Redundancy money and interest-only mortgage.

tv21

We have an offset interest-only mortgage with 10 years to run. It is offset-linked with our jointcurrent account and a savings account (unused). We have not paid off much ofthe capital due to costs associated with our child’s special needs, but these costs have ended (not in a bad way). We both also have our own bank accounts in other banks as well where our salaries are paid in, before we transfer money to our joint account.

We have not been able to save much in the current account or savings accounts to take advantage of the offset, but I have now taken voluntary redundancy with a payoff including a pension lump sum (I have good prospects of further work by going self-employed in the future).

I am looking for somewhere to put this money and one obvious place would be in a savings account linked tothe offset mortgage. (I understand that I shouldn’t put more than 85k in anycompany’s saving account).

We’d like to arrange to transfer money from the savings into the actual mortgage on a regular basis. My OH nas a steady regular income in a much more secure job, and pays the bulk of the mortgage (interest more than capital) at the moment. Between us we see little problem in paying off the capital by the end of the mortgage term.

Is it in our interests or against them forthe mortgage bank to know where the money has come from? Would money-laundering rules require they challenge my cheque or money transfer, and would they be entitled to know precisely why the money was paid into my, separate bank account?

If they did know, how would the bank react to this money being put into the offset account? We have heardof situations where banks have forced customers to switch from interest only to repayment mortgages. I’d have a big problem with this as it’s my pension and redundancy money and I don’t want it all to irreversibly disappear into the mortgage in one jump, but there are clear advantages to having it offset the mortgage via the savings account.

Am I being paranoid, or are my worries groundless?

Thrugelmir

A large cheque may raise questions however all you have to do is answer truthfully.

No one can force you to use the money to repay the mortgage.

dimbo61

As your OH has a steady well paid job you may get JSA related to the income you got from your last job but with over £16,000 in savings may not get other benefits.
Do you need £85,000 sitting in the offset with a larger IO mortgage? or could you pay some of the IO mortgage down and keep say £16,000 in the offset while you set up the new business !

tv21

To be clear, OH's job isn't highly paid, but it's as close to secure as you can get in this day and age. My business will not be expensive to set up.

At the moment our current account pays the mortgage but I intend to use the savings account as a place to keep money, offseting the mortgage interest. Each month a payment will tranfer into the actual mortgage account itself.

Surely the JSA won't be available to me if I transfer most of my money to the morgage account?