Pay of Mortgage now or keep ISA's?

mcrterry

Hi newbie here (so be gentle with me). We owe approx £8500 on our mortgage and expect to pay this off in about 18-24 months. I have an ISA worth about 5k and took out another for our daughter who is 7 as a long term investment. Her ISA is also worth about 5k. Should I cash in the ISA's pay off the mortgage and start new savings plans or just keep the current mortgage? Current mortgage is a Virgin 1 account job.
Thanks

StrawberryJam_2

Just compare your interest rates of ISA and Mortgage.

Trying_to_be_good

If ISA interest rate is bigger than mortgage interest rate, keep the ISAs.

If ISA interest rate is less than mortgage rate, move to better paying ISAs or pay of mortgage if you don't want to use them for long term savings.

It's not legal to open ISAs for other people or for under 16s, so you'll be needing to remember it's yours/your partner's (whoever's name it's in), though you may want to gift your daughter the money when she's old enough - you won't be able to transfer it into her name, though, as the I in ISA is Individual (not transferrable). Sorry if that sounds patronising - not meant to be.

mcrterry

Wow thats interesting about the ISA. I opened it for my daughter around the time she was born in her name with me as the kind of trustee I guess. I was lead to believe it was all above board. Thanks for the hint and the advice re interest on both acounts

StuartGMC

Only comment to add is that presumably you have some positive inflow to the balance in the One Account each month if I understand that the total capital you owe is £8.5k?

Your effective interest won't be on the entire amount in this case, e.g. if you have an average balance of -£7k then you may want to look at the interest incurred on this not on £8.5k in your consideration regarding the ISAs?

Others here can comment on the benefit of the One Account and similar CAMs, in terms of clearing the mortgage vs. long term operation; sorry, I'm on a straightforward offset but I do look at our total cash position and show as a debt on our spreadsheet. Just looking forward to 100% offset... someday :rolleyes:

getmore4less

I would check out the ISA situation pronto, you may have too many.

IF your ability to save once the mortgage is paoid off is below the ISA threshold, you could pay it off and reload the ISA's

If it will be higher than the threshold strat filling them now and delay paying of the mortgage, the long term tax savings will be worth a bit of interest now.