Should I take a short term ISA to save money in short term?

moneyspider

Question: Is it OK in short term to take out an interest only ISA mortage to get out of a financial fix? Or is it financially not worth it?

I am taking out a remortgage on my property as I need to buy out my partner following a relationship breakdown. The mortgage will need to be be £56k. Money is very tight as it’s so much more expensive living alone, and even the best mortgage deals on capital repayment coming in at about £300/month would leave me cash strapped.

A financial adviser with a well known Glasgow estate agents (whole of market) has advised me to take out a 2 year fixed ISA interest only mortgage. This comes out at about £210/month which may not sound a huge difference but would be for me. His argument is that this will tide me over in my current difficult situation and basically buy me time for a couple of years until my income increases and I can afford to move onto a capital repayment deal.

While the lower monthly payment seems tempting in the short term, I am worrying about the longer term implications and wonder if anyone has any advice before I sign on the dotted line.

(a) His argument was that on capital repayment mortgages, you are mainly paying off interest anyway for the first few years, so a 2 year interest only deal is not that dissimilar. However I read a post elsewhere from someone in a similar position who was advised that even short term interest-only was not a good option because at the end of the 2 fix once you remortgage or sell, you will owe exactly the same as you did at the start because the capital has not been eaten into. Is this really an issue however, on a relatively low mortgage such as mine?

(b) I know when you hear the word endowment you should reach for your gun. So should I trust someone who is selling me an ISA mortgage?

(c) He advised that I need not even bother investing in an ISA, because the mortgage company won’t ask me for proof/details – or I can take out one and just put £10 in it. Does this sound totally utterly dodgy to you or again is he simply being a savvy money saver and working the system on my behalf?

Any comments/experiences gratefully received. Thank you.