What should I do with my £3600?

d712

I have £3600 in my ISA and will be receiving interest on it in the next few days.

I was thinking of the two following options:

1) Do nothing, leave the money where it is and focus on using any spare cash to make overpayments on my mortgage. I can pay £500 a month off my mortgage without incurring a penalty.

2) Close the ISA and use the money to make a one off payment off my mortgage. The penalty for doing so would be £130 which I think is relatively modest. I would continue to make mortgage overpayments in the subsequent months.

Which is the best move?

Thanks

kingmonkey

We need to know the rates of the ISA and the mortgage to know which is best.

My hunch would be to save 6 months worth of expenses and then overpay mortgage.

d712

Thanks for the response.

My mortgage is at 4.88%, my variable rate ISA currently offers 0.5% (great isn't it?). I'm also thinking of looking for a 1 year fixed rate ISA that will allow me to transfer across the £3600 I already have and then hopefully make further deposits into it over the course of the year until I have met the £3600 allowance for the 2009-10 tax year.

My priority however is to make the mortgage overpayments every month.

apt

The penalty appears to be over 3% so it would make more sense to move the ISA to one of the 3% or more offers available and to kept the mortgage repayments to the penalty free amount of £500 per month.