Offset Mortgage- great while savings rates are low (First Direct)

Member Name: dove3066

Product:	First Direct
Date:	23/01/09 (170 review reads)
Rating:

Advantages: Saves money, really easy to swap

Disadvantages: Did take a while to get application forms, very different concept for mortgages

I was looking around for a new mortgage deal because we are due to have an extension built in the Spring and it needed financing.

I was also keen to reduce the term of our mortgage significantly as I would like to retire without having to still be paying. I looked into the Offset mortgage which were on the market as I had a lump sum saved up to go towards th ebuilding and also liked the way that the bank account would be linked to the account .

We finally went with First direct because unlike some other offset mortgages you only have to pay on the outstanding amount rather than the amount that you borrow regardless of the amounts you are offsetting.

Basically offsetting works on the basis that all your savings accounts are offset against the total borrowing. Thus if I borrow 100K and have 20K in my savings account and bank account. I would only have to pay the interest on 80K. Obviously this 20K doesn't attract interest but as the cost of borrowing is higher that the interest gained you should be better off in monetary terms.

You have the opportunity to overpay as much as you want.

The only problems I have had was obtaining the quote originally - which took three phonecalls before the application forms finally arrived - but it was well worth chasing as after this the process was seamless. One of the conditions of taking out the mortgage is that you have to take the bank account out - but they handled the switch really well

Summary: Good process, innovative - worth looking into