Mortgage queries

anticlaus105

I am looking to apply for a mortgage with my wife. We are looking at properties around £240k and hoping to negotiate down to around £220k. We have a £65k deposit that will grow over the next couple of months. We should achieve a LTV of 75% or better. Once the mortgage is up and running I am hoping to overpay by around £1k per month.

Originally I was set on an offset mortgage so I could retain any overpayments in case they were needed. These seem to be around the 2% (5yr fix at 2.69%). Then I thought to get a normal 5yr fix rate and just overpay. These however come in at around 2.49%. A variable rate lifetime tracker is around 1.79%.

I spoke to a mortgage broker and after giving some details they came back with the same options I had already found using the Mortgage Best Buys link on this very site. They couldn’t offer any insight into which type of product would be best.

I have 2 young children so can currently save at 3% tax free in their names. I will do no tax dodging here as I will let them keep all the interest that accrues. I presently have a large chunk of the deposit split between them. With the accounts available right now it would be possible to have near £180k saved like this. This may change in the future if any drop the rate or are withdrawn.

My current thoughts are to go for offset at 2% but save in kids names anyway. If savings rates drop I can move the capital into the offset account. Or would I be better getting the best deal at 1.79% as this is maybe unlikely to happen and interest rates will remain stable?

I have to say I don’t understand why anyone would get the 5 yr fix at 2.49% when 1.99% is available for an offset. Am I missing something here? - edit yes a 5yr fix is 2.69%. 1.99% is not fixed.

Can anyone give me any idea of what you would go for?


Edit. On further research a 5yr fix offset is around 2.69%

mrginge

i'm sure you have a good understanding of tax liabilities on childrens savings, but your post does seem a little ambiguous. It may avoid any unecessary 'tax evasion' type comments if you clarify your saving strategy.

anticlaus105

mrginge wrote: »

i'm sure you have a good understanding of tax liabilities on childrens savings, but your post does seem a little ambiguous. It may avoid any unecessary 'tax evasion' type comments if you clarify your saving strategy.

I "lend" them my money interest free. They collect the interest it earns and as it won't be enough they won't pay tax. When I need my capital back at some future point I will take it. They will keep any interest it has earned. Effectively I am giving them the mortgage interest and the bank are topping it up. Hopefully a few years down the line they will have a tidy sum.

I am assuming this is legal but am happy to be corrected anyone knows better

edit - a worry with this method is losing the ability to overpay. Only 10% a year is allowed so if after 5 yrs a decent sum has built up and I went for a normal fix I would not be able to pay it all off. If at this point the mortgage rate shot up I would then start to lose. If I remortgaged at this point though I assume I could then pay the saved amount off if I needed to?

A bit more research shows 5 yr fixed at 2.19% but this requires 65% ltv which may be out of reach. At 2.49% I may be better just overpaying if the above is somehow dodgy.

makeitstop

anticlaus105 wrote: »

I "lend" them my money interest free. They collect the interest it earns and as it won't be enough they won't pay tax. When I need my capital back at some future point I will take it. They will keep any interest it has earned. Effectively I am giving them the mortgage interest and the bank are topping it up. Hopefully a few years down the line they will have a tidy sum.

I am assuming this is legal but am happy to be corrected anyone knows better

edit - a worry with this method is losing the ability to overpay. Only 10% a year is allowed so if after 5 yrs a decent sum has built up and I went for a normal fix I would not be able to pay it all off. If at this point the mortgage rate shot up I would then start to lose. If I remortgaged at this point though I assume I could then pay the saved amount off if I needed to?

A bit more research shows 5 yr fixed at 2.19% but this requires 65% ltv which may be out of reach. At 2.49% I may be better just overpaying if the above is somehow dodgy.

Can I ask, who is the 2.19% with and what's the fee.?

anticlaus105

makeitstop wrote: »

Can I ask, who is the 2.19% with and what's the fee.?

Yorkshire building society. The product fee is £845.

Thrugelmir

anticlaus105 wrote: »

I "lend" them my money interest free. They collect the interest it earns and as it won't be enough they won't pay tax. When I need my capital back at some future point I will take it. They will keep any interest it has earned. Effectively I am giving them the mortgage interest and the bank are topping it up. Hopefully a few years down the line they will have a tidy sum.

Perhaps this will clarify your idea.

"If you give your children money and it makes more than £100 a year before tax in interest (or £200 if both parents give money), all this income (not just the income over £100) will be taxed as if it were your own."

makeitstop

anticlaus105 wrote: »

Yorkshire building society. The product fee is £845.

Thank you.

anticlaus105

Thrugelmir wrote: »

Perhaps this will clarify your idea.

"If you give your children money and it makes more than £100 a year before tax in interest (or £200 if both parents give money), all this income (not just the income over £100) will be taxed as if it were your own."

That is something I didn't know. I haven't fallen foul of it yet. I use an accountant so I will clarify things with him.

Thrugelmir

anticlaus105 wrote: »

That is something I didn't know. I haven't fallen foul of it yet. I use an accountant so I will clarify things with him.

Be to obvious otherwise to shelter savings.