Posted on 14 April 2010 by John
I am seriously thinking of closing my Santander Cash ISA (currently attracting a paltry 2.75% rate of interest) and transferring the money (18k) to my First Direct offset mortgage account (fixed for five years at 5.29%).
Would my money earn more tax free income (in the form of lower monthly interest repayments) in the offset mortgage account than in a cash ISA?
I'd be grateful for your advice. On the face of it, it seems like a no-brainer but I am mindful of the fact once withdrawn, the bulk sum of money from my ISA could only be reinvested at a later stage in yearly instalments of £5,100?
You have hit the nail on the head with the last point you raise. Whilst the return on your current ISA may not be as much as you would get by offsetting the same amount against your mortgage, once an ISA has been closed you cannot reinvest more than your current entitlement in a new one.
I recommend that you speak to an independent Financial Adviser who will be able to check the current ISA products available and help you decide whether to transfer your ISA holding to a new one or withdraw it and use it to offset your mortgage.
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