Offset Mortgage - any point paying it off?
Discussion
I have an offset mortgage of about £100k with Barclays/Woolwich which is cancelled out by the same amount in a Barclays savings account (so I don't pay any interest). Each month there is a direct debit paid from the current account to the Mortgage account (for the monthly mortgage payment and the mortgage has about 15 years left to run.
I have thought about repaying the full amount but apparently there's an £80 early repayment charge. That being the case is there any point in paying it off early or should I just let it run its course?
I have thought about repaying the full amount but apparently there's an £80 early repayment charge. That being the case is there any point in paying it off early or should I just let it run its course?
alscar said:
Would you have any other plans for that money.
The original plan for the money was to keep it as a "Bank of Mum and Dad" reserve (I dipped into it a few years ago to help one of my kids out with their mortgage) but now we've got enough savings in other accounts that it's highly unlikely to be needed.£80 isn't a lot of money but I'd rather not pay it unless there was good reason to. i wonder if it would be chargeable if I paid off almost the full amount but left £1 outstanding....
Pablo Escobar said:
Seriously £80 over 15 years is a factor!
It's not £80 "over 15 years". It's "£80 to pay the mortgage off now or pay nothing and just let it run its course with the added benefit that I can still access the savings if I need the money". The mortgage isn't costing me anything as it's fully offset. Countdown said:
alscar said:
Would you have any other plans for that money.
The original plan for the money was to keep it as a "Bank of Mum and Dad" reserve (I dipped into it a few years ago to help one of my kids out with their mortgage) but now we've got enough savings in other accounts that it's highly unlikely to be needed.£80 isn't a lot of money but I'd rather not pay it unless there was good reason to. i wonder if it would be chargeable if I paid off almost the full amount but left £1 outstanding....
Different times but I paid off all but £500 of my mortgage back in 2009 and retained that as that was the minimum the Lender wanted to keep in place - couple of £ monthly dd or so.
They also had to store the deeds with them - that’s probably not a thing any more though.
I’d hang on to the money, assuming you and anyone else who has access to it isn’t likely to blow it on something daft.
If there comes a time where you need to pay off the mortgage, you can do it then. In the meantime, it’s probably better not tying the cash up in your home. You don’t know what life might throw at you, and having the money to hand might one day be useful.
If there comes a time where you need to pay off the mortgage, you can do it then. In the meantime, it’s probably better not tying the cash up in your home. You don’t know what life might throw at you, and having the money to hand might one day be useful.
Isn't your £100k being eroded by inflation?
Currently ~5%, soon to be ~10%, ~15% and probably around 20% by the time we the voters can do anything about it?
So just paying the whole mortgage off in 15 years having invested your £100k over the whole (presumably) 25 year term may have left you in a better place financially.
Even just in a tracker in a GIA attending to the CGT liability each tax year with bed & ISA.
Never really understood offset mortgages or their attraction.
Always had IO mortgages so that I can decide what I do with my available cash, not have the bank tie it up looking at their mortgage all day.
Currently ~5%, soon to be ~10%, ~15% and probably around 20% by the time we the voters can do anything about it?
So just paying the whole mortgage off in 15 years having invested your £100k over the whole (presumably) 25 year term may have left you in a better place financially.
Even just in a tracker in a GIA attending to the CGT liability each tax year with bed & ISA.
Never really understood offset mortgages or their attraction.
Always had IO mortgages so that I can decide what I do with my available cash, not have the bank tie it up looking at their mortgage all day.
OIC said:
Isn't your £100k being eroded by inflation?
Yep, but so is the debt. Swings and roundabouts.OIC said:
So just paying the whole mortgage off in 15 years having invested your £100k over the whole (presumably) 25 year term may have left you in a better place financially.
I'll be paying 4% interest on the mortgage and I'd need at least 8% yield on the investment (to account for tax) just to break even.OIC said:
Never really understood offset mortgages or their attraction.
I had loads of cash that I was holding for some "legitimate businessmen". It meant that I was saving about £8k a year in interest with the flexibility of being able to dip in/out of the cash as required. Because I kept my repayments the same it allowed me to effectively pay it off a lot quicker.Thanks for all the comments - I'll hang on to it.
One more question - I assume if i was to pop my clogs they would take both the Mortgage and the savings into account when they calculate any IHT? It would be a bit annoying for the savings to be taxed and the mortgage and any other debts ignored.
One more question - I assume if i was to pop my clogs they would take both the Mortgage and the savings into account when they calculate any IHT? It would be a bit annoying for the savings to be taxed and the mortgage and any other debts ignored.
OIC said:
Isn't your £100k being eroded by inflation?
Currently ~5%, soon to be ~10%, ~15% and probably around 20% by the time we the voters can do anything about it?
So just paying the whole mortgage off in 15 years having invested your £100k over the whole (presumably) 25 year term may have left you in a better place financially.
Even just in a tracker in a GIA attending to the CGT liability each tax year with bed & ISA.
Never really understood offset mortgages or their attraction.
Always had IO mortgages so that I can decide what I do with my available cash, not have the bank tie it up looking at their mortgage all day.
That's an argument against repayment mortgages generally, not offsets. You can do exactly what you said at the end with an IO while still having the offset facility there for max flexibility.Currently ~5%, soon to be ~10%, ~15% and probably around 20% by the time we the voters can do anything about it?
So just paying the whole mortgage off in 15 years having invested your £100k over the whole (presumably) 25 year term may have left you in a better place financially.
Even just in a tracker in a GIA attending to the CGT liability each tax year with bed & ISA.
Never really understood offset mortgages or their attraction.
Always had IO mortgages so that I can decide what I do with my available cash, not have the bank tie it up looking at their mortgage all day.
Countdown said:
Thanks for all the comments - I'll hang on to it.
One more question - I assume if i was to pop my clogs they would take both the Mortgage and the savings into account when they calculate any IHT? It would be a bit annoying for the savings to be taxed and the mortgage and any other debts ignored.
Mortgage would be settled by your Executor as part of sorting out your estate. One more question - I assume if i was to pop my clogs they would take both the Mortgage and the savings into account when they calculate any IHT? It would be a bit annoying for the savings to be taxed and the mortgage and any other debts ignored.
alscar said:
Countdown said:
Thanks for all the comments - I'll hang on to it.
One more question - I assume if i was to pop my clogs they would take both the Mortgage and the savings into account when they calculate any IHT? It would be a bit annoying for the savings to be taxed and the mortgage and any other debts ignored.
Mortgage would be settled by your Executor as part of sorting out your estate. One more question - I assume if i was to pop my clogs they would take both the Mortgage and the savings into account when they calculate any IHT? It would be a bit annoying for the savings to be taxed and the mortgage and any other debts ignored.
Countdown said:
alscar said:
Countdown said:
Thanks for all the comments - I'll hang on to it.
One more question - I assume if i was to pop my clogs they would take both the Mortgage and the savings into account when they calculate any IHT? It would be a bit annoying for the savings to be taxed and the mortgage and any other debts ignored.
Mortgage would be settled by your Executor as part of sorting out your estate. One more question - I assume if i was to pop my clogs they would take both the Mortgage and the savings into account when they calculate any IHT? It would be a bit annoying for the savings to be taxed and the mortgage and any other debts ignored.
This comes up quite often and I'll never understand why some folks pay off an offset.
Whilst I am sure there are some exceptions, having an open facility to borrow a big chunk of cash, whenever you need it, for the exact amount of time you need it, without even filling in a form and all at market rates is a huge win in my view.
It means that if you are fortunate enough to have other capital, you can invest it more effectively, because you always have the offset that can provide emergency liquidity if needed.
I have quite a sizeable offset, which has been fully offset for a decade now and on more than one occasion my bank has communicated to me that they would be prepared to pay me a fee if I was to close the mortgage early.
Whilst I am sure there are some exceptions, having an open facility to borrow a big chunk of cash, whenever you need it, for the exact amount of time you need it, without even filling in a form and all at market rates is a huge win in my view.
It means that if you are fortunate enough to have other capital, you can invest it more effectively, because you always have the offset that can provide emergency liquidity if needed.
I have quite a sizeable offset, which has been fully offset for a decade now and on more than one occasion my bank has communicated to me that they would be prepared to pay me a fee if I was to close the mortgage early.
cashmax said:
This comes up quite often and I'll never understand why some folks pay off an offset.
Whilst I am sure there are some exceptions, having an open facility to borrow a big chunk of cash, whenever you need it, for the exact amount of time you need it, without even filling in a form and all at market rates is a huge win in my view.
It means that if you are fortunate enough to have other capital, you can invest it more effectively, because you always have the offset that can provide emergency liquidity if needed.
I have quite a sizeable offset, which has been fully offset for a decade now and on more than one occasion my bank has communicated to me that they would be prepared to pay me a fee if I was to close the mortgage early.
All good points.Whilst I am sure there are some exceptions, having an open facility to borrow a big chunk of cash, whenever you need it, for the exact amount of time you need it, without even filling in a form and all at market rates is a huge win in my view.
It means that if you are fortunate enough to have other capital, you can invest it more effectively, because you always have the offset that can provide emergency liquidity if needed.
I have quite a sizeable offset, which has been fully offset for a decade now and on more than one occasion my bank has communicated to me that they would be prepared to pay me a fee if I was to close the mortgage early.
My main reasons for asking were
- it's highly unlikely I'll need to borrow any more money
- I'm at the stage in life where i could do with tidying up my finances
If my bank offered me cash for early redemption I'd bite their hand off. Unfortunately mine want ME to pay THEM
Countdown said:
cashmax said:
This comes up quite often and I'll never understand why some folks pay off an offset.
Whilst I am sure there are some exceptions, having an open facility to borrow a big chunk of cash, whenever you need it, for the exact amount of time you need it, without even filling in a form and all at market rates is a huge win in my view.
It means that if you are fortunate enough to have other capital, you can invest it more effectively, because you always have the offset that can provide emergency liquidity if needed.
I have quite a sizeable offset, which has been fully offset for a decade now and on more than one occasion my bank has communicated to me that they would be prepared to pay me a fee if I was to close the mortgage early.
All good points.Whilst I am sure there are some exceptions, having an open facility to borrow a big chunk of cash, whenever you need it, for the exact amount of time you need it, without even filling in a form and all at market rates is a huge win in my view.
It means that if you are fortunate enough to have other capital, you can invest it more effectively, because you always have the offset that can provide emergency liquidity if needed.
I have quite a sizeable offset, which has been fully offset for a decade now and on more than one occasion my bank has communicated to me that they would be prepared to pay me a fee if I was to close the mortgage early.
My main reasons for asking were
- it's highly unlikely I'll need to borrow any more money
- I'm at the stage in life where i could do with tidying up my finances
If my bank offered me cash for early redemption I'd bite their hand off. Unfortunately mine want ME to pay THEM
Regarding the tidying up - It's a very simple process if you ever want to change your mind.
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