Offset Mortgages -- the Numbers

Rik_S

Thanks for the advice....I will speak to IF prior to making my choice

Rik_S

Hmmm... :-/ just to throw another spanner in the works for those considering an `offset`, First Direct have just launched a 3yr discount & a 3 months discount on their offset range.

Now where is my calculator ::)

Wsb5tails

you need to be careful[/u]. You will lose your ISA savings if you move them out of the ISA wrapper. As far as I know the only way around this is to go for an Intelligent Finance (IF) offset mortgage which let you put your ISA savings in a cash ISA which is offset against your loan.

I dont understand!
Surley if you take money out of ISA's to put into offset Morg you can potentialy get a better deal so long as the rate on the Morg is higher than the rate that the ISA is paying. Why is it important to keep savings in an ISA wrapper as I thought you are effectivly getting tax free benefits to your offset savings anyway?

david78

It is sometimes worth sacrificing some interest now for future returns.

If I pay an extra £3000 into my mortgage to clear it in the last year I save one year interest,

If I pay £3000 into an ISA I might not be able to clear the mortgage 'till next year. I pay some interest and earn some interest and overall I will pay more than I will earn in the current year. But I will earn interest tax free on the ISA money for many years after that.

Wsb5tails

Thanks for the reply and I take your point but if I am putting my £3k in an offset savings account at the begining of my Morg then I am not only saving the interest on that amount for 1 year but for the full term of the Morg or untill I withdraw it.
So it still appears to me that the offset savings account is the better place for the money than an ISA, assuming again that the interest rate on the ISA is same or less than Morg rate.

david78

I don't disagree with you. If you have a long term to go then you are better off with the money in the mortgage (well 99 times out of 100).

There are always exceptions though:

Take the case of Jim (a fictional character). Jim has put every penny he has into his mortgage over the last ten years or so and has saved lots of interest. He has made no other savings though, no ISAs or anything. His mortgage balance stands at £50,000.

Recently Jim inherits £62,0000 and can now clear his mortgage leaving him £12,000 cash which he can save. But he can't put this in an ISA can he. If only he had put £3000 each of the last four years in an ISA -- then he would be in pretty much the same position but would have £12,000 of tax free savings.

JayS_3

"I`ve looked at several lenders although for me First Direct might be the better option as i`m already a customer, the fees are generally lower & the rate is competitive"

Rik_S

If you have not made the move yet, check out London & Country's First Direct Offset Mortgage, it has preferential rates if you go through them and you do not pay them a fee (they get paid by First Direct). I'm just in the process.

Best Wishes
JayS

gmgohara

Ref First Direct Offset mortage via London and Country

Could you give me an idea of :
1. The stepped interest rate they offer / term etc.

2. Any fees that are charged (arrangement / valuation fee etc)

Thank you for your help

Regards

JayS_3

Hi gmgohara

Is that you, ?

Why are you in disguise?

gmgohara

Sorry, not sure what you mean ???

I am new here.

Are you able to respond to my original question ??

Regards