ISA Mortgage Repayment and Remortgaging

Financial_Muppet_2

Help please!

Before I launch myself at an IFA, can someone explain to me in english my options!

I owe around £30 K on a variable rate mortgage with the Abbey and am repaying interest only, paying into an ISA to repay at end of term.

I wish to purchase a new house, leaving me with £10 K profit and am thinking of changing my lender. What happens to monet I owe to the Abbey and the the ISA ? Is it fairly straightforward?

savedup

Hi

Your mortgage and your ISA fund are actually two seperate products.
So when you sell your house, the money from the house sale is paid back to Abbey to repay the original mortgage amount ( the capital ).
What happens to the money in the ISA account is up to you after that.
You could either :

1. continue paying into it as a long term investment for yourself - to raise a lump sum for example.

2. Use it to repay your new mortgage in the future - even if it is taken out with another lender.

3. Cash in the fund and use the cash to raise a larger deposit on your second house - so reducing the amount borrowed on the next mortgage etc.

These ISA funds are usually with profits funds - so you would lose out on any terminal bonuses that are paid out on the maturity of the fund .

These options are ones you would need to seek further advice on before taking any action.

From my personal experience -
I had an ISA mortgage with the Abbey, until recently, and this "with profits fund" is basically an endowment type fund, where the returns are stock market linked, and the performance of them, as an investment product, are far from excellent in my opinion.
The abbey in recent years has been paying either low, or no bonuses. The charges on these funds is also a mute point.
I now have a basic repayment mortgage instead - I know it will definetly paid off in full at the end of the term, it is not a certainty with these investment products!!

Hope these notes help to clarify the situation.

Regards
Chris.

DavidLaGuardia

Chris

Most ISAs used for mortages are not With Profit but Unit Linked i.e. a unit trust or OEIC is being used tht is linked directly to the performance of a collective fund. In contrast to endowments, With Profits ISAs are in a minority and a good thing too as for regular savers they are a pile of pants!