offset an isa?

TonyBagnall

hi,

does anyone offer an offset mortgage which will allow me to offset an isa, i.e. keep the tax free entitlement for when I pay off the mortgage? I've not seen it mentioned anywhere.

thanks

Tony

hi123

hi tony
intelligent finance offset against isa accounts
i am looking at an offset as well for myself
to my mind offsetting isa is only useful if the rate of interest u will pay exceeds what u are getting for isa
if offset rates start at 4.69%,i am already getting 4.85 % for my isa so dont see the point of offsetting it

TonyBagnall

thanks for that, I agree in principle about the rate, unless one was wanting to pay off the mortgage in say under 10 years. Then the future tax free nature of the existing entitlement may offset the very small interest loss, particularly for a 40% tax payer. I've not done the sums and am unlikely to realistically be in this position unless I buy a very cheap house!

jamesd

Does anyone offset a stocks and shares ISA?

dunstonh

You cannot offset against a stocks and shares ISA. However, many people invest into equity ISAs rather than pay off the mortgage.

ISA allowances are use it or lose it. So paying into an ISA to build up your £7000 tax free a year is often more important than paying off the mortgage in small extra chunks.

jamesd

dunstonh, thanks for confirming that I hadn't missed anything.

I agree with your reasoning, on asset allocation as well as expected return and tax grounds, though it might have been interesting for a few years given market timing considerations.

dunstonh

I agree with your reasoning, on asset allocation as well as expected return and tax grounds, though it might have been interesting for a few years given market timing considerations.

A sector allocated investment started at the worst point in 2001 (i.e. when markets were at their highest) would still have turned round over 10% p.a. average in that time. The problem is that many novice advisers or inexperienced do-it-yourself investors pick a single fund and stick it all in that.

I did a policy review for someone today with a cautious portfolio spread of 13 funds which has never gone down on a year to year basis. Even in 2001 it was up 3% and 5% in 2002 (15%, 16% & 16% the following years to date). An average of 11.11% it showed. Whilst 2001 wouldnt have beaten the mortgage, 2002 broke even and 2003 to date have doubled it. 11% a year average including the crash is around double many mortgages. Stockmarket crashes are only a problem if you invest short term or invest above your risk profile or do not invest in a porfolio spread and just pick one fund that happens to have stockmarket exposure.

jamesd

dunstonh, thanks. Novice and inexperienced describe me very well at present, though I'm gradually learning.:)

My first move was 4000 in one large cap global growth fund, deliberately chosen for the risk and geographic distribution to get things started. Don't much like the concept of just one fund as I get more involved, though. Sticking to one just seems to be missing the point.

dunstonh

£4000 would be 4 funds across 4 sectors for me. Indeed, there is one fund supermarket that has a £10 minimum per fund so you could even do a full asset allocation of 13-15 funds on that amount!

boy_3

What about the individual funds costs, commissions, fees etc? 4000 across 13-15 funds doesn't sound wise to me. I would say 4000 in 2 funds to be cautious, but they have to be low commision or I would buy index linked iShares or similar.

dunstonh

The above figures are net returns of charges. There is no cost difference whether you use 1 fund or 100 funds. Obviously each fund has its own charges but there isnt much of a difference between them all.

5 years with a cheap FTSE all share tracker would have got you about 3% a year. 5 years on a defensive portfolio would have got you 11% a year and a medium risk portfolio 15% a year. The charges on the tracker would have been less but then the return has been far less as well. There is little point investing on the basis of paying as few charges as possible. You are automatically handicapping yourself doing that.