My offset mortgage and my mother's savings

orange_peel

Hi

My mother has £150k to save and wants easy access to the cash. I have a £200k offset mortgage and pay 2.97%.

She is a tax payer and it would seem the best savings rate she could achieve is around 3% (2.4% net).

If however she was to put the cash in a savings account linked to my mortgage, there would be a benefit of 2.97 - 2.4 = 0.57%.

As long as it was documented that the £150k belonged to her (in the event of my demise!), are there any reasons why this would not be a good idea?

Thanks.

bigadaj

You would need to supply more details to provide a full answer. It should be easiest for you to make a will detailing this amount to be repaid on your death, presume you will be paying your mother monthly interest, in which case I would keep this informal.

Technically this can cause problems with deprivation of capital, cgt etc ax well as issues with other family members but is possible.

McKneff

With that amount of money, she could get a lot more than 3% if she shopped around.

harvey115

With access to funds, I do not think she can make better returns then doing the offset, or maybe near equal.

However the issue with Offset is that she would have to move the money in your offset account and there is nothing that would be legally protecting her in this instance.

In case the bank goes belly up as well. The offset balance will be used to payoff the mortgage. Only £85K will be guaranteed by the government to be returned to you and anything remaining will pay your mortgage off.

If you call you lender and ask if it would be possible to combine the offset account with a new account for your mother and mention the amount. That might be possible, if the lender agrees to open a separate account for your mother to offset your mortgage with it. No harm in asking.

plunt

sounds similar to ybs's offset plus or lloyds lend a hand. in which other peoples money is ring fenced but still goes towards the offsetting or the mortgage. (then pay the additional 'interest' on the side (which in fact is just a gift, and not interest right! ;-) )

getmore4less

I think you need to look at why she needs easy accss to £150k

unless the is a compelling reason there are accounts that pay more, some will be term accounts but they could be a mix of 1-2-3 years.

Is any of it in ISAs


Who is the mortgage with, it is unlikely they will entertain ringfenced funds unless they all ready provide the option, Barclays used to but stopped.

plunt

in terms of term account as getmore4less said, a smart option is opening multiple 1 year accounts (or 2,3 and so on) that allow for early closure with interest penalty. Then stick say 10k in each of them. That way if you actually need access to a bit you only hit one penalty and still earn the higher rates on the untouched ones