Alternative to holding lump sum in cash account

sunnyjim1234

Hi,
looking for some more advice.
I have a lump sum of around £100k which I want to place inside 2 ISAs over the next 3 years. I have a mortgage on the Nationwide BMR 2.25% interest rate which appears to allow over payment and subsequent borrow back in the future. Is there anything inherently wrong with making a large sum over payment and effectively offsetting 2.25% interest on that sum and keeping abreast of inflation, then subsequently borrowing back next years ISA allowance when needed. A virtual offset mortgage if you like.
It seems like a lot less hassle than going down the multiple current account route:)
I haven't been able to spot the flaw in my thinking but I'm sure one of you guys will point it out:(
Thanks in anticipation
Jim

jamei305

Is "borrowing it back" something that is guaranteed or just offered? How would you feel if for example, house prices dropped and they refused to let you have the money back?

sunnyjim1234

jamei305 wrote: »

Is "borrowing it back" something that is guaranteed or just offered? How would you feel if for example, house prices dropped and they refused to let you have the money back?

Good point,
I will check with Nationwide, but the website doesn't imply that there are any restrictions. You are right though, I wouldn't feel too clever if they declined the borrow back.
Thanks for your input.

jimjames

jamei305 wrote: »

Is "borrowing it back" something that is guaranteed or just offered? How would you feel if for example, house prices dropped and they refused to let you have the money back?

I don't believe that is possible with the Nationwide product. I have the same mortgage and have never had any issue getting out money I have overpaid. Your contractual mortgage amount is the original amount not the overpayment so if it puts you in negative equity then that would be your responsibility to clear.

kidmugsy

We used to have a "flexible mortgage" where we could do that: wonderfully convenient.

In your case if there's a monthly reduction in mortgage payment, I'd divert the money into a NWD flexclusive regular saver: 5% p.a. is not to be sniffed at.

Eco_Miser

sunnyjim1234 wrote: »

I have a lump sum of around £100k which I want to place inside 2 ISAs over the next 3 years.

Move quickly and you can do it in just over one year, assuming you've not subscribed to an ISA this financial year.

sunnyjim1234

Eco_Miser wrote: »

Move quickly and you can do it in just over one year, assuming you've not subscribed to an ISA this financial year.

Thanks for that, but I have already used this years allowance.

jimjames

sunnyjim1234 wrote: »

Thanks for that, but I have already used this years allowance.

If you were looking at cash ISAs not S&S ISAs wouldn't the Nationwide overpayment be a better option anyway as no cash ISA beats that rate?

sunnyjim1234 wrote: »

Good point,
I will check with Nationwide, but the website doesn't imply that there are any restrictions. You are right though, I wouldn't feel too clever if they declined the borrow back.

Just to clarify on this, any borrow back is done without the need for a valuation so if prices had dropped there is no way they would know. It is all based on the original mortgage and valuation, all you have done is pay earlier and then brought your account back to where it would have been in the first place.

jamei305

jimjames wrote: »

Just to clarify on this, any borrow back is done without the need for a valuation so if prices had dropped there is no way they would know. It is all based on the original mortgage and valuation, all you have done is pay earlier and then brought your account back to where it would have been in the first place.

I didn't claim it would need a valuation, just that if house prices generally fell then they would be more likely to deny the borrow-back application

Both you and the OP might want to read this thread:

Nationwide "borrow back" - won't give me my money without telephone assessment

It is what it says - you are asking permission to borrow back debt that you have repaid.