fixed till 2012

spykes

Hi guys and girls, my situation is mortgage 11k fixed at 5.99% till Oct 2012 got 13k in an ISA should I just withdraw it? well most of it and pay like a grand off mort a month then reduce to say 500 for few months till Im at the stage where I can get it to about £50 for the last few months thus avoiding any penalty.

Obviously if I did this, the money I would have used to pay it off ie wages etc can then go into topping the ISA up over time, back to 13k and beyond.

Is this the most economical way to do it?? Any pitfalls??

dimbo61

Any pitfalls!
Yes you will pay ERC ( early repayment charges) if you pay off a large part of the mortgage early.
You need to read the terms and conditions of your mortgage!
Are you allowed to pay say 10% extra a year ?
Can you reduce the term of your mortgage so that it finishes in oct 2012?
It would not be worth taking the 2/3%? hit from the ERC to pay it off early and have no savings while also clearing your ISA,s
But ask can you reduce the term ( my lender charged me £50)

spykes

I am tied till 2012 so wont pay it off totally till after this and was underthe impression by decreasing term I could over pay without inccuring penalty.

Tbh I have changed my payments about 7 times in 2 yrs and they tell me something different everytime literally.

LilacPixie

It depends on your lender and eeal you are tied to. My deal is if i OP more than 10% of the outstanding balance then the ERC applied

Baby_steps_2

Also consider the tax implications, once you take that money out of ISA'a you will never get the tax free status of that money back again. If you are planning on saving when you have finished paying the mortgage off it may be worth considering paying the mortgage off over a slightly longer term to keep the tax free status of the funds and think of the longer term position/

spykes

Surly I m saving £1000's by paying off early where as tax savings would be no more than few 100??

Btw when do you pay thee charges because on occasions I ve rang up and they say you can only over pay by x amount but you can reduce your mortgage by decreasing the term and increasing your monthly repayment. So thats what I did. Whenever paying a lump sum I was always within the 10% surly when fixed deal is up I can just pay it off without charges??

dimbo61

You only have a small mortgage which you can pay off in less than 2 years but you have got money in TAX free ISA,s and if you cash them in you cant put money back into previous years ISA,s
So overpay the mortgage each month having reduced the term so that it finishes in oct 2012 and at the same time fill your cash ISA allowance so you have long term savings for retirement in tax free ISA,s.
No point getting hit with ERC so if you cant reduce the term then build up savings and clear the mortgage in Oct2012

spykes

I never intended to pay off before 2012. Just overpay using the money I have in the ISA.

I can only over pay on the mortgage if I cash some of ISA in. I am now a student and therefore dont earn a lot.

I should also mention its a stocks and shares ISA so could go down but think it will rise v slowly for the next few years.

Basically without ISA I will pay off mort around 2014/5 if I use it 2012. In that time surly I will pay more on interest (just paid mortgage today looks like im paying approx £65/70 a month interest) on the mortgage than any tax saving I could possibly make.