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‘Free’ offset mortgage keeping the balance accessible sounds much better than no mortgage and no savings to me. I can’t see a down side vs just paying it off
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That’s good. Question is what interest rate are you paying on the last bit of the mortgage? Can your savings make more money in an investment isa etc? Savings accounts are still paying high rates. It’s tempting to pay off a mortgage quickly but it’s not always the best option.
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Sounds like a winner…..based on that info go 5 years.
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If you were paying a repayment mortgage, you would typically still have a monthly mortgage commitment, but that’s not a problem if you can still afford it monthly.
No interest would be charged if you’ve offset, so it would come off the remaining mortgage balance, reducing the amount you would need to offset against.
Worth transferring some money into other savings if you start exceeding the mortgage balance as you won’t get interest from the surplus funds.
I would recommend a 2 year probably, as a 3 or 5 year would still have a penalty to early repay the mortgage if you decided to get rid once savings are higher, or move house and not port the mortgage. The chances are, rates will be cheaper in 2 years compared to the 5 years, and you might prefer the lower risk of paying exit penalties. Depends on how quickly you’re able to build up a comfortable buffer of savings.
Even if rates are 25% for offset mortgages in 2 years, it wouldn’t matter to you, if you’ve offset 100% of the mortgage. But an early exit penalty of 3,4 or 5% might be pretty annoying if you wanted to settle/move home.
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@rhowe
Can anyone find a hole in my reasoning here?
We're in the fortunate position of being able to pay off the mortgage at the end of its current term, although it would leave us with basically zero savings.
Instead of doing that, we can take out a fee-free 2 (or 3 or 5) year offset mortgage with the same provider (so no paperwork). It allows 100% offsetting, so we could dump all our current savings into that and use the time to build up some headroom.