Re-mortgage advice
Discussion
Hi,
Our current mortgage has just run on its fixed term (was at 4.95%) now at 4.9% on standard variable.
Rough figures are 150k left on mortgage and house roughly 185k. Combined income roughly 60k before tax and a car loan of say 7k.
Wife can get a work mortgage (works at a bank) and they do a base rate tracker at 0% plus base but will only do 118k of the mortgage on that and then the rest on another product. Say a fixed 2yrs 4.95 apr (1k fees) but legals free.
She would also get taxed I think for the benefit???
Is this a decent deal or should we be looking elsewhere.
Thanks in advance!
Our current mortgage has just run on its fixed term (was at 4.95%) now at 4.9% on standard variable.
Rough figures are 150k left on mortgage and house roughly 185k. Combined income roughly 60k before tax and a car loan of say 7k.
Wife can get a work mortgage (works at a bank) and they do a base rate tracker at 0% plus base but will only do 118k of the mortgage on that and then the rest on another product. Say a fixed 2yrs 4.95 apr (1k fees) but legals free.
She would also get taxed I think for the benefit???
Is this a decent deal or should we be looking elsewhere.
Thanks in advance!
Edited by edition on Thursday 2nd August 10:35
edition said:
Hehe does sound stupid but I'm plot sure how much we would get taxed??
Would that cancel out the low interest rate?
Well, yes it would of course.........lower mortgage but then lower net income.....Would that cancel out the low interest rate?
You really need to do the maths of EXACTLY what her taxation position is now and what it would be after.
HMRC assume that the market norm is 4% (they change this occasional). They will then calculate the amount that you would pay at 4% minus the amount that you actually pay. You will be taxed on this sum, so you will either pay 20%, 40% or 50% of that figure depending upon your tax band.
Jonathan27 said:
HMRC assume that the market norm is 4% (they change this occasional). They will then calculate the amount that you would pay at 4% minus the amount that you actually pay. You will be taxed on this sum, so you will either pay 20%, 40% or 50% of that figure depending upon your tax band.
So a staff member on a 0.5% rate is really going to get shafted......Sarnie said:
Jonathan27 said:
HMRC assume that the market norm is 4% (they change this occasional). They will then calculate the amount that you would pay at 4% minus the amount that you actually pay. You will be taxed on this sum, so you will either pay 20%, 40% or 50% of that figure depending upon your tax band.
So a staff member on a 0.5% rate is really going to get shafted......Jonathan27 said:
Sarnie said:
Jonathan27 said:
HMRC assume that the market norm is 4% (they change this occasional). They will then calculate the amount that you would pay at 4% minus the amount that you actually pay. You will be taxed on this sum, so you will either pay 20%, 40% or 50% of that figure depending upon your tax band.
So a staff member on a 0.5% rate is really going to get shafted......Even at 40% it's still equivalent to a 1.9% mortgage.
Deva Link said:
Am I missing something here? Based on the figures the OP provided I'm guessing his missus is a 20% tax payer, so this is going to be approx like having a 1.2% mortgage. How does that compare with what's generally available?
Even at 40% it's still equivalent to a 1.9% mortgage.
I think you are missing something.Even at 40% it's still equivalent to a 1.9% mortgage.
HMRC will use a rate of circa 4% as the norm.
The OP will be on a staff rate of 0.5%, therefore way under the 4% HMRC use as the norm.
Therefore, if a 4% rate of the OP's mortgage is £800 per month for example, and 0.5% is £100 per month, there is a £700 per month 'benefit' to the OP on which they will get taxed on.
20%= £140 per month
40%= £280 per month
50%= £350 per month
It's still well worth doing if she is a 20% tax payer, as she would still be better off.
The true cost of this deal would be;
The monthly cost of the 0.5% portion, the monthly increase in tax both added to the monthly cost of the rest of the mortgage on the higher rate....
All Vs
The best mainstream product that is available.
I suspect that the staff deal would still the cheaper option but not by much.....
Sarnie said:
I think you are missing something.
HMRC will use a rate of circa 4% as the norm.
The OP will be on a staff rate of 0.5%, therefore way under the 4% HMRC use as the norm.
Therefore, if a 4% rate of the OP's mortgage is £800 per month for example, and 0.5% is £100 per month, there is a £700 per month 'benefit' to the OP on which they will get taxed on.
20%= £140 per month
40%= £280 per month
50%= £350 per month
It's still well worth doing if she is a 20% tax payer, as she would still be better off.
The true cost of this deal would be;
The monthly cost of the 0.5% portion, the monthly increase in tax both added to the monthly cost of the rest of the mortgage on the higher rate....
All Vs
The best mainstream product that is available.
I suspect that the staff deal would still the cheaper option but not by much.....
OK, so if £100 = 0.5% then adding £140 in tax makes it equivalent to....1.2%.HMRC will use a rate of circa 4% as the norm.
The OP will be on a staff rate of 0.5%, therefore way under the 4% HMRC use as the norm.
Therefore, if a 4% rate of the OP's mortgage is £800 per month for example, and 0.5% is £100 per month, there is a £700 per month 'benefit' to the OP on which they will get taxed on.
20%= £140 per month
40%= £280 per month
50%= £350 per month
It's still well worth doing if she is a 20% tax payer, as she would still be better off.
The true cost of this deal would be;
The monthly cost of the 0.5% portion, the monthly increase in tax both added to the monthly cost of the rest of the mortgage on the higher rate....
All Vs
The best mainstream product that is available.
I suspect that the staff deal would still the cheaper option but not by much.....
You'll know current deals better than me, but I suspect that's pretty good?
Deva Link said:
OK, so if £100 = 0.5% then adding £140 in tax makes it equivalent to....1.2%.
You'll know current deals better than me, but I suspect that's pretty good?
But, as per my message above, 1.2% isn't the rate to be used to judge it's worth as another part of the mortagge will be on a higher rate.You'll know current deals better than me, but I suspect that's pretty good?
But yes of course, 1.2% on it's own would be untouchable......
Sarnie said:
But, as per my message above, 1.2% isn't the rate to be used to judge it's worth as another part of the mortagge will be on a higher rate.
Ah, that's true. However I think the example numbers you used make the situation look worse than it is - in the OPs case the actual BIK tax will only be about £70/mth. Sarnie said:
How do you get to that? My figures are purely speculative...
The OP said the max his missus could get was £118K and based on their total gross income of £60K I'm guessing she isn't a higher rate tax payer.So the BIK is 20% of the difference in the interest charges between the rate HMRC assumes (4%) and the rate the OP can get (0.5%).
Deva Link said:
The OP said the max his missus could get was £118K and based on their total gross income of £60K I'm guessing she isn't a higher rate tax payer.
So the BIK is 20% of the difference in the interest charges between the rate HMRC assumes (4%) and the rate the OP can get (0.5%).
£118k isn't the max they could get, as they will still have the rest of the balance to cover.So the BIK is 20% of the difference in the interest charges between the rate HMRC assumes (4%) and the rate the OP can get (0.5%).
£118k was the max they could get at 0.5%.
Sarnie said:
£118k isn't the max they could get, as they will still have the rest of the balance to cover.
£118k was the max they could get at 0.5%.
Sorry sarnie, I don't get what you mean! (as you can tell finance isn't my game!)£118k was the max they could get at 0.5%.
Sorry mistake on 118 figure it's 116k.
Thanks for the help!
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