Benefits/disadvantages of offset mortgages?

[duchesse]

We want to do some major work on our house later this year. We have investments tied up in shares that we're unwilling to cash in at the moment due to the fall in value.

We will need about £100,000 to do what we want to do- this is less than 1/6th the value of the house. We think that an offset mortgage, such as Virgin's The One Account might be what we need as we would hope to be able to pay off any mortgage far in advance of the term and would like to avoid penalty charges and as much interest as possible.

I would be interested in hearing from anyone who might have experience of them, and any pitfalls/ disadvantages to consider.

The calculations you need to do to see if it will be worth it are here

One thing that may not be mentioned on that forum is what will happen if the bank (eg: Virgin) go bust. The bank would recoup the debt against your positive balance before allocating you your guaranteed payment.

Thank you Jan- Will investigate. In this climate I was wondering about the whole bank going bust thing. I guess it would be wise not to keep more in savings in the one account than the govt guarantees, then? (is that £35000?) Never likely anyway as most of our "accessible" savings are in ISAs.

I dont think the one account is technically an offset account. More like a very big overdraft. I have had a one account for 10 years and it works for me. Some banks do work differently and allow you to keep savings in a separate account but only charge interest on the net amount.