Kids savings account v overpaying mortgage

muhandis

Hi,


We have a mortgage currently at a fixed rate of 2% and make regular overpayments. Nationwide has a kids saving account which pays interest at 2.5%, no time limit, allows one penalty free withdrawal a year and can hold up to £50k.


The way I see it, it would be better to open an account in my 18 month old daughters name and use it to hold any cash that I would otherwise use to overpay my mortgage. I get a slightly better return and better yet still have access to that cash in case I need it.


Is there anything else I need to think of or is there any reason this is not a good idea?


Thanks,


K

E&G

Looks like you have it spot on. There's also regular savers paying more.

Anyone overpaying a mortgage in the current environment, unless they're really desperate to be debt free, is a bit bonkers.

Alexland

If the child earns more than £100 in interest from money given by a parent, the parent will have to pay tax on all the interest if it's above their own Personal Savings Allowance.

https://www.gov.uk/savings-for-children

E&G wrote: »

Anyone overpaying a mortgage in the current environment, unless they're really desperate to be debt free, is a bit bonkers.

Depends on circumstances. It can be very beneficial if it enables the borrower to get on the next LTV tier for access to lower interest rates on the overall mortgage balance.

Alex

muhandis

Oh, that's good to know! Cheers.

Alexland wrote: »

If the child earns more than £100 in interest from money given by a parent, the parent will have to pay tax on all the interest if it's above their own Personal Savings Allowance.

xylophone

The way I see it, it would be better to open an account in my 18 month old daughters name and use it to hold any cash that I would otherwise

The Smart Limited Access account opened in your daughter's name belongs to your daughter- you are simply the Trustee.

https://www.nationwide.co.uk/products/savings/smart-limited-access/features-and-benefits

Smart Limited Access
This account is for adults looking to save for a child's future, or for a child or young person to save for themselves. The account is designed for
those who will rarely need to make withdrawals.
If the account is opened by an adult, the adult will be acting on behalf of the child (as a bare trustee). Although the account is in the name of the
adult, the money in the account is held for and belongs to the child. As a the adult will have duties and obligations to the child (for
example, the adult will need to act in the best interests of the child).





https://www.gov.uk/savings-for-children


if, in the tax year, the child gets more than £100 in interest from money given by a parent. The parent will have to pay tax on all the interest if it's above their own Personal Savings Allowance.

Zorillo

Does your daughter want to pay your mortgage with her money, or are you intending to steal it back from her in order to pay the mortgage?

muhandis

Haha, 'steal it back' when I'm still the trustee

Zorillo wrote: »

Does your daughter want to pay your mortgage with her money, or are you intending to steal it back from her in order to pay the mortgage?

cloud_dog

muhandis wrote: »

Haha, 'steal it back' when I'm still the trustee

Re read xylophone's post, in bold; I assume to make it stand out and ensure you read it.

cloud_dog

OP, if you have excess money available each month I'm unsure why you don't just open a RS account in your/OH name(s), or are the amounts we are talking about soooo significant.

muhandis

Yes I did

cloud_dog wrote: »

Re read xylophone's post, in bold; I assume to make it stand out and ensure you read it.

RS?

cloud_dog wrote: »

OP, if you have excess money available each month I'm unsure why you don't just open a RS account in your/OH name(s), or are the amounts we are talking about soooo significant.

cloud_dog

muhandis wrote: »

RS?

Regular Saver (up to 5% on some accounts).