BigSte
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Registered: 27th Aug 02
Location: Sheffield
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This might be the most ridiculous question but sounds logical to me....
As I understand it, an offset Mortgage looks at the balance left on your mortgage less the amount you have in your current and savings accounts and then charges you interest on the difference....
i.e If I owed £100k and I had £10k in savings I would only pay interest on £90k??
I suppose my first question is, is this correct?
My second is, I owe about £80k - my wifes parents have about £100k in their bank - could I not borrow £80k from them and put this in my savings account......that way based on my assumption above, I would effectively pay no interest??
This sounds like a daft idea but could potentially save thousands on mortgage as you would be paying back 100% capital every month instead of a large amount of interest and a small portion of capital??
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Russ
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Registered: 14th Mar 04
Location: Armchair
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i thought it clears your current account every month. wouldnt your missus parents give you the 80k to pay your mortgage off and you could pay them off at like 330 quid over 20 years or 660 over 1 years?
i may be speaking bollocks in the first bit, and the second bit depends on how much her parents like you both lol
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Robbo
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Registered: 6th Aug 02
Location: London
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You would probably pay a notional amoutn fo interest but Im afraid your wifes parents cant just give you £80k... they'd get hit IHT... now, they could effectively take the mortgage out in their name and therefore do it that way
Russ - offset is just an interest calc, a shrinker clears out your accounts
Russ' suggestion is probs best suggestion but probably completely unfeasible
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BigSte
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Registered: 27th Aug 02
Location: Sheffield
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They wouldn’t be able to give the money permanently as it would effectively be a loan…..they buy houses to do up and sell but they take about a year between selling a house and buying a new one so I wouldn’t be able to borrow it continuously but could save me loads of interest while they are buying a new house.
Alternatively, my nan is minted (all her money is split between my dad and my aunt so no option for her to pay off my mortgage lol), so she could lend me £80k till she passes away
I thought the limit on IHT was about £275k these days?
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Robbo
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Registered: 6th Aug 02
Location: London
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Yeah but it kicks in in advance if you transfer money regardless of real limit
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Kerry
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Registered: 5th Oct 01
Location: Norwich
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I dont get why you are going down IHT route 
If you offset savings against the mortgage you dont get asked where the funds come from!
quote:
Originally posted by BigSte
As I understand it, an offset Mortgage looks at the balance left on your mortgage less the amount you have in your current and savings accounts and then charges you interest on the difference....
i.e If I owed £100k and I had £10k in savings I would only pay interest on £90k??
I suppose my first question is, is this correct?
Yes however there are different types of offset mortgages on the market some offset from seperate savings accounts others you have to pay the savings into the mortgage account. But the principle is the same. Just remember you need to keep on plan to pay off the capital as you will at some point want to take the savings out and then interest will become payable again
I work with offset mortgages so any questions give me a shout 
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RichR
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Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
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You'll have to careful borrowing/acquiring that sort of money as well; wether deemd to be a private loan or not you could end up getting stung for Capital Gains - I think the limit of a personal gift/loan is £3000 per 12 months. I may have the figures wrong, but at £80k there must be Capital Taxes to pay/avoid.
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Robbo
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Registered: 6th Aug 02
Location: London
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The £3k is IHT mate... no CGT on cash
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Robbo
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Registered: 6th Aug 02
Location: London
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quote:
Originally posted by Kerry
I dont get why you are going down IHT route
If the missus parents 'gift' them the £80k
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Kerry
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Registered: 5th Oct 01
Location: Norwich
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its just offsetting savings not paying off the mortgage
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Ian
Site Administrator
Registered: 28th Aug 99
Location: Liverpool
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Don't forget - they are probably earning 5-6% on it. They would lose that if it was sitting in your account but yeah, it would be a cheap mortgage for you.
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BigSte
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Registered: 27th Aug 02
Location: Sheffield
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Yeah I know they would lose interest so would sort them out with some extra cash....it was the principle I wanted to check out first off.
My fixed rate mortgage doesn't run out for another 18 months so plenty of time yet....
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Fee
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Registered: 16th Nov 05
Location: With AK
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IHT only kicks in when you die....
they won't get any iht on money given
If they die within 7 years of giving the IHT, then the beneficiary will have to pay IHT
Plus as already said there is an allowance of £275k as well, which includes lifetime gifts
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Robbo
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Registered: 6th Aug 02
Location: London
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No, thats not quite right...
They take IHT in advance if you make transfers, you then get that against any total IHT payable upon death but if there is no IHT payable you dont get a refund... but you are right, it is IHT free provided they dont die within 7 years of making the gift... but you cant be certain of that and theres a lot of risk in transferring £80k thats p;otentially subject to IHT IMO
IHT is THE most confusing and complicated tax and its also a vicious unfair tax that can tax you twice and not refund you as well... it should be made illegal
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Fee
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Registered: 16th Nov 05
Location: With AK
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That's only to companys and trusts though, and very rare
http://www.hmrc.gov.uk/CTO/customerguide/page6.htm
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