Offset Mortgage quick question.....

rednblack

Hi,

Can anyone give me some advice please - is £20k enough savings to consider using an offset mortgage for £81k? I am thinking of the Woolwich offset tracker at 0.99% above base rate!

Thanks.

lisyloo

If the offset is the best rate around then take it.

If it's not the best rate around then you have to do some maths and compare the tax savings on your savings with the extra you pay on the mortgage rate.

There are numerous factors that will affect the decision such as:

1) mortgage rates and savings you are comparing
2) your tax rate and that of your spouse (if you have one).
3) Whether you have ISA allowances available.

So not something we can answer without all the above details.

rednblack

Thanks lisyloo

I have 17k of savings in an ISA (no more allowance this year) at 4.79% i think and remainder of my savings in a current account (int. 5% for first 2.5k then 0.1%). The mortgage rate is currently 5.99%. Not sure of my tax rate - but not a high earner.

Hope that helps, Cheers!

ragingbass

Seems like a really good deal to me!! Basically you'd be paying 5.99% on the £61k, making your monthly payments £397 a month over 25 years. I doubt very much you'd be able to find another fixed or tracker mortgage to match that

rockrat

food for thought

if you can get your iSA's to be offset on the mortgage then you are in effect getting a better deal on your 17k savings.
i had this same dilemma some time ago, and in the end went with Intelligent Finance who allow you to transfer existing ISA's into the offset ISA account, which now reduce my mortgage balance for interest purposes at the mortgage amount, roughly the same % you are on.

I.F's best deal i think at the min is BOE rate plus 1.19% tracker.
you need to work it all out to see whats best.

when i did, even though the rate i remortgaged to on IF was slightly higher than i was already on, being able to move the ISA in ment it was a much better deal.

and for those that will say you can get an equal % deal in a seperate ISA i agree, but i could not afford to both save in the offset AND max an ISA. by going with IF i can now make sure i dont lose my ISA allownaces over the coming years.

hope that helps

lisyloo

I have 17k of savings in an ISA (no more allowance this year) at 4.79%

I would suggest moving this to Ruffler bank at 6.25% (if you can tolerate a 30 day withdrawal penalty).
It's better than offsetting and you will keep the tax free status for life.

The woolwich rate is pretty good and they DO allow you to offset ISAs, so that's another option.
Woolwich service can be pretty bad.

Another company to keep your eye on is First Direct.
They have good rates, and I think the fees are lower than woolwich.
They don't allow you to offset ISAs but otherwise it's very flexible and I've heard the service is great.