egg mortgage (tracker -saver) offset

David_Murray

I am interested in the saving aspect rather than the Egg mortgage itself. Can anyone figure out what the difference in value is in having £9K in a decent ISA or £9K in Egg Saving Account with a mortage of £100K with Egg's offset motgage, a 40% tax payer? In real terms? Egg say's that it is 'equivalent to 9.57% gross on your savings'.

David

Reaper

Very easy if you compare an offset to a cash ISA because they are both tax free. Just compare the two interest rates and forget about tax.

However you can only put £3k in an ISA each year, so unless you have been doing that for the last 3 years it's no use to you. Putting money into your offset account is far more efficient than putting money into an ordinary (taxable) building society account.

However if you do not already have an offset mortgage note that they are only of use for people with large savings because the interest rates tend to be much higher than all the discounted deals around.

Walletwatch

Is the rate for your offset mortgage 5.75%? In which case, the figure of 9.57% fits in as that rate, when calculated taxfree for a higher rate taxpayer works out to 5.75*100/60 = 9.58%. Effectively, putting in money into your offset account gives you an interest benefit equivalent to putting in your money into a savings account offering you 9.58% gross (or 5.75% post tax @ a tax rate of 40%)

Hope that helped.

David_Murray

Thanks Reaper and Wallet watch.

My new Egg mortgage is 4.24% for first 6 months then 5.75% variable. So therefore I should not add my £9K ISA savings untill after 6months.

David

Reaper

That sounds correct assuming your ISA rate is between those two figures.

Of course the other great trick I like to do with my offset mortgage is stoozing, but that's another story...

Walletwatch

Of course the other great trick I like to do with my offset mortgage is stoozing, but that's another story...

True. The very way in which an offset mortgage is structured, it is as if it and stoozing were made for each other.

Don't have a mortgage yet, but if 0% deals are around when I do get one, my mind is made up on the kind of mortgage I'm going to take up ;D

cloud_dog

True. The very way in which an offset mortgage is structured, it is as if it and stoozing were made for each other.

Don't have a mortgage yet, but if 0% deals are around when I do get one, my mind is made up on the kind of mortgage I'm going to take up  ;D

Wallet, I'm sure you probably know this but, offsetting is not black and white.  It all depends on your debt (mortgage) to savings (stoozing) ratio and the comparable interest rates.  There is an excellent positng somewhere on the Mortgage board with the formula.

Using me as an example Offsetting is not beneficial, as the offset mortage rates tend to be higher than good value rates (around the 1% mark) - my current mortgage is a 4.79%.

Current mortgage amount £90k with approx £40k savings (mostly stoozed with some real savings).

I have the added advantage that Mrs Cloud_dog does not work (no believe me she doesn't - only joking dear, if you ever read this) so all our savings are in her name with interest being paid gross 5% (plus max amount going into Abbey FRMS at 7%)

I love the idea of an offset mortgage but I can never get the numbers to work in my favour.

cloud_dog

Walletwatch

Wallet, I'm sure you probably know this but, offsetting is not black and white.  It all depends on your debt (mortgage) to savings (stoozing) ratio and the comparable interest rates.  There is an excellent positng somewhere on the Mortgage board with the formula.

Using me as an example Offsetting is not beneficial, as the offset mortage rates tend to be higher than good value rates (around the 1% mark) - my current mortgage is a 4.79%.

Current mortgage amount £90k with approx £40k savings (mostly stoozed with some real savings).

I have the added advantage that Mrs Cloud_dog does not work (no believe me she doesn't - only joking dear, if you ever read this) so all our savings are in her name with interest being paid gross 5% (plus max amount going into Abbey FRMS at 7%)

I love the idea of an offset mortgage but I can never get the numbers to work in my favour.

cloud_dog

Agreed, cloud_dog, one size fits all doesn't make sense here for offset mortgages. One would kind of expect offset mortgages to be priced higher than the rest, as the Bank has no certainty of the amount of funds deployed and the tenor for which it is deployed. To that extent, they would be justified in charging a premium for offset mortgages.

My situation does seem conducive to taking on an offset mortgage though. My wife works, and our personal (stooze-free) savings plus the stoozed money would hopefully make up a considerable portion of the debt, thereby making my debt interest outflow virtually zero.

Also, I will do my math on the conservative side, assuming that stoozing stops sometime midway, so the only savings that can offset my mortgage in such a scenario are my personal savings.

Will look up this post you are mentioning though. Can someone post a link to it for me pls?

Reaper

Will look up this post you are mentioning though. Can someone post a link to it for me pls?

It's here

Walletwatch

Thanx Reaper

Interesting chain of posts, that one. It does confirm my understanding of when offset mortgages are better, but to have it in black and white in the form of a calculation does help all the same.