Advice re Mortgage

Why an offset mortgage? Why not just the cheapest possible mortgage (once redemption fees are taken into account) ?

Tumbleweed,

Thanks for the reply. Flexibility. My, possibly flawed, thinking, was that with a "normal" mortgage I would be paying interest from day-1, but with an offset mortgage I wouldn't pay anything until actually drawing the money out to purchase the property and then would only pay interest on what was needed. e.g. It might take 3 months to find the right property and then I might only need 350K rather than the 450K estimated. And then I'd be able to use the extra 100K, if needed, for building work. But maybe I'm over-complicating things and it's easy enough to agree a maximum mortgage with a lender and then amend it and take it out very quickly when needed?

I'm happy to pay a little bit more for increased flexibility. Neil Pike

You could sell yours now. Buy ideal plot. Live in caravan until it's done. The market might take a downturn anytime soon. Or not. Depending on how desperate they get with interest rates.

thats not exactly how an offset works - or at least, thats not how my offset works. They lend you money upfront. You *may* have the ability to draw more later against value left against your house, eg if you get say a 200k mortgage on a 1M house, later on you can write a further cheque for up to 300k, if the total you were allowed to take out was 500k. But you still ge ta 200k mortgage initially. And that will have conditions, such as you cannot repay it within X months , probably 2 or 3 years, without a penalty. I am presuming there will also bea minimum amount you can borrow and that may affect the max.

Probably, and that may not have to be an offset mortgage, just a flexible one.

For you I'd have thought the main cost is likely to be redemption fees if its only for a year.

"Tumbleweed" wrote

Eh? What type of offset do you have?

"Tumbleweed" wrote

... which he can initially dump straight into his offset savings a/c (or equivalent), so that the interest is then calculated as being on (X-X) 0.

He can then draw the money from the offset savings a/c as and when needed, effectively only paying interest on the amount having been withdrawn.

"Tumbleweed" wrote

No, get the 500K mortgage from the start, spend the 200K initially and leave the other 300K in the offset savings a/c. You'll only pay interest on the 200K initially (the 300K in the savings a/c "offsets" the other 300K already "borrowed").

"Tumbleweed" wrote

In that case, you'd just leave the entire mortgage amount sitting in the offset savings a/c (rather than actually using it to pay off the mortgage) -- thereby incurring no interest -- until the end of the penalty period.

Mogga, No such thing as a plot of land where my wife wants to live. And as for a caravan, she wouldn't consider that!! Who knows what direction the market will take - all I can do is cross my fingers...

Neil Pike Protech Computing Ltd

Indeed. There do appear to be a number of zero redemption fee products out there. Though no doubt there's a catch in the small print somewhere!

Neil Pike Protech Computing Ltd

Perhaps they involve a higher arrangement fee at the outset. Basically, you pay the redemption fee up front!

Good point which I hadnt considered, assuming (yes yes I know) he'd spend it immediately (rest of your stuff logically follows)

Tw