Offset mortgages

depends on what you want. For example if you owe 100k and have 40k in 'savings', interest is now payable on 60k rather than 100k. This means that either your monthly payment would reduce if you kept the term the same, or that if you kept the payment the same, the term would reduce. My offset allows you to choose which you want to happen, I'm assuming others would be the same.

Do you not exercise that choice simply by deciding how much you pay? In the OP's example it suggests he is paying £400 because that's what he's being charged, i.e. 4.8%pa or 0.4%pm. Having then linked 40k savings in, he's only being charged 0.4% of 60k, or £240pm.

If he simply continues to pay £400pm, he is automatically reducing his debt by (initially) £160 each month. To put it differently, he has automatically converted his interest-only loan into a repayment loan with a term of about 230 months. I'm assuming the bank recalculates monthly on a daily balance.

Yes you decide when you set it up (others may be different but I suspect not), either fixed monthly payment, fixed monthly payment based on the initial calculation before any savings, or a variable dd payment depending upon the term. You can (obviously?) switch between the payment types so you could underpay at points, in effect increasing the term.

he was also talking about paying back the capital, you can also pay lump sums off that,as opposed to an increased monthly payment though I suppose it comes down to v similar things.

we just switched to off-set with 1st direct and it's even better than i expected

not only are our savings (against many accounts as we want) offset

• we are paying near 1.5% less per annum to 1st direct than we were paying Alliance (what attracted me in the 1st instance)

• we get extra 1% discount from 1st direct for first 3 months

+our saving could never accrue the amount of interest we pay out for a mortgage (not even in isa) +we dont pay tax on the interest we would've earnt, since we dont earn any as it's offset

• interest/offset is calculated monthly (Alliance was annualy - we were well stitched)

• we have online status of our mortgage arrears (we were lucky to get a statment once year with Alliance & Leics)

• we can pay back the mortgage however we feel like (fluctuate the payments if need)

• we can even borrow back any money we've already paid off if we need it in emergency - provided it's paid back at the end of the agreed term

• we can take out any additional loans at the same low rate as the mortgage

we are mega-bucks back in pocket as a result of the switch - i can't figure out how any other method of lending could possible exist along side it - 1st direct aren't out money, just they only charge us for the difference between our lending and borrowing

as a result i have transfered all my borrowing and savings to them