Sense check please - could we stooze our mortgage?

Jevvers

Hi
We have a large (£410k) flexible mortgage, £243k of which is interest only and the rest is repayment. The interest is 0.49 above the base rate for the lifetime of the mortgage so we are benefitting from the low interest rates at the moment.

As we have been paying off the repayment mortgage (and saving & investing for the I/O) we are building up an amount of available funds.

It's currently £18k - ie we now have £392k left to pay but our borrowing limit remains £410k.

Soooo my question is - should we re-borrow that money and stick it in a 1 or 2 year fixed rate savings account? I know that we would be taxed on the interest but it still seems that we would profit while the base rate is as low as it is. And we could then use that to pay back into the mortgage.

Assuming that our Ts&Cs allow (I think they do) is there any other reason for not doing this??

Thanks everyone

Thrugelmir

Are you sure that reborrowing is at the same interest rate?

Jevvers

I'm pretty sure it is, but I agree we would need to check it out.
Edit: Just checked, yep it's the same rate. They call it withdrawing rather than reborrowing.

The_J

Yes, if you can get more than 1% after tax

getmore4less

borowing at a tracker rate of base+0.5% and putting it in fixed carries risk if you don't have access.

there are some tracker products and variable rates with instant acess which reduce risk.

paulmapp8306

You can get 3.06% intereset paid monthly from Santander in their ESaving account for a one year period, with instant access.

I have £18k in there at present and its paying roughy £36 per month after tax, so that could be worth looking at - however after the year period it goes down to 0.5% interest so its short term only. Worth considering though.

Jevvers

Thanks, funnily enough that's who our mortgage is with - would be a bit ironic!

Jevvers

Have been thinking lots more about this. Would it actually work? I see that it would work from an interest point of view but as we would also be repaying it our payments would go up by £80 pm, of which £19 is the interest.

Do we just "lose" that other £61pm (732pa) doing this? I've got myself a bit confused.

Thrugelmir

Santander has tightened its policy towards interest only mortgages in recent months.

What's your current LTV?