Advice req'd - how to pay this off!

Floxxie

As you can see from my signature we are doing pretty well in getting the mortgage balance down. However I don't work (maternity leave and not going back) and husband's wage is pitiful (and not reflective on our overpayments),

So the question is what to do next? Without overpaying any further monies the mortgage should be down to £90k by the end of the year. We are stoozing £16k.

I am planning to drop the payment to the minimum allowed from Jan 09 and then put any extra into an offset pot. The reason for this is just in case I decide to rent out the current house and purchase another smaller one. I would however like to be in the position where we have enough cash to pay off the mortgage if we decide not to move.

These are the figures...

£92644.64 at 5.48% for 17 years 1 month on a tracker

Am I better off overpaying or putting any extra cash into an offset pot? Would it make any difference to the final repayment date?

Floxxie

dimbo61

hi floxxie
I take it you have an offset mortgage on a tracker deal !
It will make no difference if you overpay on the mortgage or save into the
offset account as both will save you the same interest

dimbo61

I would rather have a large ( up to £16k ) amount in the offset account
than overpay on the mortgage as its easier to access if you need some
money for emergencies.
The £16k limit is to avoid problems if you apply for benefits !
You should also consider ISA,s as they are paying 6.5% tax free at the
moment.
Therefore £12k in ISA,s would be earning the same interest as say £14k in the offset account so something to consider.
If you are not working for the next few years while the kids are small then
also consider regular saver 10% with halifax and other saving accounts paying ( martins e-mail ) 7.11% before TAX to maxmise the return on your savings GOOD LUCK

Floxxie

Thanks dimbo61,

I have one ISA with Barclays that is part of the offset. All our bits of money are held within the mortgage offset - there isn't really enough to open additional ISAs and savings accounts and pay in - we are using our credit balances and stoozing pot to help get the mortgage down and if we come into any extra money (through the challenges for example), I have been overpaying the mortgage directly.

It sounds like I should just pop it into a pot and leave it there..although there would be issues if we needed to claim benefits as we would be over £16k in savings (from the stooze pot) which was one of my initial reasons to overpaying the mortgage...

Mmm, decisions, decisions!

Floxxie

Floxxie

Rather than start a new thread, I'm just adding my latest question - not sure which board it should be on but hopefully somebody will have an answer.

I have the Woolwich offset lifetime tracker and within in I have a cash ISA whcih is offset against the mortgage. My question is - will I get interest added onto the ISA at the end of the tax year.

I know that may sound strange but with an offset you don't earn interest as any positive funds are offset against your mortgage. However an ISA is tax free so although I can offset against the mortgage, interest could be added as it is interest free within an ISA - ummm, is anybody still with me?

Does anybody know the answer?

Floxxie

gallygirl

Am still with you but haven't a clue! I assume no interest would be added, You really need to sort this out - as you are a non-taxer payer at the moment. If you don't get interest no point in having it in an ISA. You should consider putting all savings in your name in an account with the highest gross rate, which would be much higher your mortgage rate. You can get a form from the IR to enable them to pay you the interest without tax. This would be your best route.

As for not working yourself .... I take it as a good MFW'er you are mystery shopping & doing paid clicks & surveys .

Susiesue

Floxxie wrote: »

I have the Woolwich offset lifetime tracker and within in I have a cash ISA whcih is offset against the mortgage. My question is - will I get interest added onto the ISA at the end of the tax year.

I know that may sound strange but with an offset you don't earn interest as any positive funds are offset against your mortgage. However an ISA is tax free so although I can offset against the mortgage, interest could be added as it is interest free within an ISA - ummm, is anybody still with me?

Does anybody know the answer?

Floxxie

Hi Floxxie

My circumstances are spookily similar to yours: £110,000 mortgage, current balance around £90,000, mortgage offset with a stooze pot & cash ISAs.

If your offset works the same as mine you won't get any interest from your ISA. I know it seems a bit counterintuitive to have a high interest ISA that doesn't earn interest but my thinking is that when we've paid the mortgage off in 6-7 years, all my savings will be instantly tax free rather than having to build up an ISA pot from scratch.

Hope this helps!

S

Floxxie

ali007 - thanks for your thoughts. Whilst I'm not 'earning', I am registered self employed for mystery shopping purposes (of course I have the extra clicking, eBay and anything I can find that isn't taxable!) and I am currently on maternity leave (being paid non-taxable maternity allowance until Nov) but unable to afford to go back

The reasoning behind the ISA was not to lose the tax free aspect once mortgage paid off and I have no extra funds that belong to me to open a savings account.

However you have got me thinking...next year I shall not be paying a great amount of tax, if any, given the low volume of ms that I do (100 last year)..perhaps I should find more ways of making non-taxable money and put into the ISA and a savings account. How about I only one ISA for myself (and not OH)?

Floxxie

Floxxie

Susiesue wrote: »

Hi Floxxie

My circumstances are spookily similar to yours: £110,000 mortgage, current balance around £90,000, mortgage offset with a stooze pot & cash ISAs.

If your offset works the same as mine you won't get any interest from your ISA. I know it seems a bit counterintuitive to have a high interest ISA that doesn't earn interest but my thinking is that when we've paid the mortgage off in 6-7 years, all my savings will be instantly tax free rather than having to build up an ISA pot from scratch.

Hope this helps!

S

Hi SS,

Spooky! Are you still going for MiT? If so, I would like to know how you plan to. I think I have done very well getting it down by so much in so little and on so little. I am very proud of myself (but only on this board - I keep quiet to friends!)

The reason why the question arose is that I opened the ISA last year and then Barclays promptly paid the money to somebody else. It took about six weeks to get sorted and when the money eventually arrived and I offset it, I also received a letter from Barclays to says that the interest due would be backdated and added on in April. Fast forward to April and I get £30ish in interest. I can't work the amount out - I suppose it does seem quite low for the full ISA amount so I now assume from what you have said that no interest is payable and this is what it was for the period it wasn't offset?

In that case, if the ISA is not offset, would it be a Haven ISA at 6.5% and therefore I would be better not offsetting it?

I wish I could just phone up Barclays and ask them this question but everytime I do a major balls up follows!

Floxxie

Susiesue

Hi Floxxie

I'm part of the MFi3 gang but i'm being a bit misleading as I don't plan to COMPLETELy get rid of my offset mortage in 3 years. I've joined to get the support to help keep me on track. We're mainly overpaying on our monthly payments but for the last 6 months have started stoozing quite seriously. We've currently got a pot of £30,000 and we plan to expand it as far as we can for as long as we can. It's halved the amount of interest due each month. I'm in a fortunate position in that me and DH are both working full time and earning reasonable money. I think you should be extremely proud fo yourself for any mortage free aspirations when only one of you is working - well done!!

As for the ISA - I'm not really an expert but I would guess that you are better off having the best ISA rate than offsetting (and then paying your interest earned off your mortage). This would be true if the ISA interest rate was higher than your mortgage interest rate.

Hope this helps

Best wishes

Stick with it!!

Floxxie

Thanks Susie for the advice and support!

I have decided to not offset the ISA - this will have an impact on the mortgage but it will help me psychologically in seeing that I am making money somewhere. I am going to focus on saving the ISA money each year and manage the bills with the remainder going into an offset pot, along with the stoozing money.

We're just waiting to hear if our stooze pot can grow. I have found though with the changes in repayments on some of the cards, the stooze pot is going down rather quickly.

Well I shall keep a lookout to see how you are doing on the MFiT challenge - I don't think you will be too far from it.

Floxxie