Should we use our mini-cash ISA to offset our mortgage?

Posted on 24 July 2007

We currently have a £28,000 mortgage with Barclays its fixed rate is due to end soon.  Would you advise us to use our £9,000 in mini-cash ISAs to offset the interest or look for another competitive fixed rate.  We are also thinking of increasing our loan by £10000 for an extension.

Thanks


Hi Carol,

Yes, a lump sum of £9,000 would make a dent in your current mortgage term if you did choose to offset it.  As the ISAs and the offset can both be considered exempt of tax for the sake of comparison, you can just tell by rate what is best value. If the ISAs are on a higher interest rate than the mortgage rate then leave the money in them, but if they are a lower rate you might want to offset the cash.

However, if you decide to raise capital on your mortgage it is a different kettle of fish. The higher interest rate that you would have to take as a result of taking an offset mortgage is likely to outweigh the benefits so go for a good cheap standard mortgage and leave the ISAs where they are. Most lenders will let you raise £100,000 when you remortgage as long as your combined income is about £34,000.
 
Best of luck,

Katie

Categories: Offset mortgages

 

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