Non-tax payers & attacking the mortgage..

gil13

I have been reading a number of threads of late and it has really got me thinking about how best to attack the mortgage going forward. We will soon be fixing for 10 years with offset and the main reason for this was a pretty decent rate 5.49% and the flexibility of it. One of the features is going interest only without any fees (you basically are commited to making the interest payments each month). The other reason is that we have a toddler and hopefully plans for another, so just thought lets fix and know where we are budget wise as the other half is probably going to give up her current p/t job next year.

I already knew about her potentially becoming a becoming a non-tax payer and using that to our advantage with savings in her name etc. But then I thought why don't we go I/O on the mortgage for 10 years and (whilst the rates are better) chuck that portion into a savings account in her name, some are 7% odd at the moment. I'm not sure looking at the numbers whether the difference in rates mortgage vs saving is going to make it that worthwhile, so will probably not do that, but certainly worth keeping an eye on, potentially stock market investments might also be worth considering when things have settled down.

I worked out very roughly that for her to exceed her personal allowance of £6035 08/09 then you would have to have about 90k tucked away, so for most, breaching the limit would not be an issue.

So I was just wondering what other families are doing in the same sort of position, obviously ISA's are appealing due to their tax free status, but also of course being a non-tax payer opens up other opportunities to chase some of the higher savings rates available. However the benefit of the ISA is that longer term they are sheltered and in addition to personal allowances so if she ever did become a tax payer again (quite likely when kids are older) then the money tucked up in ISA and compounded is very handy indeed.

I guess it is just a case of working through all the options and figures to see what's best but it would be interesting to hear from other MSE'rs on the subject, the things to avoid, the tips, and generally surviving on one wage.

gil13

http://forums.moneysavingexpert.com/showthread.html?t=792

This was an earlier thread I found, I suspect there are more.

Jonbvn

gil,

We do something similar to what you suggest. We have quite a reasonable rate tracker mortgage. With the OH being a non tax payer we save our spare cash with Kaupthing Edge (in OH's name) getting a +7% rate. TBH, we do still overpay a bit also (which is not strictly MSE!).