Offset mortgage & interest rate query!

busy_b

I offset 100% of my small mortgage of 30k. I pay no monthly payments but receive no interest. (It will remain like that for the next 8yrs or I can chip away and pay chunks off).

Silly question coming up!! Am I still doing the write thing offsetting everything?

I am also considering adding to the mortgage by 25k to pay off a buy to let and then offsetting this 100% too with savings that are earning a pittance now! Does that make sense ?

MrMicawber_2

Your effective interest rate from your offset savings are:

a) If you are a basic rate tax payer = Mortgage Rate * 100/80

b) If you are a higher rate tax payer = Mortgage Rate * 100/60

If you can get a higher net interest rate (i.e. after tax) than this then that would be better.

Presumably you are able to save the monthly payments you don't need to pay - and are getting a decent rate on these??

Of course if your mortgage rate is high(ish) and you are able to change without penalty to a lower rate that is a consideraton.