Advice Needed, Do I Or Don't I?

Lee_T.

First of all I'm not sure if this is the correct forum, so I apologise if it's not. My dilemma is as follows.

1.We have £30000 in savings. These are in isa's which are only paying 2.6%. I have looked at other's and the best I can find is 3.1%.

2.We owe £14500 on our mortgage. We are on a fixed rate of 5.99%. The mortgage repayments are £140 per month but we overpay so actually pay £400 per month.

3. We have no other debts and our personal circumstances are that we live comfortably.

My dilemma is, as isa's are basically rubbish at the moment do we pay off our mortgage and just put the money we would be paying per month into savings/investment products or stay as we are.

The other thing is in around 6 months I am going to have to borrow £20000 for an extension we are having built. ( We will only borrow this if we paid off our mortgage.)

Any advice would be greatly appreciated. Please if you need more info from me concerning my dilemma please do not hesitate to ask. I would love to know what Martin would say. I can but hope!!!

pixiepie99

These things are important in making this decision:

When does your fixed term end?

Will you have to pay a penalty for paying off your mortgage early (if so, how much?)

How much can you overpay your mortgage by without incurring a penalty?

Are there any ISAs out there that pay higher interest that you could transfer your ISAs to?

In my opinion, as you will be needing £20k soon, there is no point paying all your savings into your mortgage and then end up borrowing again. Transfer your savings into the highest interest ISA you can find (that doesn't require you to keep it in there for a certain length of time).

Extensions notoriously cost more than you budget for so I wouldn't overpay the mortgage with the other £10k until it's finished. Once the work is completed and you know how much you've got in savings, overpay the mortgage as long as this won't incur charges.

If you don't already have separate rainy day savings, keep some of it back in an ISA for this purpose.

dimbo61

I would overpay the mortgage by the max you are allowed each month without any penalties !
I would also save into regular savers Barclays 6% £250 a month max before TAX ( OH is a tax payer ? ) and also Halifax 5% saver £500 a month max.
Keep £20,000 is the best ISA you can find and rest in instant access which you drip feb into regular savers.
Save like mad and build up savings to pay for extension and pay mortgage off as soon as fixed rate ends. GOOD LUCK

dimbo61

Sorry should say" DRIP FEED " into regular savers

MrMicawber_2

1. ISAs: I'd do my best to keep them. Rates might be poor now, but that won't last forever.

2. Presumably your mortgage comes off its fix fairly soon and then you will be able to pay off more without penalty depending on the next product you get. I would throw every saving you can make at the mortgage and if there's any left over find the highest rate you can and put the extra in there.

ailuro2

Sometimes you need to look at the mid to long term plan instead of the imediate saving and end up hanging on to the ISAs

However, you will likely take money out of the ISA to pay for the extension, so take £14K out now, plonk it in the 5.99% mortgage to save yourself around £250, but put it in a n overpayment fund, NOT pay it off the capital.

Then take it out in 6 months to fund the extension without any need to borrow further, organise a loan etc....

That's if you are allowed to pay that much into your mortgage in one lump sum...;)

Dithering_Dad

I agree with the posters above, keep the ISAs because they are a very valuable tax haven for your savings and if you lose them, you lose them forever and, as someone has already said, these low rates won't last forever.

If I were in your shoes, I would stop paying into the ISAs and direct all my efforts over the next 6 months to saving up for your extension. I don't understand why you would want to pay off the mortgage before having the extension done because you'll just be getting another mortgage straight away for the extension.

As an aside, having your extension built now is perfect timing - there are so many builders in need of work that you should be able to get a bargain, but just be aware that there is a very slight possibility that the builder may go bust halfway through the build and take some of your money with him. It might therefore be a good idea to see if there are any insurance policies that cover this?

Good luck with the extension. We had one built rather than moving house and it's made a huge difference to the enjoyment of our home. It also saved us a fortune in removal costs!

Lee_T.

Thanks everybody for your invaluable advice. I think I have been persuaded to keep the isa's although I do like the sound of the overpayment fund. Any more advice would be more than welcome.