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£5000-pay towards mortgage or isa
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gord115
Posts: 1,077 Forumite


My fixed rate mortgage comes to an end in a few months.(£21500 owed over 13 years)
Unfortunately,my workplace shuts down in July so I may well be unemployed.
My question is,should I pay £5000 towards my remortgage and reduce the payments or leave the money in an ISA.
My mortgage rate at the moment is 5.09% (which should reduce when I remortgage) and my ISA makes 3.2%
A rough guess is that the £5000 wil reduce my payments by £40 per month.
Thanks in advance
Unfortunately,my workplace shuts down in July so I may well be unemployed.
My question is,should I pay £5000 towards my remortgage and reduce the payments or leave the money in an ISA.
My mortgage rate at the moment is 5.09% (which should reduce when I remortgage) and my ISA makes 3.2%
A rough guess is that the £5000 wil reduce my payments by £40 per month.
Thanks in advance
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Comments
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My fixed rate mortgage comes to an end in a few months.(£21500 owed over 13 years)
Unfortunately,my workplace shuts down in July so I may well be unemployed.
My question is,should I pay £5000 towards my remortgage and reduce the payments or leave the money in an ISA.
My mortgage rate at the moment is 5.09% (which should reduce when I remortgage) and my ISA makes 3.2%
A rough guess is that the £5000 wil reduce my payments by £40 per month.
Thanks in advance
Have you thought about an offset morgage? You can effectively "pay off" part of your mortgage (by off setting your savings) but can still access your savings if you have to.
It has worked for us. We are with Natwest. I believe that First Direct are quite good..
Good Luck
Dx0 -
If your mortgage is reduced by £40 a month then it will take 125 months to see any advantage to having paid off a this part of your mortgage; 125 months, 10 years 5 months.
How much quicker could you pay off your mortgage by paying that much? Are you allowed to overpay without incurring any charge?
In those 10 years your could save it in an ISA end of March, beginning of April so 2 years worth of ISA payments. In 10 years (with interest rate staying at 3%, which they won't) that would be worth £6719.
Personally I'd save it, its there when/ IF you need then.
Edit: Ofset mortgage sounds like a good idea0 -
In your situation I would enquire with your lender what happens with overpayments. I know on my mortgage you can overpay and it forms a separate fund that can be accessed as required or used to take a payment holiday.
If you have money in an isa it will count as savings if you need benefits but (I believe) if you use it to pay the mortgage that is no longer the case, even if you use it to take a payment holiday while looking for more work.MFiT-T2 challenge member #59
Aiming to pay of £30k from my mortgage between Dec '09 and Dec '120 -
(quote)If you have money in an isa it will count as savings if you need benefits but (I believe) if you use it to pay the mortgage that is no longer the case, even if you use it to take a payment holiday while looking for more work.[/QUOTE]
That's one of the reasons I was thinking of paying off some of my mortgage,so I don't have over £16000,if I have to claim benefits.
If I offset my mortgage wont it still be classed as savings? -Not really up on this mortgage thing...0 -
You only owe £21500 so it might not be worth changing lenders !
What does your mortgage revert to after the the fix ends in ?
You need to speak to your lender and ask a few questions about overpayments and once on the lenders( SVR or some tracker deal )can you get back any overpayments or take a mortgage holiday / go onto interest only!
Will you get another job quickly ?
Do you have other savings to live on for a few months/year ?
Most savings rates are not as good as the mortgage rate you are paying NOW
Good Luck and I hope you find a new job quickly0 -
if you lost your job, would the savings not come in handy for actually paying your mortgage/food/heating while you search for another job?0
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TrickyDicky wrote: »if you lost your job, would the savings not come in handy for actually paying your mortgage/food/heating while you search for another job?
Yeah ,they would but I wouldn't be able to claim any benefits.0 -
are you allowed up to 6k before benefits are affected?
you will get very little to live on with jobseekers allowance, plus no help towards your mortgage payments at first.
i don't know what your circumstances are, but check out www.entitledto.co.uk to see what you might be entitled to even with the savings.
when you get a new job try and pay it off asap (overpay a little - or a lot - each month) - you'd be amazed how little time it takes.0 -
i dont think JSA is savings related for the first 6 months only income support is0
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I have been led to believe if I have over £16000 in savings I can't claim JSA.
This is why I want to pay £5000 off my mortgage so I have less than £16000 left and can claim benefits.0
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