Offsetting options

Jonesy1977

Hi All, 

Looking through the threads, I am very lucky that I am still fixed at 2.64% until Jan 25 so I am thinking ahead here.   I am lucky enough to have enough money in investment ISAs to cover my mortgage balance although I was saving this for the long term.   My question is regarding an offset mortgage, 

1 Do offset mortgages allow you to transfer the ISAs into the savings account? (convert to cash ISA)?
2. If you fully offset a mortgage it looks like you can by default reduce the term by a substantial amount, this looks attractive - are there any catches/things to consider that you would recommend?

I guess this looks more attractive now we see high rates coming in, I feel this is here to stay but keen to hear any words of wisdom or suggestions regarding Offsetting!

many thanks 

amnblog

Transfer Investment ISA into the Savings Account for Offset? No

If you can afford to fully Offset or Offset to a substantial amount (and you have good financial discipline) they are a great product.

If you are Offsetting under 20% of the mortgage balance in the current market you are generally not covering the cost of the higher interest that you are charged on an offset account.

Jonesy1977

amnblog said:

Transfer Investment ISA into the Savings Account for Offset? No

If you can afford to fully Offset or Offset to a substantial amount (and you have good financial discipline) they are a great product.

If you are Offsetting under 20% of the mortgage balance in the current market you are generally not covering the cost of the higher interest that you are charged on an offset account.

Thanks very much for this, I would definitely be looking to offset 100%.  Understood regarding investment ISA, do you think it is possible to sell the ISAs and swap for Cash ISA (just thinking about losing the tax wrapper built over a number of years)

Many thanks 

simon_or

1. I think it'll depend on the bank, whether they offer cash ISAs and what kind of ISA it is
https://www.barclays.co.uk/help/savings-and-investments/isas/offset-savings/

You could possibly achieve your objective by making using of a flexible cash ISA as they allow you to withdraw previous years subscriptions and pay then back in and afaik you could do that with any amount.

So you could withdraw and park it in the offset savings account for most of the tax year and then transfer it back in for year end and then back out again on day1 of the new tax year. So you don't lose your ISA wrapper and get to offset 100% of your mortgage for 360+ days of the year.

Jonesy1977

Thanks! I think it is feasible by the looks of it. 

My plan would either be reduce the mortgage term (pay off quicker) or reduce the monthly payment and increase my wife’s Salary Sacrifice pension contribution to the same amount which over 10 or more years could be really beneficial. Quick calculations make both look attractive but the tax saving on pension could make it very attractive.  

Much appreciated!

silvercar

With the recent rises in interest rates, we have just juggled our savings around and are now fully offset. Mortgage payments are now 50p/ month. Previously we were earning more interest on savings accounts than the mortgage rate, now the position is reversed.