Should I use my savings to offset against my mortgage?

Posted on 7 October 2007

I have an interest only mortgage of £110k at 6% and savings of £15k. Is it viable to use those savings as an 'offset' and pay 6.3% mortgage rate? I can keep the offset in ISAs.

Andy

Hi Andy,

All the time you are making tax free income from your ISA's at a rate about the same as your mortgage, it is broadly equal to offsetting them against the mortgage, so you might as well stay as you are.

With an offset, you have to move your money into the offset account, so it could not stay in ISA's.

So, if your savings aren't already in ISA's, or are at such a low rate that your debt (the mortgage interest) is costing you more than you are making by having money in a savings account,  you could switch to an offset, where the two interest rates will, effectively, match.

Katie.

Categories: Offset mortgages

 

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