A little Advice Please

jem16

ydraigcoch wrote: »

I am interested in the Index Linked saving certs. But to be honest I know little about them and so I will have to read up on them. Any good sources

http://forums.moneysavingexpert.com/showthread.html?t=528781

or
http://www.nsandi.com/products/ilsc/index.jsp


I have to agree with Aegis though as I don't think savings is your answer here.

Aegis

ydraigcoch wrote: »

I understand that paying larger sums into the mortgage is the best (sensible) way to do it and hence reduce the overall cost (interest). However due to circumstances (1st new Baby on the way) I would rather have the security of having my money invested, should I need it in an emergency.

One thing to consider would be an offset mortgage, which essentially allows you to put your money into an account where you can access it, it doesn't generate interest for you, but it counts as having paid off that amount of your mortgage. For example, if you have £60000 outstanding balance and put £20000 into an offset account, you will only pay interest on the £40000 difference, but your £20000 will not increase in value. The advantage of this is that should you need the savings in a hurry, you can get it without having to release equity.

I'm not sure what the rates are like on such mortgages, but it might be worth consulting an independent mortgage adviser about that possibility.

I could use the Wifes Accounts who is a low tax payer (will soon not be working) but she already has £3000 in a Cash ISA for this year.

I don't think there's a limit on how much you can transfer to your wife each year, so I guess that if she did all the savings for you, you'd only pay either nil or lower rate tax on the interest (providing you filled in an R85 for the various accounts), but that still leaves you earning about 6.3% at best compared to the 6.5% interest on your mortgage, which is still a less than ideal solution.

I am interested in the Index Linked saving certs. But to be honest I know little about them and so I will have to read up on them. Any good sources?

They are returning about 5-5.5% tax free at the moment, if I remember correctly, which doesn't compete well with your mortgage. In addition, they're 3+ year certificates, which may make them less useful as emergancy savings.

Once again Thankyou for your advice so far it is much appreciated.

Just let us know what you decide to do and how it works out!

Jonbvn

With this further information, I have to be honest that savings would not be the best option in your circumstances.

Since you do need access to funds for your security and peace of mind, then I would suggest you have a look at offset mortgages.

ydraigcoch

Ok everyone thanks very much. It sounds like the Offset Mortgages are for me. I have an independent FA who is currently searching for the best mortgage for me! I will ask him to give me some options on Offset mortgages.

Thanks again for all your help and I will let you know what I end up doing.

Dave

Jonbvn

Thanks Red Dragon &

Cymru Am Byth!

ydraigcoch

Hi

Well I said I'd keep you up to date with my progress and so here goes.

I have had my Independant Financial advisor round. He has come up with a couple of suggestions looking at both a normal interest only mortgage and an offset one.

The Normal Interest only mortgage is with the Nationwide and gives me a fixed rate of 5.63% for 5 years. With a setup fee of £499. Based on a loan of £60000 thats £283.84 per month. The total cost of this mortgage is therefore £17030.40. But obviously I still have my £12,000 per year savings to invest.

The other option he gave me was the offset mortgage. He shown me this through the IF Website. This was a Tracker Mortgage with a rate of 0.34% above the B.O.E Base rate. With a setup fee of £799. Paying the interest only would give me a monthly payment of £308.68. But as I would be investing £1000 per month. My payments would decrease month on month. So the overall cost of this type is £10,104.91 over the 5 years. So this is clearly about £7000 cheaper.

But, if I invest my £12,000 wisely, i.e. using my wife's ISA allowance and my own. Over 5 years I would have invested £30,000 in ISAs and based on an interest rate of 6%. This would give me a return of £5340. I think? I would still have another £30000 (or £6000 per year) to invest. So I would think I could make another £3000 in interest if invested wisely over the five years. If this is the case that would make the Nationwide mortgage the better option.

So heres my question! Am I right? Have I thought this through correctly? This stuff makes my head hurt!