Offset Mortgage Question

G

geecee

Registered User
Messages
51
Hi All
We were talking about Offset mortgages today and came up with more questions than answers
Current Situation:
Outstanding Balance €209000
Term: 31 years left
Rate 0.75 aboveECB - 4.75%
Monthly repayment: €1067


Looking at The first active website calculators the equivalent loan and term would cost me €1125PM - so €58 extra per month - for an offset mortgage

I currently have approx €40,000 knocking around in various savings accounts, when i plug these numbers into the FA offset calculator I can reduce my term by 10 years and 10 months.
After 242 months ~20 years (31 Term less the 10years 10 Months reduction) I have to hand my 40K over to them to clear the mortgage

On the other hand if I use Karl Jeacles calculator and:
Overpay AIB monthly by the €58 above and
Pay AIB a lump sum of €40K after 242 Months my mortgage Term is shortened by just 8 years

So at the end of the term I have
Shaved 2 Years 10 months off my Mortgage = €38,250 in repayment


However will have lost any potential interest on the 40K over the 20 years...
Assuming a rate of 4.3% (Less DIRT = 3.44% PA) compounded over 20 years my 40K would be worth €78600
Less the principal this is €38600

So at the end of the the offset account is no better (or worse) than the AIB tracker

Perhaps my maths are wrong?
Have i over simplified matters?
Would appreciate others opinions on this...
Thanks in Advance
Geecee
 
geecee said:
On the other hand if I use Karl Jeacles calculator and:
Overpay AIB monthly by the €58 above and
Pay AIB a lump sum of €40K after 242 Months my mortgage Term is shortened by just 8 years
Click to expand...
Bear in mind that Karl's calculator takes no account of owner occupier mortgage interest relief. Perhaps other calculators do and this may be significant here?
 
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