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Old 26-07-2012, 12:12   #1
splobber
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Offset Mortgage Questions

I'm looking at remortgaging my current rate and are looking at offsetting my savings.

I can either reduce the time it takes to pay it off or I can pay lesser monthly repayment per month. Obviously reducing the term is the better option, but am I better off taking the lower monthly payments and then overpaying to the same amount as the monthly payment on the reduced term option?

The mortgage advisor at the bank doesn't seem to be able to advise on what is the better option, which is a bit worrying.

I'm assuming taking the term is the better option and have used a few calculators to see the most preferable solution, but just wanted a few opinions of anyone else who has been in the same boat.
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Old 26-07-2012, 14:57   #2
jockosjungle
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They won't advise you in case it was the wrong option for you.
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Old 26-07-2012, 15:22   #3
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They are supposed to recommend though, which they seem incapable of doing so either. I want to make an informed decision based on someone who can tell me the ins and outs of both options. She4 had to make a phone call to HQ as she couldn't tell me how long my term would be reduced by as it wasn't on her screen, although the online calculator on their website can give you this information

My dealings with these people are they are no more effective than the herbert who takes your order at the drive-thru.
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Old 26-07-2012, 15:56   #4
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By using an advisor at the bank you limiting your choices somewhat.

An individual broker with access to all of the market would be better placed to show you what options you have and work out which is better for you too.
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Old 26-07-2012, 18:00   #5
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My bank (Barclays) offers the best tracker rate which is why I have gone with them. I know what the best rate is, just what is the difference between the two options I have. I know a broker will be better placed to advise on this, but I don't really need to pay their arrangement fee for telling me which is the better scheme, or to waste their time giving me all the info and me then buggering off back to the bank.
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Old 26-07-2012, 21:25   #6
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Surely you pay interest on the outstanding balance. Either way the outstanding balance falls. However, if you change the term by increasing monthly payments, it may not technically be savings and therefore not be available should you decide to have an epic evening of prossies and coke!

CJ will know. She'll be along at some point with the right answer.
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Old 30-07-2012, 14:20   #7
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Mathematically you are the same either way, if you keep the same term and overpay or shorten the term and just pay the changed amount.

obviously the 1st one needs discipline to always overpay. But then you also have the option to not overpay if something like say redundancy occurs, without having to ask the bank for a payment holiday.

I went for the keep same term and just overpay option when I remortgaged (well i don't overpay now as the tracker is at a lower rate than i can get on my savings).

Offsets are good, though I'd not put any isa cash in them as once its out of an isa, the benefit is lost forever of being tax free. but depends on your mortgage rates whether the benefit now outweighs longer term savings benefits.
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Old 30-07-2012, 17:34   #8
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There's a spreadsheet here:

http://forums.moneysavingexpert.com/....php?t=1157173

that I used to work out what was best.

If you offset your current account against the mortgage too, then you essentially overpay very easily ie salary going in reduces the mortgage balance therefore interest and then you borrow part of it back until the next payday. This is what I did, and with both the Mrs and I being made redundant a few times and then finding work again we are now at a 90k mortgage/ 89k savings. We could pay the mortgage off, but like the idea we can still draw on the savings if we need to. The original mortgage term is til 2023, when our endowments mature.

Last edited by shteve; 30-07-2012 at 17:45.
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