesting the interest on the morgage. So if you're going for a rempayment option (I'm guesing you are), then you'll still have to repay the 'repayment' element of the morgage. So £100 offset saving will not cancel out £100 of your morgage, only the 3.8% interest of that £100.

If that makes any sense?

[Babw]

Thanks for the input all.

Evo141n said:

One thing to be aware with an offset is you're only offesting the interest on the morgage. So if you're going for a rempayment option (I'm guesing you are), then you'll still have to repay the 'repayment' element of the morgage. So £100 offset saving will not cancel out £100 of your morgage, only the 3.8% interest of that £100.

If that makes any sense?

I think with your example a £100 offset wouldn't cancel out £100 of the mortgage but interest would be worked out from a £100 less of the total. So I would only be paying the interest back that had accumulated previously plus I'd have the actual £100 mortgage to pay back. No further interest would be incurred since I had offset all of my mortgage amount. Offset funds don't actually "cancel out" the mortgage.

for example -
mortgage 500
offset 100

interest only calculated on 400. Since interest is calculated on a daily basis any increase in the offset amount even short term would have a benefit on the monthly repayment.

My mortgage would be a repayment type.

Please correct me if I'm wrong.

I have a fair idea that offset is the most beneficial to me but it's the SVR part that's I'm doubting.

Edited by Babw on Thursday 7th November 19:31

[Babw]

Just to update this -

I got my written offer of 3.19% on the SVR offset mortgage and I have no self employed accounts done as of yet! I was really surprised at this as the house is above average price for the area so I had my documents ready to have my accounts done but they never asked for it. Happy days.