Offset mortgage help

[blue22]

Can someone help me understand my offset mortgage?
We have a 300,000 mortgage and about 74,000 worth of savings in the linked account. Are we better off asking them to reduce the sum of the debt by 74000 therefore having a smaller mortgage, or does it make no difference as the interest is calcluated on the difference anyway?

TIA

It will make no difference in terms of the interest that you pay as that is the whole point of the offset

but

without knowing the terms of your mortgage, one thing to consider is how easy it would be to get the £74k of savings back if you did pay it off the mortgage and then found you needed it....

If you can just draw it back if you needed it then no problem, but it might not be that simple....

Yes, that's what I thought. I just get a bit freaked out seeing the size of the mortgage never changing, though I know that logically it's a 226,000 mortgage in effect.
My tiny brain likes to see the numbers coming down!!!!

Depends who the offset mortgage is with but you can reduce the mortgage but keep the monthly payments as if it was £300k and so reduce your mortgage quicker.

I was going to post a question about understanding offset mortgages and saw this...I may be a bit dim but I really need to understand it...

My mortage is £47,000 and I have savings of £57,000 - If i put say £50,000 in the Offset linked account - Virgin one online tells me that I will only have to make 2 payments and thats it...am then mortgage free...or not??

Because say I need to draw my savings back in a few years where does that leave me? I know its a dim question - but I don't want to put all my eggs in one basket...but on the other hand offset mortage sounds appealling in the current climate...

sorry for being dim

If the £47K is in a separate account from the £57K (ie are you paying interest on the 47K? ) Then you might be better to pay it off, as you will then be mortgage free, and no longer paying interest.
With the virgin one mortgage you are able to keep the account even though the mortgage is paid off, and it is essentialy just like a current account.
You can also keep your mortgage facility, enabling you to borrow again if you need to without having to apply for a new mortgage etc.

Not sure if that helps or adds to the confusion

Hi - thanks for that - Hi - yes the £47k is the mortgage (so yes paying interest) and its with a building society and the £57k savings £42k if it is in ISA's and the rest in a normal savings account and some in a shares account...

But what I want to know is I won't really be mortgage free unless I don't need my savings for however many years? Because say if some emergency crops up (i.e. I get the boot from my public sector job ) I then need to draw back my savings and then am left with a mortage again??

I don't want to just give £47k to the mortgage lender because then I will have £47k less savings and I like to know that it is there IF i ever need it...although yes I will be mortgage free - I am so confused...AND on the other hand my MIL keeps advising that its good to have a mortgage

Is your mortgage with virgin one at the moment?

Yes, if you use your savings to pay off your mortgage then you will be mortgage free, but will not have the savings.

But at the moment you are paying for not doing that with the interest payments every month.

If you pay off your mortgage then you will have no interest to pay, and that will be money that you could save if you wished.

If your mortgage is with virgin, and you pay the money in so that you have a positive balance rather than a negative one, it doesnt change the way that the account functions - you will still have the facility that you can borrow up to - the only difference will be that they are paying you money rather than the other way around.

YOu could look at the rates you are paying vs earning.

You might be earning 1% on your savings, bu paying 10% on your mortgage.

Earn (1% x 42k) = £420
Pay (10% x £57k) = £5700

You are coughing up (5700-420) = £5280 per year

HOwever, pay doen some of your mortgage - eg £20k and you get this result:

Earn (1% x 22k) = £220
Pay (10% x £37k) = £3700

You are now coughing up (3700-220) = £3480 per year, saving £1800 per year.

Are there any offset mortgages where you make a repayment every month? We have a One Account and I'd like to see the total physically going down if you see what I mean

notsureatall, with IF we can just transfer money into the mortgage account and it reduces the balance