MBNA zero per cent , a warning and hope!

Aug 24, 2005 46 Replies

There is that to consider, of course, but if you already had an offset, with some existing savings offset against it, then any extra savings will improve your cashflow. Your mortgage could be too small to accommodate the extra savings if they would cause the debt to become negative.

But I take your point. You're saying your mortgage debt is so large that you chose not to place it at the higher rate associated with offsets. Nevertheless it may be possible to go for a "normal-price" mortgage which, although it does not describe itself as "offset" nevertheless permits occasional overpayments and reborrowing.

That doesn't follow, bearing in mind you don't need one which is marketed as "offset" in order to have one which has some offset features. I took out a BTL mortgage branded as "flexible" with L&G (now taken over by NR) which allows you to make reversible overpayments. It calls this building a "flexible reserve" against which you can draw, so you can choose either to take the money out again or take an interest payment holiday, provided the "reserve" doesn't go negative, i.e. the total borrowing would not exceed the scheduled loan balance profile (which in the case of interest-only is equal to the amount originally borrowed, but in the case of repayment is a bit more complicated to calculate, being the amount of debt you would have had at the relevant moment if you had not made any overpayments).

When I sold another property, I put most of the spare proceeds from the sale into this "flexible reserve", leaving only a token net debt costing me a mere £7 a month in interest, and the rest into "normal" savings accounts. The advantage of not having paid off the mortgage completely is that I retain the ability to re-borrow up to 65k for any purpose, whenever I like, without needing to go through a new loan application procedure. So if the right yacht came along, I could augment the fleet and have my tenants pay for the loan.

Meanwhile these "savings" are "earning" me interest at the loan rate of 6% (in terms of mortgage interest I no longer have to pay from rental income). Since this is a BTL, this interest isn't earned tax-free, as it would be with a residential mortgage, since it means my taxable rental profit is now higher than were I to set more mortgage interest against rental income. Alas this "earned" interest is in effect taxed at 22% instead of the 20% normally charged on savings interest. The up-side is that I can have access to an any-purpose loan costing me only some

4.7%, in theory. In practice, since most of my income is below the tax threshold, it will be a bit nearer the full 6%.

"Ronald Raygun" wrote

The conundrum I faced at the time was that I hadn't yet blagged my 48k when I applied for the mortgage, and was reluctant to do so in case an apparently huge credit card debt resulted in my being rejected. So I only built up to

48k after the mortgage went through.

I guess I could look for an offset type when I come to renew but one of the drivers of owning a BTL (well, converting my former residence into one in fact) is that you actaully *want* a large interest bill to minimise the taxable profit. In fact, what I'd really like (and I don't know why this doesn't exist) is a 'reverse offset' mortgage where you pay a really terrible interest rate and get an offsettingly high rate on your savings. The BTL makes less or no profit and the interest can be earned by my non-taxpaying SO.

Bullshit. You don't want to minimise taxable profit, you want to maximise post-tax profit. Maximising your expenses achieves the former, not the latter.

Electronic gizmoes are there to do what I want them to, not the other way round. Even if I had chosen to wire up the speakers which came wit my PC, it's not a fat lot of use if they go "beep" while I've nipped out to the loo or to cut the grass.

Not very useful if you have to switch them off when going to the theatre etc.

Just testing, were you?

I don't take milk, and the papers come through the letterbox and just pile up with the mail.

The plants will keep until I get back; they always recover from the brink of dessication.

The cat has been murdered so is no longer a problem.

If that ends up slap bang in the middle (or the day I expect to get back from) holiday, it means I'd have to lose out on another whol bloody week or two of blagged interest. It just looks more and more unattractive.

Yes, in theory. Again, it would probably need to go via an intermediate account, with the concomitant loss of a week's interest, not to mention the risk of slight timing mistakes jeopardising the whole show. It's OK if you notice straight away, as the OP said a couple of weeks' debit interest wipes out a good chunk of the credit interest, but if your holiday timing is particularly unfortunate, you could end up with a whole nother month's interest, wiping out *more* than what you earned.

... and some people just don't see the necessity for *any* of these diaries or diary equivalents. I don't wear a watch, I don't keep a paper diary. I do have a Palm PDA but I don't use its diary or reminder functions. I do hold down a full time technical job and have done so for thirty years or more.

You don't have to be a slave to times and dates!

At 10:18:09 on 25/08/2005, Tim delighted uk.finance by announcing:

And a simple search reveals at least 7 different companies offering up to 9 months at 0% and *without* charging a transfer fee.

It would be "barking" to pay 1.1% when you could pay nothing.

"Alex" wrote

So - do those as well!

"Alex" wrote

No - it would be "barking" not to take them *all* up on it!

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