Author Topic: Using an offset mortgage to advantage in FIRE  (Read 490 times)

celticblue

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Using an offset mortgage to advantage in FIRE
« on: June 14, 2018, 07:41:39 PM »
Please forgive me that this is a repost of something I put in the US dominated forums. I got minimal response and I think its because offset mortgages are not a thing in USA

hi,

I have a fully funded offset mortgage in the UK (meaning I owe 200, 000 dollars but have an account containing 200,000 dollars where the savings interest forgone offsets the mortgage interest).

I am wondering whether I should be using it as a tool in my FIRE plans.

I am recently FIRE and intend to use proceeds from selling other home to fund a 3 year CD ladder with 3 years of expenses to reduce Sequence of Return Risks.

The rest of my stash is 80:20 stocks to bonds. Or will be with home proceeds

Should I have a strategy for dipping into the mortgage offset account? How and  when should I do this? Is this already mitigating SORR ? I have not given it much thought but as I am now recently FIRE and about to get the proceeds from selling USA home, move to UK and set up the pipeline that funds my expenses I wanted to ask. I wonder if I am missing a trick or even something obvious?. The mortgage offset account is a variable interest rate currently around 4%. Should I forget about having a 3 year CD ladder and just dip into my offset for a couple of years in an extreme bear market?

Any advice from the wise crowd?

PhilB

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Re: Using an offset mortgage to advantage in FIRE
« Reply #1 on: June 15, 2018, 12:04:10 AM »
I can see some merit in the idea, but I would be far too chicken myself to live off the mortgage during a downturn hoping that markets recovered before I ran out of facility  - and watching the interest compound against me each month!  I have a small offset mortgage (70k max) in the same position, which I will be keeping open, but I see that as purely for cashflow smoothing.  For that purpose it's brilliant eg I can hold my cash in fixed term accounts without worrying about early withdrawal penalties because I'd use cash from the mortgage then pay it back when the account matures.