All my Eggs......Offset vs Sharesave

OverlandLandy

Ok here we go.... 1st Post......I have searced the forums and cant quite get an answer.......and my mind is going into meltdown.....

I have got an Offset Mortgage (£80k over 23years).
I have savings in the account (£20k)

But here is the question.............

I could pay more into the account Or pay capital off against the loan. IF I diverted my Share save and Share plan payments each month. (I would let my existing ones mature). The new offer is just about to start...hence my post.

But I could divert around £250 per month into the Mortgage.

In addition I have just got a new tax code (due to opting out of the company car scheme - claiming the tax back on the fuel allowance). This could add around another £80 per month if I diverted this 'income increase'.

So in total, I could (once all my sharesaves mature) pay an extra £330 into my mortgage. (currently £500 odd/month) -

:confused: BUT SHOULD I?


I will use the sharesaves, on maturity, to help pay of the debt (but they are not doing too well at the moment).

The offset choice/equation at present Its OK for me.

I know that 'shares can go up as well as down....'. But with Sharesave you can always get your money+bonus back rather than buy the shares. I know that you should aim to get rid of all your debts before you start saving. But also 'dont put all your eggs into one basket comes to mind....

Any help/opinions greatly appreciated......I cant see the wood for the trees on this one!

Fruitcake

I can't really help you with an answer about diverting money to your offset that you would otherwise put into a sharesave scheme. I was lucky with a recent GUS sharesave scheme where the shares doubled in value over three years. This was a gamble that paid off compared with what we would have saved via the offset route.

As you say, the share price could go down. I'm using a 7 year sharesave to cover the shortfall in my endowment that matures at the same time so that one is set in stone as well.

The important thing about using an offset is to "use and stooze" your credit card for EVERY possible purchase. Every time you draw cash, use a debit card, or write a checque you are wasting your "offset". Use your cc and the money stays in the bank working for its living, provided you pay the cc bill off in full each month.

I have a Woolwich Offset mortgage combined with a current account and 6 savings pots. Money in these accounts all counts towards offsetting interest. Every few days I move money from my current account to cc savings pot so the cc bill is covered by the contents of the pot when the bill arrives.
It doesn't matter what it is, I use my cc to buy it if at all possible; the cheapest item I have purchased with it was ₤1.98!

"Use and stooze" is a double whammy. You offset interest by keeping money in the bank longer and you get the points/cashback from the card as well. In the last 2 years I have gained enough loyalty points from my cards to get 11 free nights accomodation for our holiday in the USA next week, worth about ₤550.


Fruitcake

You Only Listen To Me When I'm Wrong

Thefunkygibbons

This is a tough one as it requires crystal ball gazing

However, the sweetners on the SAYE are so good, that it would be surprising if putting the £250 in there was not the best idea

Possibilities
1. The shares marture at the exercise price so at the end of the term, you get the interest tax free, so this will tend to be close to the gross payment on the mortgage
2. The shares stay flat. However, the exercise is a discount to the starting price, usually 20%, so on maturity it is worth cashing in the share options and selling immediately. In this case, your return is the interest tax free but the 20%
3. The shares rise - you get the interest, the initial discount and any gain

If the shares gain a lot, perhaps due to a merger then those gains can be siginificant

The important thing with SAYE is that they are a one way bet, if 1 happens, you just take the interest, where if 3 happens, you will end up minted

Hope this helps