So fingers crossed, I'm actualy making progress on the ol' D.I.V.O.R.C.E malarkey...
I've realised that TBH, i'll have to forfeit a huge chunk of the equity of the house, but I get to keep most of my pension.. swings adn roundabouts but it's the only was to her her to agree to a house sale..
I'll get my FA to look into mortgages, and Barclays and Scottish Widows have been suggested for their offset mortgages.. Any other companies to look out for bar the typical high street lendors?
Offset is ideal as I have chunks of money in the account waiting to pay the tax man twice a year - I need instant access to them, so offset wuits that need well..
Ta
DrP
Interest rates seem to have hit the floor; gravy days if you are remortgaging - just done a 1.45% five year fix on our place.
Don't the usual comparison suspects include offset deals?
First Direct have offset mortgages, both fixed rate and a tracker for the term. Mortgage caclulator on their website for you to plug some numbers in & get some idea of costs/value of the offset.
Just done this - Scottish Widows professional mortgage was best by some margin for an offset. Only available via a broker though.
They will also lend staggering amounts it seems - declined that option!
first direct..ta..one i wouldn't think of...
I ahve literally just given this some though..legal stuff not finalised yet, but worth looking..
DrP
Had*/have an offset mortgage with Santander, rate seems quite high at 3.39% so not sure if it would work for you cf a std mortgage plus savings account.
* Currently at zero balance 😁
Edit - interest rate corrected
Top tip for offset mortgage.
Take out a new credit card or two, interest free introduction for a couple of years. Put that money in the savings until the end of the interest free period.
Many, many years ago I looked at offset mortgages as one of my Team Leaders had just got one.
And been a logical type I just couldn't see how they'd work to his (and my) benefit - also knowing him as one of my team, he could be a bit slack and was always fixated on tech. So I created a spreadsheet, month-by-month & year-by-year for the full mortgage period.
It just never added up, and he'd have been better off just overpaying a 'normal' mortgage whenever he had spare cash. And tbh in all the scenarios I tried, it was more expensive.
Maybe it's different now, but I'd have to 'prove' it first before I would.
Happy with my Scottish widows one. On line function seems to work well if you are moving money about. Didn’t use it as a current account though.
It depends on how much "cash" you have available to offset.
Offset mortgages usually have a higher interest rate than standard so you need a fair wedge of cash to offset the higher rate in the first place.
It works for me as I had a decent payout from redundancy, so has kept my interest payments down.
I've also over-payed on mine (Barclays) so now I have a monthly payment of about £60 with no interest as the total amount owed is covered by savings.
As the mortgage drops I switch out of the savings into an ISA.
It works for me but it's definitely not for everyone.
Got a Scottish widows offset. Think it's around 1.6 % for 5 year fixed. Seems ok
Like intheborders, I spent quite a lot of time a few years ago staring at spreadsheets comparing offset to non-offset, and concluded it just wasn't worth it due to the higher rates. We now have the £2k tax free savings income allowance which further reduces the benefit of offsetting.
Worth looking carefully at the terms of non-offset mortgages, as they're often more flexible than you might think. Not checked the latest one, but one of mine allowed me to take payment holidays up to the value of any overpayments I'd made up to that point.
Scottish Widows is the main one my broker suggests.
It's the one we've got on the 'family home' at the moment too..
It just never added up, and he’d have been better off just overpaying a ‘normal’ mortgage whenever he had spare cash. And tbh in all the scenarios I tried, it was more expensive.
Maybe it’s different now, but I’d have to ‘prove’ it first before I would.
I guess for me it should work as I geenerally have a hefty tax bill, so want that float of cash working for me.. but like you say, it's all maths at the end of the day, and there will be a 'cut of point' whereby unless i've got over £X in the offset, I'm better off with a normal account!
DrP
I've used Yorkshire BS offsets for years now and have been great. Generally they charge a 0.2% premium for offsetting. One advantage of of offset vs overpay is that the cash is still there for a rainy day/emergency bike purchase!
It's tricky to get any return on savings these days so even at low interest rates I think it still makes loads of sense.
@DrP - we stumbled into a Barclays offset mortgage many years ago, and it's turned out to be one of the best financial things we've ever 'done'. we're still on base rate + 0.75%, which is basically free lending.
Key things that have worked well are the credit facility - basically a cheque book (I think it's digital now)- that enables you to 'borrow' at the same rate, plus the 'pots' that enable you segregate and manage your cash.
Happy to answer questions on Sunday Hills if that helps!
Phil
OK, cheers phil!!
DrP
Depending on tax to pay also possibly consider putting into you pension just before end of tax year.
Unless you already put in the full amount possible. Assuming that you are a higher rate payer then you can save 20pc of the gross amount put in or even eliminate the tax due, obviously would need a sizeable float fund if tax due is more than a few k.
As others have said, no point in artificially having a higher rate on offset than you would save in easy access other savings and lower normal loan rate....
I think offset mortgages make most sense as a Lifetime Tracker rather than a fixed rate for a few years. What people always seem to ignore is the hassle and costs of remortgaging every few years.
Lifetime tracker takes that away, avoids any risk from your employment or income status being different in a few years when you remortgage.
Rates *Shouldn't* be any different - all the mortgages on offer at any time from a lender should all be calculated to cost the bank the same as I understand it. Our First Direct LT tracker was definitely competitive when we took it out.
Other benefits? simpler tax return (as you don't have any interest income) and the money remains accessible. Yes, you can overpay on most other mortgages but you can't usually grab the money back to pay for an unexpected cost.
I'm not going to pay any more into pensions, TBH... my NHS pension is already set at something like 25% of my earnings, and seems to climb year on year. I'm already looking at paying tax on my pension pot contributions, so that's out!
DrP
second vote for the yorkshire building Society - were really good with us - even though I bank with first direct
Coventry BS will be worth a look, their rates are usually very competitive.
Also a happy Coventry customer here. Just had the annual mortgage statement on fact, total interest for the last year, 20 quid. I'm now paying the mortgage from the savings.
Nothing to suggest, just wishing you all the best DrP!.
Rates *Shouldn’t* be any different – all the mortgages on offer at any time from a lender should all be calculated to cost the bank the same as I understand it.
Plus any additional costs of 'managing' a wayward account. You can't underestimate the cost of 'risk'.
I'd be amazed if there are any decent offset deals in the current low-interest climate. For an offset, you're basically saying "don't pay me any interest on my savings, knock it off my mortgage instead". But at the moment no-one is paying any interest on savings anyway, and mortgage rates are crazily low, so there's little or no no margin in between for the offset to take advantage of.
As others have said, you can get a 'normal', mortgage rate of about 1.3%, fixed for five years. How much lower do you want (or think the lenders are going to give you)? They are, quite honestly, barely covering their costs at the moment.
I get people may have deals they're on already that they're happy with, but I doubt there's much open to new lending.
Good point IHN...
I guess at present it's going to be a simple equation of "what's gonna cost less"...
1.3% on the WHOLE mortgage...
or
1.7% on the mortgage MINUS £40k tax savings etc...
I guess at present, whilst I'm literally looking at spending ALL my current savings on the house in the first place, I'm unlikely to have a large saving chunk to 'offset the offset', so to speak!
DrP
MINUS £40k tax savings
As a high-rate tax payer, unless you're earning over £500 in interest a year (and you're not in the current environment unless you've got a LOT of savings, like £100k+), you're not paying any tax on your savings interest anyway.
oh, I meant that would likely be the 'tax payment buffer' in the offset account.. i.e a reduction of the mortgage value by £40k ISN'T going to be worth the extra %age on the interest..
DrP
Ah, gotcha. You're right (probably), and you'll do well to get a 1.7% offset rate anyway, best I can see is 2.2%
Easiest way to see for sure is crunch the numbers:
https://www.moneysavingexpert.com/mortgages/offset-mortgage-calculator/
Just remortgaging to the Coventry offset. Rate had moved up and down a bit in the past few weeks, currently they are doing 2 year fixed at 1.79 with no product fee. It was 1.65 the day before we applied. What's on offer does depend on your LTV.
Sad to see our tracker finished as its currently less than 1%.
The spreadsheet on the MSE link above allows you to compare options side by side which is really useful.
slight hijack if thats ok, to help me understand my mortgage and options?
in 2018 we changed provider to barclays. borrowed a nice round figure (£50,000) on a 5 yr fix at 2.15%, (7 yr total, last 2 yrs to go to whatever rate it will be at the time), but we'd remortgage again then looking for another fix.
just been looking at the bumph and it says £50,000 borrowed, £54,000 total to be paid back, for every £1 borrowed its £1.09 to repay.
now im no accountant but that looks like 9% to me? yet our mortgage is 2.15%?
just to confuse matters more, it also says APRC applicable to the loan is 2.4%. ive no chance of understanding all this have i! 😀
we're overpaying at present to the tune of about £100 per month, around £750 per month now. not cos we know what we're doing, but just cos we think it makes sense to do so.
as rates are so low at the moment, we were just looking to see if it would make sense to suffer the early repayment charge (about a grand before oct 2023), plus the charge to set up a new one (also they seem to be roughly a grand), so £2,000 to come out of it and start a new one. gut feeling is its not worth it, we wouldnt make that £2000 back, but how can i make sense of the percentages to try and work it out myself? (its about £34,000 at the mo)
goal is to pay it off as early as poss, hopefully knock those last 2 years on the head.
thanks
just been looking at the bumph and it says £50,000 borrowed, £54,000 total to be paid back, for every £1 borrowed its £1.09 to repay.
That's because the 2.15% is per year, but you're paying it back over seven years, so the interest compounds over that time (you pay interest on the interest).
Think of it another way; if you'd put a quid in a savings account with a rate of 2.15% a year, you wouldn't expect to get £102.15 back after seven years, would you?
we’re overpaying at present to the tune of about £100 per month, around £750 per month now. not cos we know what we’re doing, but just cos we think it makes sense to do so.
It does. It always makes sense to overpay a loan if you can.
As for working out if it's better to remortgage, I think by the time you've paid penalty fee for your existing mortgage and an arrangement fee for a new one, I'd be surprised if you'll save anything on a 50k mortgage. Same goes for when you just have two years to go at the end of your fixed rate; the balance will be tiny by then and probably not worth paying an arrangement fee to move elsewhere. Just keep paying off as much as you can.
Again, if you want to be sure:
https://www.moneysavingexpert.com/mortgages/fixed-mortgage-calculator/
I’d be amazed if there are any decent offset deals in the current low-interest climate. For an offset, you’re basically saying “don’t pay me any interest on my savings, knock it off my mortgage instead”. But at the moment no-one is paying any interest on savings anyway, and mortgage rates are crazily low, so there’s little or no no margin in between for the offset to take advantage of.
Does look to be the case - quick google says FD Life tracker is 3.19% over base rate. Ours from c7 years ago is 2.49% over base
A mate of mine had tracker at some discount to base some years back - they offered him lump sums to come off it and in the end I think they refused to transfer it when he moved..
I've had a First Direct offset mortgage for the last 17 years, its served us well, as long as you keep tabs on how long is left on it & what repayments you need make its also been a very convenient and cheap way of borrowing additional money for additional house renovations over the years
In true sense of recommend wot ya got we've had FD offset for 14+ yrs, I've no idea if it's the best deal but when the fixed rate expires I just sign up to a new fixed deal. I've no desire to shop around as it's just too convenient. Anyway no complaints, super easy to use as our savings offset the balance and when we've had spare cash we just paid down the balance, in the past we've drawn back against it etc and it's helped us pay off our mortgage super early.
Edit: To add to this.. I'm not sure how other Offsets work but with FD you get a monthly charge which is your 'interest only' and it's taken by DD, when you see how much interest you pay in isolation without paying down the capital amount it really focusses you on getting it paid off as sharpish as possible.
Had an offset with "the one account" for a while, worked well when easy credit was available. I think I had about £55k on 0% credit cards at the time all sitting in the account, that all dried up with balance transfer fees and when I moved I swapped to a standard repayment.
Think of it another way; if you’d put a quid in a savings account with a rate of 2.15% a year, you wouldn’t expect to get £102.15 back after seven years, would you?
and that is why im not an accountant 😉
As for working out if it’s better to remortgage, I think by the time you’ve paid penalty fee for your existing mortgage and an arrangement fee for a new one, I’d be surprised if you’ll save anything on a 50k mortgage. Same goes for when you just have two years to go at the end of your fixed rate; the balance will be tiny by then and probably not worth paying an arrangement fee to move elsewhere. Just keep paying off as much as you can.
thatll do for me. its actually 30-odd grand now, so your point is probably even more valid.
thank you.
I had the first direct offset back in 2008 for a few years. It wasn’t a huge premium over repayment back then. Think I took 8 years off the term by overpaying a little. Interest rates were very different back then tho
In recent years the point that it becomes a good deal is way north of my nest egg so I’ve not bothered
What I would say is I’ve always stuck with FD because their products are always top of the pile so there’s no urgent need to shop around every few years.
