Please help confused best UK reduced payment offset Mortgage

Not sure what you mean by "reduced payment", but RBoS also does an Offset mortgage which has no tie-ins or early redemption penalties.

Based on the figures you provided, (loan = 62,500; offset = 50000; interest = 0.95 + BR = 5.7%) after 24 payments you would have about 53,200 left outstanding, meaning you will have paid 9,300 towards the value.

Saving 200 per month leaves you with 4,800 in savings which when applied to the outstanding amount leaves you with 57,700 to find.

BUT, the difference between what you have paid out in each case (9,300 -

4,800) is 4,500, which when subtracted from your 57,700 leaves you at 53,200, so it's swings and roundabouts IMO.

However, if the 200 was saved in a linked account, then you would effectively pay even less in interest, meaning the first option is possibly more attractive. Having said that, will a bank give you an interest only mortgage if you have no visible means to repay at the end of term? (perhaps you have, I don't know your circumstances!)

If you're interested I modified an Excel Template available from Microsoft's website which calculates loan repayments for offset mortgages. At least you can change the values and see how it affects your payments. Get it from

If all your finances are kept in one account, you will need to be quite strict with yourself not to "dip in" to the available funds you appear to have, otherwise you'll prolong your mortgage.

HTH Steve.

Well, you've managed to confuse the hell out of me as well, but as I have a One Account, here goes.

It's just like a huge overdraft on a current account which is secured on the property. It's both a flexible and a current account mortgage (CAM). You can do all the things you normally do with a current account. The only restriction being a) you must repay it before you retire and b) the balance (debt) must not exceed the agreed limit, £62,500 in your case. The interest rate is 5.85% (the rate varies according to the agreed limit ie the LTV). No monthly payment are required. You can add and remove what you want when you want. So you can put the £50,000 in at the start and reduce the balance to £12,500, then take it out when you want.

Any mortgage which can't do this is unnecessarily restrictive.

This explains the basics -

hth

Daytona

"Daytona" wrote

Well, FirstDirect beats that hands down - it can do all that, but is even more flexible & the interest rate is lower. Check it out!

Northern Rock offer one, but they don't call it offset, they call it "connection" or "connexion". They also seem to offer more variations on it in practice (when you phone them) than their rather vague website suggests.

And for those of us who are retired, that is not only unnecessarily but too restrictive :-)

They are the same thing - the banks set their base rate on the BoE base!

Thanks for all your replies. I think I understand them now. I have a couple other questions.

1) I have been told that virgin one account has been bought by Natwest and their(Natwest) Flexibale Mortgage and one account are the same thing under there unbrella. One is a current account mortagage(have cheque books) the other is strictly a Mortgage with saving offset(no cheque books and allow that).Is this true? 2)Which one is better and why?

I have also been told that I can either reduce my payments(i.e. pay enough to cover the 12,500 overdraft that will be outstanding + say £200 extra) or in order to reduce the term to 12 years If I make high payments as if my overdraft was of 62,500.

3)What is the best option for me? As I said I have/need a Mortgage for 62,500 and I have 50,000 pounds of savings. For 2 years I will have this savings at my disposal. At month 25 I will no longer have this saving. At month 25 my payments will be high as I will not be able to offset the savings as these type of mortgages tend to have higher interest rates. I may need to move.What I can't get round my head with these type of mortgages is how much of the pricipal(62,500) will have been reduced?. I need just an approximation if anybody can give me one.

once again thanks in advance

Dont Barclays have an overpayment calculator to tell you this? In any event your mortgage will be reduced by the amount of the overpayments (duh!). If you know what the payment will be at 62,500, then divide the payment by that, multiply it by 12,500 and that is the monthly excess. Or to put it another way, 80% of your monthly repayment at 62,500 when you have a 50k offset, will be overpayment. So multiply that by 24 and that is what it will be reduced by. Very roughly (at 6% ) I make that 3,750*80%=3,000 per year so in 2 years, ballpark number is that it will be reduced by 6,000.

Another thing you can do is keep the term the same, but put the extra money in a linked savings account (make sure you do this rather than think you are richer each month!). That way, when your 50k disappears in 2 years, you'll still have a mortgage of 62,500 but also savings of 6,000, as opposed to no savings but a mortgage of 56,500. The latter is probably better as its more flexible and means you have some cash which you'll need when it comes to moving. And if you dont, you can always reduce your new mortgage by 6k.

Tw

They get a slagging off here as well

Daytona

If you haven't heard it from the One Account people then call them.

It was bought out by RBoS who also own Natwest. Last I heard it's called the 'One Account'.

Daytona

One account also do a flexible mortage option which is at the same interest rate as firstdirect. This flexible mortage is more restrictive than the FD account, BUT they do not charge you a single penny to set up, unlike FD. If you can handle the very few restrictions and would rather save the setup fee or a few hundred pounds, I thought this was a good deal.

Andy

I forgot to mention that they allow you to deposit savings and also take them out when required, so you can operate it like an offset mortage.

No, I'm not on commission :-)