Advice please on a new mortgage!

sandydog_2

Hi everyone

I'm really enjoying reading the forum, but would now be very grateful if you could give me some advice on a new mortgage.

I'm moving house (does this make me a remortgager or a house mover?) and currently have a mortgage for about £35k. The house will potentially sell for £100k and our new house will potentially cost £185k, leaving us with a mortgage for £125k with all costs taken into account.

At the moment I'm considering a 10 year fixed rate so that we know how much we're going to pay for the forseeable future (between 4.89 and 4.99%), but I am also thinking about an offset account (rate of 5.1%), using our children's savings of approx £5k. They are getting about 5% in their accounts, and currently keep all the interest to themselves!

So what do you think? Which route do you think I should follow?

Thanks for any help!

silvercar

Offsets generally work out cheaper only if you have or intend to have at least 30% of the mortgage value in offset savings. This is because the offset mortgage rates are generally a bit higher than other deals you can get.

If your only savings are your children's accounts then it probably won't save you money.

Why are you taking your kid's interest anyway? Surely they should keep the interest on their money!

sandydog_2

Thanks for the reply, sounds like it's not worth doing offset then.

By the way, you cheeky devil, the money is our child benefit. When my children are old enough to earn their own money, they can keep their interest!! But at 4 and a half, they don't contribute financially!

roswell

Must say as the money is paid to you for the fact there here id leave the interest with them, if the state didnt pay you benifit you wouldnt have the 5K regardless.

sandydog_2

Well I'm a bit miffed that this has turned into a debate about what I should do with the interest on their account - they are lucky that we save that money and use our money instead. In the long run it would benefit them. This was a question about mortgages, not their accounts.

silvercar

.....using our children's savings of approx £5k. They are getting about 5% in their accounts, and currently keep all the interest to themselves!

OK it was your phrasing that made me ask why you were taking their money. If you had said that you have saved up £5k of child benefit and are receiving 5% interest on it that could be used to offset, I wouldn't have asked the question.

From your phrasing I assumed they had put away pocket money or gifts and you were now taking it!

You know the tax rules only allow children to receive £70 of interest on money given by parents before the whole lot becomes taxable?

sandydog_2

Thanks for that Silvercar. Is that £70 per year, or forever?

emmaHarris_2

You know the tax rules only allow children to receive £70 of interest on money given by parents before the whole lot becomes taxable?

WOW!! My sister (who has a baby) nor me knew that.

sandydog_2

I can only find this information from the government website:-

However, children, like adults have a personal tax allowance of £5,035 for the tax year 2006-2007. This is income they can receive tax-free. As long as their annual income (including interest) is below this amount, they’ll be able to:

receive interest without having the tax deducted (parents or guardians fill in a Form R85 for each account)
claim back any tax they shouldn’t have paid (parents or guardians make a separate claim to HM Revenue & Customs (HMRC) using Form R40)

A child can't claim to recieve savings interest tax-free if their income is above the personal allowance. But they will be able to reclaim some tax if their overall income in the tax year falls within the starting rate (10%) tax band (up to £2,150 above the personal allowance).

emmaHarris_2

Thank you...there is so much to learn. My sister says thank you as well:)

sandydog_2

That's ok! I don't think mine get £5000 in child benefit!