Remortgage to Savings - Any pitfalls to be aware?

jimjames

Probably a very strange question but I need to have a significant sum of money in a savings account untouched for at least 6 months, possibly a year. I have no mortgage currently on my property so was looking at options to borrow the money so it doesn't affect any of my existing savings as I would lose ISA allowance.

Best remortgage rate looks to be around 3.79% fixed for 2 years, best fixed rate savings account  currently shows as 4.4%. Both are fixed rates so base rate change won't alter the ratio between savings and mortgage. This appears to me to be a no risk option other than any costs of setting up the mortgage as the interest on the savings will offset the interest on the mortgage but this seems too easy. The mortgage could then be fully or partially cleared after the 2 years is up. I'm aware I'll need to make mortgage payments which will/may include capital payments so could be more than the interest and sequenced differently from the interest being paid.

Is there something else I've missed? Would a remortgage on fully owned property be viable?

singhini

You got things like arrangement fees, possible early termination fees, valuation fees, solicitors fees, monthly repayments.

The cash will earn interest (4.4%), but will be charged at 3.79%

You will (probably) have to pay income tax on the savings interest (either 20% or 40% or both)

So if you took out £250,000 as interest only (your annual mortgage will be £9,475). 
£250,000 earning 4.4% = £11,000 (now lets assume 20% income tax = £2,200) = £8,800 annual interest 

Fag pack analysis your short £675 a year + all the other bits