Just wondering what 'tricks' the STW cohort employ in order to make the most of the offset feature of a mortgage?
Obviously stuffing all spare money in there is a good start, but was thinking of a few other ploys...
1) Get the longest 0% credit card you can, and use this for ALL purchases (food, fuel, hookers, bikes etc). At the same time, any money spent on the card gets transferred from the current account into the offset. You'll have all the money 'aside' to pay off the CC bill at the end, but it's been 'working for you' whilst you enjoy the 0% card..
2)Hmmm.. I only had one didn't I..
DrP
Depending on your bank open a savings account with offset benefits (mine used to allow that) and put your cash in there rather than your current account, this helps being disciplined and using the offset benefits to actually reduce the mortgage principal rather than spending them. My other tactic was to have no other debt using the mortgage/savings account to fund everything.
I have no dispensed with it as with mortgage rates lower the tax benefits aren't so great and I felt getting the best term mortgage deal outweighed them.
I found putting a car on the mortgage was much cheaper than getting a separate loan.
This does require some self control though as nobody is watching over you to pay it back - the less disciplined could end up paying for a car long after it had gone to the great scrap yard in the sky!
alibongo001 - Member
I found putting a car on the mortgage was much cheaper than getting a separate loan.This does require some self control though as nobody is watching over you to pay it back - the less disciplined could end up paying for a car long after it had gone to the great scrap yard in the sky!
i'm assuming this was just an equity release/remortgage??
When I looked at them the rate offered was greater than a normal mortgage rate, so you were already on the 'back-foot'.
I just set up a spreadsheet to work it out, on a monthly basis - didn't add up IMO.
Better to be able to overpay the mortgage IME.
On advantage is you can have capital sat in the bank waiting to use should you need to which you can't do if you overpay on the mortgage.
You can still overpay on an offset but it's not as easy to access the capital if you do that.
The rate on this mortgage was the best on the market for me - 2.39% fixed for a few years.
I'm looking at the offset account as a savings account with 2.39% on it...
DrP
I have a 0.48% tracker offset from the good old days.
Just throw all you're money in and use credit cards as much as possible - used to be able to borrow on a 0% card and shove the cash into the offset but can't do that so well now. I think the flexibility is great - I could buy a far too nice a car if I wanted just by writing a cheque and it just costs me my mortgage rate. It can make you a bit too obsessed with being efficient with money but in a way it makes it easy - don't have to keep switching savings accounts or whatever.
No point overpaying of course - except if you don't trust yourself to not spend money you shouldn't.
My mortgage calculator:
https://docs.google.com/spreadsheets/d/1cLH5NU8s4ghbiB7wlc_a1obAcjXdY59TZuW5jhStqjc/edit?usp=sharing
What I do is this:
1) Have a cashback card (eg AmEx or Capital One), and do all your spending on that.
2) Get a 0% BT card: biggest limit, longest 0% and lowest fee you can get. 28mths @ 1.5% is about the best around, which is more than paid for by the cashback from 1). Transfer the balance from 1) until full.
3) Get another 0% BT card, repeat 2)
4) Your salary piles up in the offset mortgage (or savings account), effectively "earning" interest at your mortgage rate. FFS don't get flash and spend it!
5) When the 0% BT periods end, simply re-finance by either rolling over onto a new deal with the same provider (MBNA are good for this), or transferring to a new one.
It'll trash your credit score, but with a bit of discipline will take years off your mortgage.
^^
This is what I'm on about!!
In a way, I wish there was a way of having 'multiple offset accounts' so as to have a 'salary' 'spending' ' saving' 'tax' etc account, but I'll just have to be disciplined and use excel to let me know how much of the 'overall account' is actually available to me..
DrP
Overpay, beats everything else hands down and doesn't cause your brain to melt.
Overpay, beats everything else hands down and doesn't cause your brain to melt.
Maybe on a fixed rate / tracker mortgage but on an offset it has the same effect as putting the money in savings and in the savings you have access to the capital if you need it.
First Direct can link many accounts to the offset.
We have several accounts all linked to the mortgage.
First direct also do a sweep where at the end of the month it sweeps anything over a certain amount into a savings account ensuring your current account is at poverty levels so you are not tempted by a healthy balance.
Overpay, beats everything else hands down and doesn't cause your brain to melt.
And will leave me with a big tax bill and no money to pay at the end of the year 😉
DrP
On the other hand, i put all my spare cash into mortgage offset for the last 10 years, now I sort of regret not investing some of it in stocks. Mortgage rate is 1.49% against possibly better than 10% from careful S & S ISA.
Well yes, I used to but it's hard to make what I'm about to describe work these days with balance transfer fees etc.
Certain "mule" credit cards allowed you to transfer a +ve balance to a bank account. Egg (sadly no longer) was one that springs to mind. The "mule" card is pivotal to this.
You'd take out a new card with a zero % deal for balance transfers and request at day one a balance transfer of full credit limit to the "mule" card. Then transfer this +ve balance from the "mule" to the offset account.
Repeat for as much credit as you can find.
At one point I had £35k of various credit card companies' "free loan" money sitting in my offset account avoiding mortgage interest.
I can't make it pay in my particular circumstances now that balance transfer fees are applied by CC companies and my mortgage rate is basically BoE base rate. The principle still holds good though and might still work for you if you can find a suitable "mule" card and your mortgage rate is significantly greater than your transfer fee/interest free period.
First Direct have an offset calculator and an overpayment calculator on thier site which is rather good.
I did a comparison on my remaining mortgage and I'd have to have (approx) £16k savings, to make the same reduction in interest payment as a £150 overpayment over the term.
Its up to you which is more comfortable for you situation but its a useful tool to make a comparison with.
http://www.moneysavingexpert.com/latesttip/#money
There's an MBNA credit card, 0% interest with a 2.69% transfer fee, the bonus though, you can transfer in to a debit account that's in credit.