Offset Mortgage against CASH ISA?

surpoob

Is anyone aware of any OFFSET mortgage provider that provides the facility to offset the mortgage against a CASH ISA Savings account? I believe that Woolwich/Barclays do but do any others?

theduke2011

The majority of lenders will only allow you to offset a conventional savings account. I assume you want to offset an isa so you dont lose out of previous years allowances you had utilised? otherwise, if this is not an issue for you, it doesnt matter what account the funds are in when you offset, due to the fact you dont earn any interest on the savings you offset anyway and there would be not tax advantages to offsetting an isa.
Regards,
D

surpoob

I understand there is no tax advantage when offsetting, but I want to keep my ISA savings in an ISA so if in the future I decide not use my ISA to offset my mortgage I will still have the tax benefits.

I'm pretty sure only Barclays/Woolwich offer this but I thought I would check.

theduke2011 wrote: »

The majority of lenders will only allow you to offset a conventional savings account. I assume you want to offset an isa so you dont lose out of previous years allowances you had utilised? otherwise, if this is not an issue for you, it doesnt matter what account the funds are in when you offset, due to the fact you dont earn any interest on the savings you offset anyway and there would be not tax advantages to offsetting an isa.
Regards,
D

getmore4less

I don't know of any others that allow ISA offset.

Handy way to keep utilizing the allowance which is a use or lose when the primary objective is pay off the mortgage

We get the new one each year and don't offset for the year when the rate is good then offset. At some point we will review again there are some better rates, if we transfer to a longer term offering like the 2.65% NR e-isa that is not bonus based we would be better of not offsetting.

If the longer term plan is a S&S ISA this is another way to build up a stash ready to invest.

One down side to offsetting is you don't accumulate inside the ISA which has the longer term benifit. Small effect so the rates have to be close to make this worth while considering and/or a 40% tax payer in the future.

Thrugelmir

surpoob wrote: »

I understand there is no tax advantage when offsetting,

There is a tax benefit to offsetting. As there is no tax due on the interest earnt on the offset account. The interest is technically paid gross.

The real question is the additional cost of the offset facility worth while. In that often there is an interet premium. For people who need to maintain large\variable cash balances such as the self employed. An offset provides real benefits. Not really any use as a long term savings facility as once the mortgage balance falls then less can kept in the offset. So might as well use the annual ISA allowance.

getmore4less

THis is a bout offsetting ISA's

Thrugelmir wrote: »

There is a tax benefit to offsetting. As there is no tax due on the interest earnt on the offset account. The interest is technically paid gross.

ISA pay gross.

The advantage of the offseting ISA is that you can build up an ISA pot while reducing mortgage costs(when mortgage cost more than savings).

AS you become close to 100% offset you unoffset those ISAs AND can still fill the current years allowances with surplus cash.

Thrugelmir

getmore4less wrote: »

THis is a bout offsetting ISA's

The OP said.

I understand there is no tax advantage when offsetting,

That was what I was commenting on.

HappyMJ

getmore4less wrote: »

THis is a bout offsetting ISA's



ISA pay gross.

The advantage of the offseting ISA is that you can build up an ISA pot while reducing mortgage costs(when mortgage cost more than savings).

AS you become close to 100% offset you unoffset those ISAs AND can still fill the current years allowances with surplus cash.

I still don't see the point.

Offset £10,000 at 3% saves £300 per year. Invest £10,000 in an ISA at 3% earns £300 per year. Same? I thought offsets were always compared to standard savings accounts so £10,000 invested in a standard savings account at 3.75% after tax earns £300 per year (assuming 20% tax).

I wouldn't go switching mortgages to save a few quid. It'll cost a lot more in the long run. If you are already with barclays/woolwich then if you can't find an ISA rate that exceeds your mortgage rate then offset it but don't switch just to do this.

What is the interest rate with the barclays/woolwich offset product compared to the normal repayment mortgage rate? Aren't offset products about 0.5% more expensive than normal mortgages? i.e on a mortgage of £100,000 it'll cost an extra £500 per year defeating the whole point of offsetting £10,000 just to save £75 in tax per year. All numbers made up....

getmore4less

Thrugelmir wrote: »

getmore4less wrote: »

THis is a bout offsetting ISA's

The OP said.

I understand there is no tax advantage when offsetting,

That was what I was commenting on.

no the OP said

I understand there is no tax advantage when offsetting, but I want to keep my ISA savings in an ISA so if in the future I decide not use my ISA to offset my mortgage I will still have the tax benefits.

Refering to the loss off the ISA tax advantage.

getmore4less

HappyMJ wrote: »

I still don't see the point.

Offset £10,000 at 3% saves £300 per year. Invest £10,000 in an ISA at 3% earns £300 per year. Same? I thought offsets were always compared to standard savings accounts so £10,000 invested in a standard savings account at 3.75% after tax earns £300 per year (assuming 20% tax).

You should use the best available net savings, if they pay more than the mortgage you save if less you offset
The advantage of ISA offset it offers a class of saving not available to most(all?) other offsets that you can move in/out as the rates change.

I wouldn't go switching mortgages to save a few quid. It'll cost a lot more in the long run. If you are already with barclays/woolwich then if you can't find an ISA rate that exceeds your mortgage rate then offset it but don't switch just to do this.

common sense look at all the angles picj the best deal overall

What is the interest rate with the barclays/woolwich offset product compared to the normal repayment mortgage rate? Aren't offset products about 0.5% more expensive than normal mortgages? i.e on a mortgage of £100,000 it'll cost an extra £500 per year defeating the whole point of offsetting £10,000 just to save £75 in tax per year. All numbers made up....

Differentials are much tighter these days, FD were at 0.2% but have widened to 0.3% Barclays are 0.1% or Zero if you pay a fee. I thing there are other lenders offering offset =s with no margins over their equivilent tracker rates.

The key point is that if you can offset the ISA and your mortgage rate is higher than the best net savings rate there is a long term advanatge to being able to offset in an ISA because you don't lose the allowance when rates are against you.

For anyone that will have a savings rate above the ISA allowance at some point in the future needs to consider how they utilise the cuurent years allowances

wapit

Hi All,

Thought I would resurrect this one again.

Anyone know of other offset mortgage lenders who NOW allow cash ISA savings to be used to offset against their Offset mortgages?

It still seems only to be Barclay's that I can find.

I want to start to shift my offset savings into ISA savings so when I eventually achieve 100% offset I can enjoy the lifetime tax free benefits of the cash ISA.