Director's loan + Offset mortgage = low interest?

**Flubster** · 24 March 2009, 15:38

Yes, but expect to pay BIK on this....so don't.

**Olly** · 24 March 2009, 15:40

no BIK - I'm paying interest to the Ltd!!!
...or are you CERTAIN ???

**Flubster** · 24 March 2009, 15:44

IANAA, but pretty sure. And all loans have to be paid back within 9 months of company year-end I think). There is an upper limit of something like £5k which attracts the BIK.

**Ravello** · 24 March 2009, 15:45

I'm fairly sure that the £5k upper limit is the interest free limit before it becomes a BIK. I don't however know the status of loans upon which you are paying interest.

**Menelaus** · 24 March 2009, 15:48

You might find from the perspective of the loan that you end up paying an early repayment charge to your lender, depending on the % of the capital being repaid through the loan?

**Olly** · 24 March 2009, 16:03

"I'm fairly sure that the £5k upper limit is the interest free limit before it becomes a BIK. I don't however know the status of loans upon which you are paying interest."

Sorry, my fault - I said "director's loan". That probably only refers to the 5K interest free bit. I wasn't referring to that at all. A Ltd can lend money to staff, directors, probably someone's dog.... as long as they pay 4.75% interest minimum.

"You might find from the perspective of the loan that you end up paying an early repayment charge to your lender, depending on the % of the capital being repaid through the loan?"

Erm...really? I thought offset mortgages were pretty flexible in that respect. You pay interest on the diff between your bank balance and the outstanding loan. I would aim to structure repayments so no penalties are incurred. Perhaps 15K a year or something. I wouldn't not be repaying ANY capital through the loan - just using the offset mechanism

**Ravello** · 24 March 2009, 16:04

Originally posted by Menelaus View Post

You might find from the perspective of the loan that you end up paying an early repayment charge to your lender, depending on the % of the capital being repaid through the loan?

?? Hisco would be lending the cash and therefore presumably wouldn't levy an early repayment charge

Alternatively if you mean the mortgage, then the whole idea of an offset is that you can repay any or all of it as and when you feel like it without penalty.

**Ravello** · 24 March 2009, 16:06

Originally posted by Olly View Post

Erm...really? I thought offset mortgages were pretty flexible in that respect. You pay interest on the diff between your bank balance and the outstanding loan. I would aim to structure repayments so no penalties are incurred. Perhaps 15K a year or something. I wouldn't not be repaying ANY capital through the loan - just using the offset mechanism

You're right, and furthermore, if you wish to actually pay off the capital for whatever reason, you are also free to do that without penalty.

**Pickle2** · 24 March 2009, 16:09

Originally posted by Olly View Post

Get an offset mortgage at x%? (er what's a fair rate with 50% equity)

With that LTV, plenty of offsets in 3% to 4% range.

So not sure what you would gain by lending at 4.75%, even ignoring the corp tax due on the payments?

Director's loan + Offset mortgage = low interest?