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offsetting money on mortgage

jrs101
jrs101 Posts: 286 Forumite
Part of the Furniture 100 Posts Name Dropper Combo Breaker
in Mortgages & endowments
Hi

I pay 2.49% on an offset mortgage and have a lump sum offsetting the mortgage.

How is it possible to know what rate I would need elsewhere to make it worthwhile putting the money into another savings account rather than offsetting it?

thanks

Comments

  • HappyMJ
    HappyMJ Posts: 21,115 Forumite
    10,000 Posts Combo Breaker
    Divide it by 0.8 (3.12%) or by 0.6 (4.15%) depending on your tax rate. If you have a non working partner with a personal allowance remaining then save in their name to not pay any tax.
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • jrs101
    jrs101 Posts: 286 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    HappyMJ wrote: »
    Divide it by 0.8 (3.12%) or by 0.6 (4.15%) depending on your tax rate. If you have a non working partner with a personal allowance remaining then save in their name to not pay any tax.

    thanks for the quick reply.

    So that is 3.12 AER? I would have to receive elsewhere (i pay 20% tax) to make it worthwhile?

    My wife works part time, does that have any effect?
  • thenudeone
    thenudeone Posts: 4,462 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    If you haven't used your cash ISA allowances yet, you should use them rather than offset the mortgage, because it's certainly possible to get over 2.49% interest on a cash ISA, tax free.
    We need the earth for food, water, and shelter.
    The earth needs us for nothing.
    The earth does not belong to us.
    We belong to the Earth
  • HappyMJ
    HappyMJ Posts: 21,115 Forumite
    10,000 Posts Combo Breaker
    jrs101 wrote: »
    thanks for the quick reply.

    So that is 3.12 AER? I would have to receive elsewhere (i pay 20% tax) to make it worthwhile?

    My wife works part time, does that have any effect?
    Does she earn more than £7,475 per year? If she earns less then she can earn up to that amount tax free without any ISA needed. Some good rates are with Santander at 3.1%. I'm sure you can find better than 2.49% easily enough.
    :footie:
    :p Regular savers earn 6% interest (HSBC, First Direct, M&S) :p Loans cost 2.9% per year (Nationwide) = FREE money. :p
  • jrs101
    jrs101 Posts: 286 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    thenudeone wrote: »
    If you haven't used your cash ISA allowances yet, you should use them rather than offset the mortgage, because it's certainly possible to get over 2.49% interest on a cash ISA, tax free.

    Yes we already have, but thank you.
  • jrs101
    jrs101 Posts: 286 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    HappyMJ wrote: »
    Does she earn more than £7,475 per year? If she earns less then she can earn up to that amount tax free without any ISA needed. Some good rates are with Santander at 3.1%. I'm sure you can find better than 2.49% easily enough.

    ok thank you
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    HappyMJ wrote: »
    Divide it by 0.8 (3.12%) or by 0.6 (4.15%) depending on your tax rate. If you have a non working partner with a personal allowance remaining then save in their name to not pay any tax.
    Correct. Only it has to be a spouse not just a partner to be able to "move assets freely" between the two of you.
  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    HappyMJ wrote: »
    Does she earn more than £7,475 per year? If she earns less then she can earn up to that amount tax free without any ISA needed. Some good rates are with Santander at 3.1%. I'm sure you can find better than 2.49% easily enough.
    Also, if she earns between this and £10,035 then she can earn up to £10,035 including savings interest and only pay 10% tax on the interest.
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