Mortgage debt reduction or ISA?

Stuart_L_2

I currently have around £50,000 of mortgage debt but also have £16,000 in an ISA. I am paying about 5.5 per cent interest on the mortgage debt but earning 6 per cent on my ISA cash. With that in mind would it still be beneficial to use the ISA money to bring my mortgage down? There are no penalties or charges for doing this with my mortgage.

Welshlassie

Leave the ISA money where it is, you have a better rate there (because it is tax free) than your mortgage and once it has been removed you'll never get past years entitlements back. Put your £3,600 allowance into the ISA this year and then OP any more you have onto the mortgage.

gil13

Think in general terms if you have ISA's paying more than the mortgage rate then keep those, firstly because of the marginally better interest return and secondly becuase they are a valuable tax shelter that will hopfully last beyond a typical mortgage. However, if the interest rates come down next year and ISA rates too, then more people may decide to overpay more on their mortgages I guess, although the tax shelter bit with ISA remains. As Welshlassie mentioned max out the ISAs then overpay the mortgage or a combination of both perhaps if rates start falling

dimbo61

Hi mark.carline
Well done on building £9,600 x 2 plus interest in ISA,s over the last 3 years.
You do not say how long your mortgage deal will last for and if its a tracker
BOE plus 0.89 !
If you used the ISA,s to clear the mortgage now you would be mortgage free
BUT the last three years of ISA,s cannot be replaced and if you wanted to save more than £7200 in cash ISA,s this year you would end up paying TAX in other savings accounts.
If you could get a better rate of return for your ISA,s with another bank/ building society to at least match your mortgage rate you would be no worse off than paying the mortgage.
So try to save money into a better paying ISA and transfer the rest into the same account and overpay the mortgage ( if allowed ) GOOD LUCK