Offset Mortgage Question
Discussion
With the recent base rate changes I’ve been looking at mortgage options, but unfortunately current still on a fixed rate deal for another couple of years (I think, need to check).
The interesting thing is that it’s an offset mortgage. Not bothered to use it as the interest rate on the mortgage is so low that the benefit of using the offset was marginal.
It’s recently occurred to me that if rates are sky high at the point my fixed deal ends, we may have enough money in other accounts / investments to put 100% of the outstanding amount into the offset.
What I’m not clear on is what would happen with the monthly payments at that point? Would they still take a monthly payment and the offset account would have a positive balance? Or would I make no payment at all?
Only theoretical at this stage, but in the above scenario I like the ability to still access money if required, compared to paying off the mortgage and having to go out and apply for one to get hold of my funds.
The interesting thing is that it’s an offset mortgage. Not bothered to use it as the interest rate on the mortgage is so low that the benefit of using the offset was marginal.
It’s recently occurred to me that if rates are sky high at the point my fixed deal ends, we may have enough money in other accounts / investments to put 100% of the outstanding amount into the offset.
What I’m not clear on is what would happen with the monthly payments at that point? Would they still take a monthly payment and the offset account would have a positive balance? Or would I make no payment at all?
Only theoretical at this stage, but in the above scenario I like the ability to still access money if required, compared to paying off the mortgage and having to go out and apply for one to get hold of my funds.
Sarnie said:
It depends if you have an Interest only mortgage or Repayment.
If your mortgage is fully Offset hen you would pay no interest but would still pay the capital payments, if you had a repayment mortgage, it just depends on how your mortgage is set up...
Thanks. It is a repayment mortgage, with options of reducing the monthly payment or reducing the term. It’s not entirely clear to me how it works in practice.If your mortgage is fully Offset hen you would pay no interest but would still pay the capital payments, if you had a repayment mortgage, it just depends on how your mortgage is set up...
survivalist said:
What I’m not clear on is what would happen with the monthly payments at that point? Would they still take a monthly payment and the offset account would have a positive balance? Or would I make no payment at all?
.
I have a repayment one that is fully offset. Each month the normal mortgage payment comes out my usual bank account, then I ‘withdraw’ the amount from the offset ‘savings’ account, so that it remains at exactly 100%. .
survivalist said:
With the recent base rate changes I’ve been looking at mortgage options, but unfortunately current still on a fixed rate deal for another couple of years (I think, need to check).
The interesting thing is that it’s an offset mortgage. Not bothered to use it as the interest rate on the mortgage is so low that the benefit of using the offset was marginal.
It’s recently occurred to me that if rates are sky high at the point my fixed deal ends, we may have enough money in other accounts / investments to put 100% of the outstanding amount into the offset.
What I’m not clear on is what would happen with the monthly payments at that point? Would they still take a monthly payment and the offset account would have a positive balance? Or would I make no payment at all?
Only theoretical at this stage, but in the above scenario I like the ability to still access money if required, compared to paying off the mortgage and having to go out and apply for one to get hold of my funds.
They still take the same monthly payment. It doesn't matter how much is in the offset account.The interesting thing is that it’s an offset mortgage. Not bothered to use it as the interest rate on the mortgage is so low that the benefit of using the offset was marginal.
It’s recently occurred to me that if rates are sky high at the point my fixed deal ends, we may have enough money in other accounts / investments to put 100% of the outstanding amount into the offset.
What I’m not clear on is what would happen with the monthly payments at that point? Would they still take a monthly payment and the offset account would have a positive balance? Or would I make no payment at all?
Only theoretical at this stage, but in the above scenario I like the ability to still access money if required, compared to paying off the mortgage and having to go out and apply for one to get hold of my funds.
The way Ive done it is to link my mortgage to the same account that the monthly payment is coming out of. So every month the offset account reduces by £900 and the mortgage reduces by £1000. e.g.
Offset account £100k
Mortgage £100k
Interest payable = zero
The following month
Offset account £99k
Mortgage £99k
Interest payable = zero
I'm able to dip into the offset account as often as I need to. I only pay interest on the difference between the balance in the offset account and the outstanding mortgage.
SL22 said:
survivalist said:
What I’m not clear on is what would happen with the monthly payments at that point? Would they still take a monthly payment and the offset account would have a positive balance? Or would I make no payment at all?
.
I have a repayment one that is fully offset. Each month the normal mortgage payment comes out my usual bank account, then I ‘withdraw’ the amount from the offset ‘savings’ account, so that it remains at exactly 100%. .
survivalist said:
eliot said:
Last time I looked at this the interest rate was very unfavorable - so i just paid the mortgage down instead.
Surely that would only become an issue if you needed to withdraw the money from the offset?Depends on your lender, with YBS (Yorkshire BS) on a 10y fix with about 2 years to the end of that fix, paying it off isn't an option without a massive penalty and you can't have savings side larger than the mortgage. So we withdraw the amount we go over by, as they still take the fixed monthly. You do have a choice once a year to go to a minimising payment option.
We don't intend to pay it off, as having hassle-free near* instant access to a large amount of cash without having to jump through hoops is very reassuring. It does look like the credit agencies have no sight of the savings side of these Offset Mortgages though, might be different if it was a true bank account mortgage like Virgin One Account ( not sure if available these days)
"*" If you use a £30 BACS transfer, but they normally take 2 whole days to transfer to your personal bank account, so some planning maybe needed. This is a bit annoying and the banking side of this product feels clunky, ok for a DD that never changes, but really better done elsewhere.
We don't intend to pay it off, as having hassle-free near* instant access to a large amount of cash without having to jump through hoops is very reassuring. It does look like the credit agencies have no sight of the savings side of these Offset Mortgages though, might be different if it was a true bank account mortgage like Virgin One Account ( not sure if available these days)
"*" If you use a £30 BACS transfer, but they normally take 2 whole days to transfer to your personal bank account, so some planning maybe needed. This is a bit annoying and the banking side of this product feels clunky, ok for a DD that never changes, but really better done elsewhere.
thepeoplespal said:
"*" If you use a £30 BACS transfer, but they normally take 2 whole days to transfer to your personal bank account, so some planning maybe needed. This is a bit annoying and the banking side of this product feels clunky, ok for a DD that never changes, but really better done elsewhere.
I think you mean CHAPS. I'm not sure why you would need to do a CHAPS when Faster Payments is near instantaneous and free?Countdown said:
I think you mean CHAPS. I'm not sure why you would need to do a CHAPS when Faster Payments is near instantaneous and free?
YBS doesn't do Faster Payments, which is a hassle, or in other words their version of Faster Payments take two days to move money around, Puts the kibosh on a.lot of transactions to my mind & makes it a less attractive product.thepeoplespal said:
Countdown said:
I think you mean CHAPS. I'm not sure why you would need to do a CHAPS when Faster Payments is near instantaneous and free?
YBS doesn't do Faster Payments, which is a hassle, or in other words their version of Faster Payments take two days to move money around, Puts the kibosh on a.lot of transactions to my mind & makes it a less attractive product.xyz123 said:
thepeoplespal said:
Countdown said:
I think you mean CHAPS. I'm not sure why you would need to do a CHAPS when Faster Payments is near instantaneous and free?
YBS doesn't do Faster Payments, which is a hassle, or in other words their version of Faster Payments take two days to move money around, Puts the kibosh on a.lot of transactions to my mind & makes it a less attractive product.Gassing Station | Finance | Top of Page | What's New | My Stuff