Offsetting an ISA against a mortgage?

If your aim is to pay the mortgage off, you have to sacrifice your savings anyway, whether they're in ISAs or in taxed accounts. The thing about offsets is that they're mechanisms which basically let you pay part of the mortgage off temporarily and let you get the money out again, which you apparently don't want. They also tend to charge a slightly higher interest rate than vanilla mortgages.

If there is such a thing as letting you link an ISA with a loan account, it would tend to be less advantageous than linking an ordinary savings account, because the savings you make would be less. You might have the loan account charging 5.5% interest, an ISA paying 4.5%, and an ordinary savings account paying 4.5% interest less tax, i.e. 3.6%. Linking them (or even cashing in the savings and paying them off the loan account) in effect boosts the savings interest rate to the loan rate, and so the ISA rate would be boosted by 1%, but the ordinary savings by nearly 2%, in terms of having to find less money from other income from which to pay loan interest.

The nearer your ISA rate is to your loan rate, you might as well leave the savings where they are but direct the ISA interest to be paid into your current account which feeds the loan payments.

" If your aim is to pay the mortgage off, you have to sacrifice your

Thanks for your reply.....in actual fact I think that *is*, or at least could be what I want to so...

My original post was a bit poorly worded, and my use of the phrase "paying off the mortgage" is misleading because I don't think that my goal is as clear cut as that. Essentially the thing that I'm trying to achieve is making the best use of myself and my partner's savings in order to minimise what we pay as interest as we despatch what's left of our mortgage.

As I see it I have two options:

Firstly to completely cash in a bunch of ISAs and pay off a chunk of the balance, which will mean that our mortgage will disappear sooner, and amount that we've paid in interest will be less in the long-run. The downside being that we'll have killed off those ISAs.

The other option, and this is really what I want to know if is possible or not, is to consolidate our mortgage together with our ISAs, keeping them as ISAs in an offset account, to cancel out the interest payments that we're making on the mortgage. making a similar sort of saving on interest payments to the first option, while retaining the ISAs for the future.

Thanks,

Martin

Intelligent Finance will do this. Obviously, this only becomes an advantage when the total savings are greater than your mortgage balance.

Pete

There is obviously also a third option which is to cash in the ISAs but leave the money in an offset account.

If you need the money in the future you can get it easily, and whilst it wont be in an ISA, if you need the money that doesnt really matter since you'll have to cash in the ISA anyway.

The only flexibility you would lose would be if in the future you wanted to change back to a non-offset mortgage.

An offset mortgage means that you get no interest on your savings and only pay interest based on the mortgage balance minus savings.

If you are not getting any interest on your savings, it really does not matter if it is in an ISA or not.

Do not worry about taking money out of the ISA. You have already earned tax free interest, so it has already been sucessfull.

My advice is: REDUCE DEBT. Cash the ISA's, pay it off the mortgage, and increase your mortgage payments to as much as you can comfortably afford. Then add another £50 or £100 to your monthly mortgage payments, and you are then doing something worthwhile.

However, if you expect to pay the mortgage early out of cashflow, then surely it's better to keep the ISA intact since those savings will hopefully continue to attract tax-free interest after the mortgage is paid off?

FoFP