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Are they worth it? Do they work? What are the benefits over saving or paying off early?

Cheers

Like any mortgage, whether it's good for you depends your individual circumstances. Seek proper financial advice if you think you need it.

That said, as I understand it, they tend to be very flexible, meaning that you can overpay at any rate you like. But more importantly, due to the offsetting, the tax you would have paid on any equivalent savings goes towards paying off your mortgage. Got to like that. 🙂

paulosoxo – e-mail me if you want some free advice on them, its in the profile 😉

I've had one for years – 1/2% over base with Woolwich. I got one as I can't be bothered to manage my money in an efficient manner so I know that all the money in my current a/c is reducing my mortgage without me doing anything so very efficient. Probably only really worthwhile if you have lots of money saved each month from your income of irregular lump sums.

Only really worth it if you've enough cash to off-set the additional fee/interest.

And if you've spare cash, better just to be able to overpay a 'normal' rate mortgage.

for us it works very well as we can have a pre-agreed facility for £x, a net debt of £y and we only pay for our exposure, but we are also then able to draw for projects as and when we need to at short notice, (say an auction) and then refinance with something more longterm as necc.

Unfortunately for us, we are moving our security and so will lose our stonking 85bps margin for something closer to 200bps 🙁 in the near future…

but as above, its all down to your personal circumstances and what works for you.

Cheers all, Bigsi, I'll mail you closer to the time 🙂

I've a standard mortgage with the Nationwide that allows me to overpay and then take the overpayment out if I need to. Don't think in the usual names that banks / building societies talk about but …..

mortgage = you are borrowing money from the bank
savings = you are lending money to the bank
Cash ISA = you are lending money to the bank

Traditionally people have had a mortgage (loan) from the bank at say 4% only to have a savings account (ie lend it back) @ 2%? They try to confuse you with different names and of course it's in the banks / BS interest for you to borrow money off them and then lend it back at a lowe rate.

And any interest saved on the mortgage is not subject to tax whereas savings are (usually) subject to tax. So in the above you'd have to save at 4% plus your rate of tax to be better than paying off the mortgage.

Of course it's strange times at the moment as my mortgage interest rate is LESS than I can get on a fixed rate ISA and it's normally the other way round. Same with some investments I've held for a few years.

Re offset mortgages – excellent idea but the interest rate is usually higher than a standard mortgage. All boils down to the sums involved.

Mine works really quite well, no fees like for early repayment, the money is readily available if I need it and the rate seems pretty good. If you have make any big purchases you can use an interest free credit card, and then you're effectively earning money from your credit card…

I have one with IF. I have a great rate and my savings which were earning poor rates in other accounts now pay off my interest debt each month, so does my ISA and other savings I have. I also make overpayments each month.

It works for me and the interest savings are quite large.

remember , paying an extra £1 per day in overpayment (easily achieved by the less interest due to the offset bit) will slice years of your total term.

of course that £1 per day could be invested over the same term, but I'm assuming that you'll want to spend your savings on something at some point, so they are working hard for until you need them by offsetting the interest on the mortgage.

Lot of things to take onto account.
Do you have relatively high cash flow each month, or a large cash savings sum which you don't want tied up? Will you use the overpayment facility? What tax do you pay and of course what sort of size mortgage an no of years?
They can work very well for people that will actually use the offset and overpaymnent facilities but they do come at a premium as far as the rate is concerned. I often find that whilst they may save money through interest and tax for people that they are often better going for a lower rate without such facilities.
As said above though speak to a qualified mortgage advisor and they'll check all this and work out what's best for your own circumstances.

Leave my pay in the account until the last day of the month when the baclaycard bill is paid, that helps offset, plus all my savings are offsetting. Its saving me a fortune offsetting

Had one with IF for the last 8 years, have overpaid and offset the intrest on our savings. As of last week we are now mortgage free, 6 years early

Tracey

Offset mortgage has been the best thing we ever did (financially speaking). They are simple to understand, so you don't need all the BS from IFA's. They encourage chipping away, and as stated above, small payments make a big difference.

No need for complicated investment portfolios…pay down debt's and have the security of owning your house.

I've had 2 different offsets over the past 10 years. They have worked well for me, but as others have said it depends on your particular circumstances. In some cases a flexible mortgage (with unlimited overpayments and underpayment/borrow-back) can achieve a similar thing.

One comment I'd make is that some providers allow you to maintain different accounts that are offset together, others just lump everything together (i.e. one account with a huge -ve balance). For me, the former is vastly preferable – you can still maintain different 'pots' of money that makes it much easier to visualise and manage what you have (e.g. a 'mortgage' account with a huge -ve balance, then a current account where your salary comes in and then payments go out each month – which you try to manage without going -ve 😉

I think the best thing about them is that they are the fairest for both lender and borrower. In the olden days(!) some borrowers would jump around taking the intro offers whilst others just stayed with a lender and paid more than they perhaps should. Harder to move around now.

Cheers. We bank with HSBC and are quitre happy with them, I've seen quite a few first direct deals around, but HSBC seem quiet on that front, I'll probably have to make an appointment to see someone.

I've had one with first direct for about 6 yrs or so. I got it when I was working away from home a lot and had a lot of expenses going through my account, which were paid weekly so i had a fair bit of money sat in my account before the credit card bill came in.

The first direct one I've got links a number of accounts together, which I find great for managing money and budgeting.

Now I'm not doing so much travelling with work, I might be able to find a better way of doing things, but I really like dealing wih first direct, so may well just stick with what I've got….