Mini cash ISA linked to offset

Supernova

Anyone know which companies do this or where I can find an easy to search table?

Ta

Tustastic

That's an interesting idea, Supernova. I've got an offset mortgage and I thought the bargain was that you avoided paying tax on your savings and interest on the part of your mortgage that is 'offset' by your savings. Do you mean that it is possible to 'offset' a mini cash ISA, on which you are earning tax-free interest, against part of your mortgage debt?

Supernova

So far I've found that Intelligent Finance allow it and that would free up some of my other savings even if I was fully offset.

But I don't know what happens to the ISA account itself - presumably that doesn't earn interest in itself. Not sure if that's good or bad yet.

Supernova

http://forums.moneysavingexpert.com/showthread.html?t=162182&highlight=Intelligent+Finance

Possibly a bad idea, no?

roswell

My Isa is offset with my mortgage, once my mortgage is a little below the amount in my ISA I will be trasnfering it out to a high Interest paying ISA, this way i have kept the tax free status for the future although not relivant as i havent been getting interest. I will then get interest at the same or higher rate than my mortgage while my capital on the mortgage is being repaid.

does that make sence?

Tustastic

Is yours a mini cash ISA Roswell, and which is your mortgage provider? I could imagine myself doing the same a few years down the line.

roswell

Mines a mini cash isa yes, mortgage is with Woolich through Barclays, so is the ISA (This was done before my MSE days), there isa rate is only 4.4% but when it means that a fair chunk of your Mortgage is 0% it doesnt matter what the ISA rate is,

Im my case I will probably be taking the ISA out of the offset next year sometime.

jamesd

Since you can get 5.75% from Ruffler Bank it only pays to use the ISA as an offset account if the mortgage interest is that high. Seems unlikely. Otherwise you're better off paying the mortgage interest and keeping the profit from the higher ISA interest.

Once you've used your ISA limits or if you're using them for equities, an offset account is a way to get tax free interest saving equal to the mortgage interest rate. That can be a good deal.

The Ruffler Bank rate doesn't yet include the effect of the latest interest rate rise.

roswell, it makes no sense at all. You're throwing money away by not transferring to a high interest ISA now, unless your mortgage interest rate is higher than the high interest ISA rate, in which case you have an expensive mortgage.

Supernova

Well, in my own case I was thinking it might have advantages in freeing up more of my savings for longer term investment and greater gain.

I'm looking to remortgage at BOE + .75 and have savings equal to the mortgage and another £27K in an Abbey ISA earning 5.05%.

If the ISA was linked then I would have the £27K to pay for larger items like holidays and emergencies etc. and invest.

Abbey don't link the ISA. IF do but at a higher fee plus the exit charge from Abbey. Abbey don't allow savings higher than the mortgage amount anyway whereas IF savings start to earn their normal rates of interest, ISA first.

Supernova

Oh, and the other difference is that any monthly payments on a fully offset mortgage reduce the capital with IF but are added to the savings pot with Abbey, so with the latter you have to be careful to keep just under fully offset otherwise they automatically redeem the mortgage.

Blimey, are there any sites that actually summarise offsets/flexibles at this level of detail?

jamesd

Supernova, just take the 27k out of the offset account if you need it. If the ISA is paying more than the mortgage that's cheaper than taking it out of the ISA and doesn't throw away the accumulated ISA annual limits.

Abbey redeeming the mortgage when your savings match the mortgage is a very nasty catch. Seems they don't understand that they are savings, not mortgage overpaments.