From: Alex Butcher 
Newsgroups: uk.finance
Subject: Re: one account
Date: Fri, 30 Jan 2004 17:18:03 +0000

On Tue, 27 Jan 2004 11:47:29 +0000, Thom wrote:

> Alex Butcher wrote:
>> What about the tax benefits of a flexible mortgage (i.e. you pay tax on
>> interest /earnt/ but not on interest saved) and the benefits of having
>> your salary save interest until it's all spent at the end of the month?
> 
> The tax position is identical whether you offset a mortgage or use spare
> cash to pay off mortgage debt (provided the mortgage is daily interest
> and carries no penalty).
> 
> Unless you have lots of cash sloshing in your current or savings account
> that can't predictably be used to pay off mortgage debt (e.g., erratic
> cash flow) the slightly higher interest on most offset type accounts
> will eat up the advantage.

I think you're missing my point.

Assume I'm making the most of all my tax-free saving options (e.g. ISAs)

If I invest 10K in a bank account, I'm likely to get ~3-4% interest at the
moment, and need to pay tax in the interest earnt, reducing that 3-4% to
maybe 2.5%.

If I put that 10K into a flexible/offset mortgage account, I'll /save/
interest on 10K of the mortgage loan, which a) will probably be at a rate
higher than savings interest and b) won't have tax payable since the
interest is saved, rather than earnt.

The difference between an offset mortgage and a traditional mortgage is
that it's easy enough with an offset mortgage to get that money back out
again if you need it later.

> Thom

Best Regards,
Alex.
-- 
Alex Butcher      Brainbench MVP for Internet Security: www.brainbench.com
Bristol, UK                      Need reliable and secure network systems?
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