offsett, stooze and debt free concept advice please

rockrat

i have recently taken heart from the mortage free thread posted on this forum the other day from the guy who overpayed and stoozed his way out of mortgage debt, and i have made a decision to do similiar.

but i cant decide how best to do it and would value any input, mainly in case i have missed something in the plan i propose below.
this post may ramble, if so bear with me

currently i enjoy a £96k mortgage with saffron walden BS, set at 0.2% above base rate for the life of mortgage with no lock-ins or penalties.
i have 23 years remaining on capital repayment, costing £650 a month.

i have no other debt currently other than £2700 left on my wifes car loan with 10 months remaining. The monthly cost for this is £240.

any option i take must have no lock ins and be penalty free. I have fallen foul too many times of lock ins and the fees to move when deals end, so wish not to be in that situation again. On this rule i am immovable.

i currently put away around £650 a month spread across 2 isa's, one for me and one for the wife. But i am now thinking i would benefit more from overpaying the mortgage instead.

i could also stretch and pay a little more, but not too much.

If i was to payoff the car loan when remortgaging, then the total i could afford to pay on a mortgage payment per month could be £1700.

current mortgage payment - £650
current loan payment - £240
current ISA payments - £650
propose additions - £160

total possible - £1700

Thats the details, here are the options i currently have by not changing anything.

1. I could simply overpay on my mortgage the extra £1050 a month from what i pay now. There would be no fee to do this. but once i do this i cannot get it back should something unforseen happen in the future. i have called the bank and confirmed this. I would like this simple option if needed, you never know.
To simply over pay this amount each month would reduce the term to about 10 years, as interest would be amended after each new deposit.

2. i could continue to put the money into the isa, but the interest there we all know will not have the same effect as bringing down the mortgage amount and its interest each month.

so, i propose to get an offset mortgage.

I have found a tracker mortgage with hinckly and rugby BS, thats almost the same as my current one, at 0.25% above base rate, with no penalties ect, but allows the facility to offset. The setup fees are £595.
The monthly fee for my £96k mortgage are the same, and offsetting an additional £1k a month would reduce the term to 10 years, the same as the overpayment process above. By doing it this way rather than the simple overpayments, i have the option to get at the cash should it ever be required.

but i propose going further if i have got the concepts right.

A. re-mortgage i am proposing i take a mortgage for £150k for the same 23 years initially, which would have a monthly repayment of £1010 a month.
i intend to instantly offset the £53k that would be left after paying off my current mortgage and the wifes car loan.
This extra amount will not be spent, but would allow the opportunity to port the mortgage if at somepoint in the future we look to move into a house of a similiar value give or take, without any risk of additional costs should it ever happen.
This just gives that possible opportunity at no risk.
offsetting this amount alone will give the same basic overall reduction in mortgage term as mentioned above, paying it off in around 10 years as nothing is fundementally different.

B. overpay Then i intend to pay the additional £700 on top each month into the offset account. By doing this i have forecast i can reduce the term to roughly 6 years.
By doing it this way i have the option to access these overpayments should it be required, but gain the full benefit of offsetting.


C. Stooze then, i will attempt to stooze additional amounts into the offset account, of which the monthly card payments would be made from the £700 overpayments mentioned above.
i have been good at balancing several 0% offers in the past and am organised enough not to !!!!-up this part.

now, how does all that sound, have i missed anything?
any advice and comments, especially on a better mortgage product i may have missed would be welcome.
the one downside the the hinckly and rugby offset tracker is that the offset account is postal/phone only SAVINGS account , i.e its not a current account, i.e i cannot write cheques or use a card. This is not all together a bad thing as it will prevent frivolous use of the balance, but it does mean i cant put my salary and DD through it etc.
If i could do that, then having extra pounds in for periods throughout the month i am sure would be beneficial to the overall offsett.

Overall, theres roughly an additional £1500 a month that could go through the account that is needed for general monthly expenditure but dribbles out over the course of the month.

thoughts?

Martinslovechild

rockrat wrote: »

I am proposing to take a mortgage for £150k for the same 23 years initially, which would have a monthly repayment of £1010 a month. I intend to instantly offset the £53k that would be left after paying off my current mortgage and the wifes car loan. This extra amount will not be spent, but would allow the opportunity to port the mortgage if at somepoint in the future we look to move into a house of a similiar value give or take, without any risk of additional costs should it ever happen.

Double check that you can make a payment of £53K instantly - the offset account which I had allowed maximum overpayments of 10% during the first 2 years, then no maximums thereafter.

Also - ask yourself this question - do you really need access to the £53K? If in 3 years time (say), should you decide to move house, you'll still have your mortgage and you could simply borrow an additional £53K at that point if required. There's less likelihood of you withdrawing the £53K for some reason (new kitchen, new car) if you know that you can't easily touch it.

rockrat wrote: »

I intend to pay the additional £700 on top each month into the offset account. By doing this i have forecast i can reduce the term to roughly 6 years.
By doing it this way i have the option to access these overpayments should it be required, but gain the full benefit of offsetting.

This is what I did. Sounds good to me.

rockrat wrote: »

I will attempt to stooze additional amounts into the offset account, of which the monthly card payments would be made from the £700 overpayments mentioned above.
I have been good at balancing several 0% offers in the past and am organised enough not to !!!!-up this part.

I suggest setting up a spreadsheet to note all the various dates etc. Assuming that a maximum of £700 is available monthly for this purpose, you'll be able to stooze up to a maximum of £23,333 (assuming 3% minimum monthly repayments). If you could look for cards with lower monthly minimum payments, then this figure will increase and help you (MBNA used to have a £5 monthly repayment on 0% BTs which was fantastic, but I'm not sure whether this is still the case - can anybody else confirm this?).

rockrat wrote: »

How does all that sound, have i missed anything?

Not that I can see. I think you're pretty well covered.

rockrat wrote: »

Any advice and comments, especially on a better mortgage product i may have missed would be welcome.

I used to have a Co-Operative Flexible Tracker but I know that they still have the 10% restriction during the first 2 years. You could look at if.com or oneaccount.com - their rates will be higher than elsewhere so you'll need to do the maths. If you're throwing more than £50K into the pot on day #1 though, it should work in your favour. I've never used these accounts but comments here on MSE regarding if.com have generally been favourable.

rockrat wrote: »

The one downside the the hinckly and rugby offset tracker is that the offset account is postal/phone only SAVINGS account , i.e its not a current account, i.e i cannot write cheques or use a card. This is not all together a bad thing as it will prevent frivolous use of the balance, but it does mean i cant put my salary and DD through it etc.
If i could do that, then having extra pounds in for periods throughout the month i am sure would be beneficial to the overall offset.

For me, it worked well keeping the two things separate; you're much less likely to touch the funds in your overpayment pot if they're harder to get at.

YorkshireBoy

Martinslovechild wrote: »

(MBNA used to have a £5 monthly repayment on 0% BTs which was fantastic, but I'm not sure whether this is still the case - can anybody else confirm this?).

More-or-less, yes.

As you know, MBNA run a lot of cards. Some remain at £5, some have moved to £10, and others have hit the heady heights of £25...all of which are obviously much better than 2-3%.

jamesd

rockrat wrote: »

2. i could continue to put the money into the isa, but the interest there we all know will not have the same effect as bringing down the mortgage amount and its interest each month.

The best cash ISA rates are higher than your mortgage interest rate, so the cash ISA deposits make you more interest money than you would save with an offset.

You can actually mix the two, with an Intelligent Finance or other mortgage that lets you offset with cash ISA money. At the moment the money is best off outside the offset account in a regular ISA, but that could change and you can keep the long term tax benefit this way.

The bigger gains to be made are with the stocks and shares ISA, though.

A current account offset is not really of great value unless you have a lot of money moving in and out of the account each month. Mortgage rate on your average balance, less the amount you're getting paid on balances in a competitive current account. Perhaps 2% on 1000 or so, 20 a year. Transferring your salary into a high interest savings account and making a couple of standing order transfers from there to the current account to pay the bills largely eliminates the potential gain.

You might also want to check to see if you can offset 100% of the mortgage or not. If you can and it'll let you offset with ISA money it's a useful way to accumulate ISA tax benefits while paying no mortgage interest.

rockrat

jamesd wrote: »

The best cash ISA rates are higher than your mortgage interest rate, so the cash ISA deposits make you more interest money than you would save with an offset.

You can actually mix the two, with an Intelligent Finance or other mortgage that lets you offset with cash ISA money. At the moment the money is best off outside the offset account in a regular ISA, but that could change and you can keep the long term tax benefit this way.

The bigger gains to be made are with the stocks and shares ISA, though.

A current account offset is not really of great value unless you have a lot of money moving in and out of the account each month. Mortgage rate on your average balance, less the amount you're getting paid on balances in a competitive current account. Perhaps 2% on 1000 or so, 20 a year. Transferring your salary into a high interest savings account and making a couple of standing order transfers from there to the current account to pay the bills largely eliminates the potential gain.

You might also want to check to see if you can offset 100% of the mortgage or not. If you can and it'll let you offset with ISA money it's a useful way to accumulate ISA tax benefits while paying no mortgage interest.

james
i will be really honest, i didnt understand most of this, could you explain again?
are you saying to look for a mortgage that offers to offset via an ISA account, making no actual interest but accrueing ISA benefits locked in over the years, so that when i eventually look to exiting the mortgage, i could just remove the amount thats over and above the £3000 x however many years i have been using it, then from that point on the funds left remaining will gain ISA interest?

MartinsLC
thanks, i appreciate your input as well.
i have checked and there is no limit to the first deposit or any deposit so long as it does not exceed the mortgage amount obviously.

jamesd

rockrat, yes, you can lock in many years of cash ISA allowances instead of losing them. No ISA interest in the ISA offset account, but the ISA allowance is still there.

In the middle years, you can just look at the mortgage and cash ISA interest rates and move the ISA money to whichever one is higher. If it's the external ISAs you'd pay mortgage interest but earn more tax free ISA interest than you're spending on the mortgage interest.

If you think that you'll keep the money in the ISAs after the mortgage ends the ISAs win even if the mortgage rate is a bit higher. The reason is the accumulated interest in the external ISAs, which earns compound interest beyond the end of the mortgage.

getmore4less

The headline figure of £1700pm is more than two Maxi ISA allowances so once 100% offset you cannot protect all the future saving from Tax, keep using the ISAs they are use or lose.

Stooze money is more and more expensive especialy for BTs but not for the slow "purchase" stooze.

Look at the long term big picture not just the short term goal of a mortgage. whatare the other long term savings/investment goals

Some offsets allow cash ISA offsets so you may be able to use these for some money and "un offset" them slowly later not sure if this is possible.

rockrat

thankyou to all those that commented and gave advise, it was greatly recieved.
i spent ages over this and eventually went for somthing different and plumped for the Intelligent Finance 0.34% above base rate for term with no penalties.

the deciding factor was the fact that i can have mini-cash isa's offset against the mortgage, and i can transfer our existing isa's into it as well.

so, its done now and i am on my way.

thankyou once agaian