Staff Mortgage Rate

ironman1

Hi all,

I have read on here that it is not worth getting a Bank Staff rate of 0.5% due to the tax you have to pay etc.

Is this the opinion of most?

My fixed rate runs out in August and at the moment it is 6.4% and I have been told I can fix it at this 0.5% rate but as I said I have read a few things saying it is not worth doing.

Could anyone give me their opinion please! I am just looking forward to getting away from this 6.4%...

GDVS

The HMRC official rate is currently 4%, you pay tax at your highest marginal rate on the difference in value between what you pay at your rate and what someone on a 4% mortgage would pay. Even as a higher rate taxpayer that's going to be tough to beat.

Edit: Are you sure that that 0.5% is fixed or is the mortgage tracking the base rate?

lee111s

GDVS wrote: »

The HMRC official rate is currently 4%, you pay tax at your highest marginal rate on the difference in value between what you pay at your rate and what someone on a 4% mortgage would pay. Even as a higher rate taxpayer that's going to be tough to beat.

Edit: Are you sure that that 0.5% is fixed or is the mortgage tracking the base rate?

In laymans terms please?

GDVS

lee111s wrote: »

In laymans terms please?

I'm not an expert so take this with a pinch of salt until someone who knows for definite comes along but I'm pretty sure this is more or less how it works...

You have a 25 year mortgage of £100,000 at 0.5% interest, your monthly payment is £355.43.

Joe Q Public would pay 4% interest on the same mortgage (doesn't matter if he would or not, that's the rate HMRC use at the moment) which would be £533.43 per month.

This means you are receiving a benefit in kind from your employer of £178. You pay tax on a benefit in kind just as you do on your salary, so on my £100k example if you're a base rate taxpayer you owe £35.60/month in tax and a higher rate taxpayer would owe £71.20/month.

If the tax plus the mortgage payment is less than a high street mortgage the staff deal is good, if not you're better with a high street deal.

lee111s

Hehe cheers, makes perfect sense. Had an idea it would be something like that

dimbo61

Hi Ironman1
What does your mortgage revert to when the fixed rate deal ends?
Check that first before looking at other lenders.
ALL you eggs in one basket!!!!
working for a bank is not the secure long term " job for life" it used to be so why have the mortgage with them as well?

opinions4u

0.5% is most likely a tracker for life.

Based on 20% tax rate, that's equivalent to 1.2%. (4% - 0.5% = 3.5% x 20% = 0.7% + 0.5% = 1.2%).

A 40% taxpayer is equivalent to a 1.9% rate.

So, would you want a tracker rate at 1.2% or 1.9%?

(there may be additional benefits such as reduced / waived fees)

ironman1

Very infirmative replies. Thanks...

I am not a higher rate tax payer! Also we currently have a shared ownership and pay £470 on our half. If I was to go on staff rate how much would we pay roughly ibstead of the 470?

Thanks I am new to job and getting my head around rates etc

GDVS

How much would the mortgage be for?

ironman1

Well we owe around 60,000 on our half. I want to make sure we staircase soon though.

We will owe around 58000 by the time I start the new rate

GDVS

And the length of the mortgage from the start of the new rate?