Stick with ISA, or get lower mortgage

gph73

Hi,

My wife and I have around £25k in a cash ISA. As we are about to move house and get a larger mortgage, we're wondering whether we should keep our savings in the cash ISA, or whether we should use these savings to fund more of the purchase so that we have a lower mortgage.

On current rates, the mortgage interest rate is greater than the ISA savings rate. Other than the obvious short term benefits of lowering the mortgage (as it is has the greater interest rate), are there any benefits to retaining savings in the cash ISA? Using this money would place all of our savings into the house.

Any thoughts and advice appreciated!

Thanks

Lokolo

What happens if one of you should lose your jobs? Or both? Or you want to have kids? Or your car blows up?

I agree it makes sense to put more money towards mortgage, but I wouldn't put all of it towards mortgage, because using savings is better than having to remortgage or take out a loan.

Are you still saving at the moment? If so, instead of using the savings, why don't you use that money you are saving every month or whatever, to overpay the mortgage?

chookie1

paying off a mortgage is also effectively tax free saving as you pay the interest with after tax income and there's no personal deduction. Really depends how much flexibility you want to preserve as it's harder to extract money by re-increasing your mortgage than taking it out of an ISA