IOffset mortgages

[noddyholder]

Does anyone have one of tehse?Does it mean if you have a 100k mortgage and 100k savings then you pay nothing monthly and are left with a lump sum at the end of the term?

I have offset noddy; The way I understand it is that the savings offset the mortgage so in your example you wouldn't rack up any interest. They set the payment based on the mortgage alone ( because you can take the savings away at any time) so you would pay as normal but as you are in effect being charged no interest, all your payment would reduce the capital and it would be paid off much sooner.

Usually you would have something like 50k mtge, 10k savings (held seperately) so interest would be calculated on 40k. More of the monthly payment than expected pays of the capital and the loan is paid of early. We've had one for about 3 years and have reduced the term by 18 months already.

FGS off not of.

sagg, who is your offset with? We have been thinking about getting one.

thanks we have cash from a house sale and were going to buy mortgage free but am looking at these now.I suppose it depends on teh term of the mortage etc Need to look at some examples

we have one with first direct. Basically the way it works is that the mortgage interest is calculated based on the amount of money in the offset account, so if you have £10000 then the interest for that period is calculated at £10000 less and consequently the capital is paid down quicker.

FD have estimated that we will pay off our mortgage 8 years earlier.

Although iirc they're not currently taking on any more mortgage customers.

Tis with NatWest.

You do need to check the examples because the rates quoted are sometime a little higher than a straightforward mortgage but if you have a decent amount of savings it can be worthwhile. In your inital example noddy you'd be in effect borrowing interest free I suppose, but obviously your savings earn no interest of their own so that capital sum doesn't increase.

We have Barclays Openplan.

I like the account because it is worry free. We don't have to stress about moving savings etc., and we have a line of credit if we want to borrow more. There is only one interest rate, and we don't officially have savings, so no tax to pay.

The downside is that the interest rate is the prevailing rate, so there are no discounts available - that is probably not a problem in today's 'credit crunch' climate.

It is a good way of getting tax free interest on your savings - cos the interest is never paid to you - just deducted, and therefore becomes tax free.

I have one noddy where the savings equal the mortgage. They do expect you to pay capital off the mortgage each month but I just take that out of the savings, so eg mortgage reduces by £500 per month, savings reduce by £500 per month, net balance the same. It means you don't have to find the monthly mortgage payment, but one the downside means your savings are slowly diminishing.