£30k - pay off mortgage or leave in ISA??

Hi, trying to work through my dilema and getting stuck! Can anyone help please?

I have £30k in a Cash ISA - I took advantage of the Newcastle Building Society offer last year and managed to fix it for 3 years at 5%. Therefore it's earning £1500 a year.

I'm currently paying 5.62% on my mortgage.

Does the Tax Free Benefit of my ISA outweigh what seems to be the logical answer to use my ISA to pay off some of the mortgage?

Comments

  • opinions4u
    opinions4u Posts: 19,411 Forumite
    edited 31 October 2010 at 9:29PM
    £30k at 5.62% would cost £1810 a year. So on a like for like basis, the money's best paid off the mortgage.

    Put simply you're paying 5.62% and earning 5%. So you're 0.62% worse off.

    But how long are you on that 5.62% for, what rate will it go on to, and what would the penalty be for closing the ISA and paying a lump sum off the mortgage?
  • diable
    diable Posts: 5,258 Forumite
    How much is the mortgage as I would pay off the £30k then keep the repayments on the mortgage the same to get it paid off sooner. Once its paid off then carry on putting the money into an account to save the £30k again.
  • Why dont you look around for a lower rate for your morg, and keep your savings at the 5% rate.
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  • dimbo61
    dimbo61 Posts: 13,712
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    If you are paying 5.62% I guess you are in a fixed rate mortgage deal and you will pay ERC to get out.
    now is the £30K in ISA,s your only savings ? If so leave them alone and just overpay the mortgage if allowed.
    You are losing out a little in the different rates but not that much and its good to have emergency savings!
  • It isn't all about interest rates.

    Yes, you would be better off with the mortgage paid off (ERCs permitting*). However, once the ISAs have been cashed you cannot use those years again. This has some value but it is up to you whether or not it is worth £310 per year. Persoanlly, I like to have some cash available for emergencies and at 5% tax free that is as good as anywhere.

    GG

    * And the ISAs are fixed until 2012 - there may be a loss of interest if you withdraw the money.

    A cheaper mortgage would be the answer.
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