Some advice please? :)

Thrugelmir

Tidd83 wrote: »

The payments each month are around £2.50 so barely noticeable and it means future borrowing will be much easier at the rate of whatever the mortgage is running at (currently 2.5%).

No benefit whether your mortgage is open or not.

The one thing you pay is a far higher redemption fee in 24 years time. Which may outweigh any perceived advantages.

Tidd83

IFTS - Thanks for clearing that up, something to think about definitely, if and when they come on sale of course. Since they are tax free is there a limit on what you can buy and is this kept separate from any ISA allowance you may have?

In regards to keeping the mortgage running/not. I am unsure how there is no benefit to this? The flexibility of lending against it is a plus even if it is for extreme emergencies. As for the redemption fee in 24 years, I assume by the fact you mean it is expensive is due to the fact that price increases over time etc? On the current mortgage I am on it's set to not raise more than 2% above the base rate plus my terms and conditions states that if I close the mortgage with less than 10 years remaining they will waiver any redemption fees so I am pretty much sorted I think?

Ifts

Tidd83 wrote: »

if and when they come on sale of course. Since they are tax free is there a limit on what you can buy and is this kept separate from any ISA allowance you may have?

I'm afraid you can only invest £15K per person in each new issue (current rules). No ILSC are not connected to your ISA allowance that is separate.

Does not apply in your case but if you were married then you can put 15K in each name, so that would be £30k (15k each) and there is a way to have another £30k if you each hold a second certificate in trust for the other.

Tidd83

Thanks for the info again Ifts, to be honest £15k is a good number.. is that a yearly amount that gets refreshed or just total per person?

Is anybody able to answer the question in the last paragraph I wrote in Post #10 for me please?

psychic_teabag

The 15k is per issue. So that's probably about every year, but I don't know if there's a strict relationship. There could be multiple issues in a year if they want to raise lots of money. Recently they've tended to close them fairly quickly suggesting they're getting plenty of money in.

They used to do both 3-year and 5-year certificates, with different issue numbers, and you could put £15k into each.


On the ISAs, I did start to reply, but wasn't sure which aspect you thought prevented you from transferring. A transfer doesn't count as new money in, and so is not affected by the annual £5k cap. But if you open a fixed-term ISA in April, you almost certainly can't transfer another ISA into it later. Is it important to you to have all the ISA money consolidated into a single account ? I think some people have ladders with different maturation dates, so eg you might start a new 1-year fix in April, but then transfer your maturing ISA to a 2-year fix later, then you can have an ISA maturing every year, but getting 2-year rates, for example.

VT82

Tidd83 wrote: »

As for the redemption fee in 24 years, I assume by the fact you mean it is expensive is due to the fact that price increases over time etc? On the current mortgage I am on it's set to not raise more than 2% above the base rate plus my terms and conditions states that if I close the mortgage with less than 10 years remaining they will waiver any redemption fees so I am pretty much sorted I think?

I think you're right. Some split the cost into a deeds release/sealing fee and a redemption statement fee. You'll definitely be avoiding the redemption statement fee by letting it run. And they've had their wrists slapped for cranking up redemption fees in the past, so I wouldn't be too concerned about any other fees spiralling more than inflation.

So, I think you're right and I think I'd do what you are doing. Now, back to investments... and I'll let someone cleverer than me talk :rotfl:

Tidd83

Thanks again guys, I appreciate all the responses on this...

PsychicTB -in regards to the transferring of the ISA I was a little confused simply because my one year bonus term ends in July (when interest will be paid). If I was to transfer this ISA earlier say in April and open a new ISA and consolidate the original one with any new money I put in what happens with my original interest since I have done it earlier. If I wait until July when the original bonus term ends, get paid the interest and then transfer it with my new funds I will get everything I need however it means I miss April/May/June where I could be getting tax free interest on any new money I wanted to invest. If I open a new ISA with new funds in April then when the original one ends in July I will be sat with the £5,300 which will fall out of the tax free bracket. Does that make sense?

psychic_teabag

One-year-bonus suggests an instant-access account ? If so, there's usually no penalty for withdrawing / transferring early : the bonus is typically of the form of an increased interest rate during the first year. Sometimes its only paid on the anniversary if the account is still open, to dissuade you from closing before the year is up - you'll have to check T&C for that (or just tell us which account it is).

Any (standard) interest accrued will be paid when the account is closed / transferred - shouldn't need to wait until the scheduled payment date. Just need to check the terms of the bonus.

If it is instant-access, and there's no penalty, then you can just transfer it if you can match or beat the rate you are getting.

If you open a new instant-access account in April, there should be nothing to stop you transferring in additional funds from another ISA in July - that will then earn interest at the bonus rate of the new instant-account. Note, however, that some cash ISAs are new-money only : they don't allow transfers in (but do sometimes offer slightly better rates). eg
http://www.!!!!!!.uk/free-services/best-buy-savings-accounts/
has two separate sections for instant-access cash ISAs - those accepting and not-accepting transfers.

Note: your old ISA will not fall out of the tax-free bracket : once an ISA, always an ISA. It will just earn a lower rate until you transfer it.

Tidd83

Hi PT,

It definitely is an ISA, I think when I say bonus interest I am just referring to the interest paid for the first year. I know after one year of it paying 3.x% it will reduce down to 0.1% or something ridiculous so I will need to get it out when it finishes. With that in mind and from what you just told me, if I was to open a new ISA in April with my maximum allowance that allows transfers in would I be allowed to transfer the original one in to it come July or does it generally have to be done at the time of opening?

jrawle

Tidd83 wrote: »

In regards to keeping the mortgage running/not. I am unsure how there is no benefit to this? The flexibility of lending against it is a plus even if it is for extreme emergencies. As for the redemption fee in 24 years, I assume by the fact you mean it is expensive is due to the fact that price increases over time etc? On the current mortgage I am on it's set to not raise more than 2% above the base rate plus my terms and conditions states that if I close the mortgage with less than 10 years remaining they will waiver any redemption fees so I am pretty much sorted I think?

Is your mortgage an old-style Nationwide mortgage by any chance? If so, that would explain why you refer to borrowing against it flexibly, as presumably you have a large overpayment balance that you are allowed to borrow back at any time at the current mortgage rate (no higher than base rate +2%).

I'm actually in a similar situation to you, but have decided not to pay off my mortgage as I can get a higher return from savings, even after tax, by using fixed-rate accounts. I do make overpayments, although even this seems a little silly as there are no restrictions on overpayment, so I could wait until the rate increases. Of course, I will review everything should the base rate jump up.

As for the ISA, if you withdraw the money early, presumably the bonus interest won't be paid, so that's a bad idea. Again, it would help if you would give details of which product you have if you want advice. Typically, when such accounts mature, they revert to being a basic, instant access ISA. You won't lose the ISA wrapper, but the interest rate will be poor. You can just ensure that the new ISA you open allows incoming transfers, then merge the accounts once the old one matures. The only way this may be a problem is if you wanted to open a fixed term ISA next year. These don't usually accept incoming transfers once the account is open. If you want one of those, it's best to wait a couple of months, with the money for next year's subscription kept in the best instant savings account you can find in the meantime.