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[quote][i]Originally posted by Paul_J[/i] [quote][i]Originally posted by AndyKent[/i] Offset means you keep cash in a separate account. Rather than earning any interest on it like you usually would, instead you don't pay any interest on the same amount off your mortgage. For example, you buy somewhere costing £100k, you put down £20k deposit and keep £30k in your offset account. You only pay interest on £50k of the mortgage. You don't earn anything off your savings, but you have access to spend it if you need to. Save you a bloody fortune in the long run and means you don't tie up all your cash. [/quote] That is interesting to know. Yeah I think some people who don't get mortgages, neglect the effect of the interest payments - for example going for a longer repayment term may make your monthly repayments smaller, but in the long run makes you spend far more on your mortgage (including not paying off the actual mortgage for ages). Rob I've got a great Excel spreadsheet where you can put in your deposit, your mortgage amount, length of term and % interest and see what your repayments will be month by month for the whole mortgage term... it's really eye opening playing with the numbers. For example, my colleague has just got a mortgage with his girlfriend. Property is £255,000 They had £38,000 deposit. They are borrowing ~ £220k - over 35 years! The total interest they will have paid in 35 years is £350k!!! (thats not repayment, that's just interest). The total repayment will be like £570k - for a house only worth £255k. Not to mention, per month it's like £1100 in repayments, which initially only pays off about £100 of actual mortgage and the rest (£1000) is just interest. This continues for about 12 years - where after 12 years they'll have only paid off about £15k of debt, and still owe £208,000 - despite having shelled out over £120k by this point in repayments. About year 18 they get to 50:50 split, where they're paying about £500 mortgage off a month... but ultimately the bottom line is, they're going to pay a fortune on top of what the house is worth. They would have been far better off buying a cheaper property (They honestly didn't need a 3 bedroom house, with garden / garage etc at this stage). In comparison, my sister put down I think £60k on a house worth £170k - thus borrowing about £110k over 25 years. I think she'll only have a total of £80k interest over the time - meaning she'll only have paid about £250k for a property worth £170k (not too bad). [Edited on 02-08-2011 by Paul_J] [/quote]
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