ISA or Mortgage Overpay?

parsniptoast

I have about £300 per month to save regularly and another £300 a month approximately that I'd rather like to have access to for emergencies, house maintenance and up and coming purchases like washing machines etc as they go kaput.

I would also like to pay off my flexible mortgage...

am I better off putting all my savings into the mortgage (given that I can withdraw what I overpay in emergencies) or should I still apply for an ISA next year?

Any advice would be gratefully received

cogito

Depends on the rate. If you're mortgage rate is less than the rate you get on your ISA, you might as well hang on to the cash but keep it in an instant access account.

dunstonh

I've done both. I have upped my monthly contribution on the regular investment purchase and I have also put in an overpayment on the mortgage.

For the large numbers of people that this recession is passing by, the lower mortgage rates and the lower equity prices offer great potential to do well on both fronts.

parsniptoast

Thanks cogito
My mortgage rate is 3.49% for another 23 months and I was considering an ISA with 3.51%

cogito

It's marginal then but I think I would keep the money in case I needed it.

sjhunt69

It also depend on how quickly you are going to pay off your mortgage and you financial position. Having paid off the mortgage on my first home really quickly (by the time i was 27ish) i wish i had been putting the max into a cash ISA each year as now i struggle to find quality savings accounts to put my money into. If had put the full amount into my ISA each year and taken a little longer to pay the mortgage i would have a lot more tax free savings than i currently have. Normally ISA interest rates and mortgage rates are similar any way.

adrian_bond

hi everyone,

im in a similar position to OP. do i overpay on my mortgage each month by £300 or so ontop of the £606 i currenlty pay (fixed at 5.53% for three more years).....or do i save like mad while im still in work by sticking the lot in an instant access ISA?

ive got about £2500 saved which should fill my ISA up before april this year, so i can fill up a new allowance from there.

work isnt exactly stable at the mo. just survived the second round of redundancies at work, but doubt i will survive a third as we have already lost about 40% of staff!

would appreciate any advise anyone could give. cheers.

alastair_h

adrian_bond wrote: »

hi everyone,

im in a similar position to OP. do i overpay on my mortgage each month by £300 or so ontop of the £606 i currenlty pay (fixed at 5.53% for three more years).....or do i save like mad while im still in work by sticking the lot in an instant access ISA?

ive got about £2500 saved which should fill my ISA up before april this year, so i can fill up a new allowance from there.

work isnt exactly stable at the mo. just survived the second round of redundancies at work, but doubt i will survive a third as we have already lost about 40% of staff!

would appreciate any advise anyone could give. cheers.

First thought was overpay on the mortgage as it will save you a lot in interest long term.

However with you financial status being uncertain I feel you need to build up a bit of a buffer (just in case the axe falls) - personally i'd max out Cash ISA then instant access with remainder.

PS you only have until 5th April to max out 2008/9 allowance of £3,600. Then from 6th April you have another £3,600 tax free allowance.