Pay off alot or little

AVAGO_2

We have a flexible offset mortgage , current rate 6.94%, net position as 31 Dec 07 approx £73,000. We have £10,000 in building society accounts, between mini isa and standard account. Recently inherited £ 20,000. Not sure whether to pay the £30,000 off the mortgage or put in high interest savings account and skim off interest to put towards mortgage. Any thoughts?. (As we will have overpaid we will still have access to funds if desperate).

dimbo61

I would pay the £20,000 into your offset straight away.
Check what interest you are getting from your ISA,s tax free
and standard account % after tax !!
You may get a higher rate of return if you put it into shares with
Northern Rock over the next 10 years , BUT i can guarentee you
will save 6.94% tax free right now .
The money in the offset will save you interest on your mortgage
you can then decide to reduce your payments ( and have the same term)
or carry on paying the same amount and knock years ( save thousands ) off
the term of your mortgage.
The money in the offset is still available if your circumstances change and
you must have that new Range Rover
good luck

Capricorn_One

dimbo61 wrote: »

I would pay the £20,000 into your offset straight away.
Check what interest you are getting from your ISA,s tax free
and standard account % after tax !!
You may get a higher rate of return if you put it into shares with
Northern Rock over the next 10 years , BUT i can guarentee you
will save 6.94% tax free right now .
The money in the offset will save you interest on your mortgage
you can then decide to reduce your payments ( and have the same term)
or carry on paying the same amount and knock years ( save thousands ) off
the term of your mortgage.
The money in the offset is still available if your circumstances change and
you must have that new Range Rover
good luck

I thought NR was almost certainly going to be nationalised?

Also, I'd keep the ISA if at all possible and find the best possible rate and switch.

I'm thinking of remortgaging to the Barclays/Woolwich offset tracker as it allows the ISA to be offset as any ordinary savings a/c. Don't like the £595 arrangement fee, though.

Ed.

catshark88

Capricorn_One wrote: »

I thought NR was almost certainly going to be nationalised?

I'm thinking of remortgaging to the Barclays/Woolwich offset tracker as it allows the ISA to be offset as any ordinary savings a/c. Don't like the £595 arrangement fee, though.

Ed.

You have to put up with the nightmare that is Barclay's customer service, but it does seem a good product. You can see your mortgage balance alongside your current account and savings pots online too, which we have found helpful.

dimbo61

sorry capricorn one the northern rock shares thing was a joke !!
what i was trying to say was that paying the £20,000 into the offset will
save £20k interest at 6.94 % , yes ISA, s are good for saving but not if you
are getting less than AVARGO is paying on his offset rate of 6.94%.
avargo why are you paying 6.94% much better deals on the market
check the new WHICH mortgage comparison website. good luck

johncolescarr

I have also recently considered whether it is better to save than to pay off the mortgage. I think fundamentally it is all down to interest rates (assuming you don't need the money for spending). If your savings acount interest is greater than your mortgage in real terms then you should save. What should be factored in is tax. However, usually, once you have filled up your ISA allowance, it usually works out better to pay off the mortgage, as depending on whether your a lower or higher tax payer, the interest payments attract 20% or even 40% tax. There is a calculator on this site that works out whether it is better to save or pay off the mortgage

http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

At your rate, you would have to get 8.7% on savings if you are a basic tax payer or 11.6% if you are a higher tax payer or better to beat the interest saved paying off your mortgage.

Capricorn_One

dimbo61 wrote: »

sorry capricorn one the northern rock shares thing was a joke !!
what i was trying to say was that paying the £20,000 into the offset will
save £20k interest at 6.94 % , yes ISA, s are good for saving but not if you
are getting less than AVARGO is paying on his offset rate of 6.94%.
avargo why are you paying 6.94% much better deals on the market
check the new WHICH mortgage comparison website. good luck

Thanks Dimbo.