Leave my money in offset mortgage??

cslogg

I have an offset mortgage with the Woolwich
It finishes in around seven years and I owe £39000.
I also have £25000 sitting in the same account.
My question is,should I leave the 25k there to offset my mortgage or would I get more benefit elsewhere?I also have around £100 per month to invest in a bond/isa/savings scheme etc which would not be a problem to me if it was tied up for a period of 5 years.Any suggestions on this one or should the £100 also go into the offset?I do not want to gamble any of this money but am looking for a reasonable return.Any suggestions would be appreciated.

Thanks
cslogg

silvercar

no doubt you could put some into an ISA and find a rate higher than your mortgage. If you have the patience to do this and watch for rate changes and keep moving your money around to get the best deal you could do (slightly) better than the offset.

Otherwise I would put it all in the offset and, presuming you can afford it, keep your mortgage payments at their current level, that way you are paying chunks off your mortgage each month.

If your mortgage rate is 5% you would need to earn 6% as a basic taxpayer (7% as a higher rate payer) to get the same benefit from your money elsewhere. Unless it is in a tax free savings where the rates are directly comparable to the mortgage rate.

Repayments on an interest only mortgage of 39,000 would be £162.50. If you have 25,000 sitting in the offset the interest you need to pay is only £58.30. So you would be reducing the capital by over £100 per month.

Personally I would put the extra £100 into your mortgage each month as well.

cslogg

Silvercar,thanks for your advice.
Its an endowment mortgage so I do not know if that makes a difference.

cslogg

apk1

With Woolwich you can offset cash Isa's so I would suggest placing your funds in these (before 6th april and the after), if you are a basic rate tax payer and paying about 5.5% this is the equivilant of about 7% gross, which you would be hard push to get elsewhere without taking a high risk. Although there is no immediate benefit in placing in an ISA now, it is worth getting as much tucked away tax free as possible in case you do not need these funds to repay the mortgage.

Just noticed it is an endowment mortgage, so subject to any shortfall you should'nt be needing these funds, so tuck away now !

cslogg

Just an update on this.
My wife was paying £140 per month into a share save scheme at work but that is now ending as her company is to be taken over.I assume the advice would be to also put this amount into our offset mortgage as well?We would be prepared to start a five year plan if there was one that would give us a better return.

cslogg