Offset mortage and ISA accounts

pardal51

hi all,

I am quite unsure on what to do in terms of using my Cash ISA funds against my offset mortgage.

Basically we are on FD Offset Lifetime tracker (2.29% + BoE, ie, 2.79% at the moment). We have some reasonable funds on 2x Cash ISAs at 2% at the moment, but the rate will drop to 1.8% in October.

I know that by withdrawing funds from ISAs and putting on a savings to offset the mortgage will void the tax-free status. However because the ISA rates seem so low at the moment, I am a bit unsure whether I should keep them on ISA or just add to the offset mortgage and reduce the interest paid.

I am also trying to organise time to read articles on how best to invest on ISA (monevator, etc).

What do you guys suggest?

ViolaLass

What do you mean by 'reasonable' funds?

pardal51

ViolaLass wrote: »

What do you mean by 'reasonable' funds?

59.7% of our mortgage outstanding balance.

ViolaLass

The actual amount is relevant since it would indicate how many years it would take you to put it back into ISAs if you wanted to.

pardal51

ViolaLass wrote: »

The actual amount is relevant since it would indicate how many years it would take you to put it back into ISAs if you wanted to.

90K, so I believe it would take around 7 years with the new 15K allowance...

dimbo61

So you are earning 2% now and soon to be 1.8% on your ISA,s while paying 2.79% on the mortgage!
A few years ago we took money out of our offset mortgage rate 4.74% to pay into a cash ISA paying 6% ( oh the good old days!!)
If you pay down say £10/15K of the mortgage each year you could drip feed one of the new Super ( £15K ) ISA each year as you pay down the mortgage once fully offset.

pardal51

dimbo61 wrote: »

So you are earning 2% now and soon to be 1.8% on your ISA,s while paying 2.79% on the mortgage!
A few years ago we took money out of our offset mortgage rate 4.74% to pay into a cash ISA paying 6% ( oh the good old days!!)
If you pay down say £10/15K of the mortgage each year you could drip feed one of the new Super ( £15K ) ISA each year as you pay down the mortgage once fully offset.

That means: withdraw the ISAs, transfer to the offset account and keep topping it up until fully offset....then start new ISAs????

ViolaLass

pardal51 wrote: »

That means: withdraw the ISAs, transfer to the offset account and keep topping it up until fully offset....then start new ISAs????

Precisely.

pardal51

ViolaLass wrote: »

Precisely.

I suppose the best way is to create 2x individual savings accounts to split the whole pot in case FD goes bankrupt???

amnblog

Have you asked FD is they can assign the ISA's to the offset as they sit.

You can with some other lenders.

getmore4less

The issue with ISA cashing is, is once you are mortgage free will you be saving more than the allowance each year £15k for a couple thats £30k

If you will you need to think twice about cashing it all in and your investment stratagy going forward for surplus funds

Might be a good idea to start building up expereince of alternative investments especialy if thinking about S&S ISA options.

We have a slightly different situation because with Barclays you can offset ISAs.


The tax savings are minimal at the moment but if rates rise that £90k in ISA and a 40% tax payer could be worth enough to keep the mortgage running for an extra year or few.