Cash in the ISA to pay the Mortgage ?

RocketRonnieRadox

Hi All,

First post in this forum and am looking for some quality advise as not sure what to do.

As it stand we have been on an interest only mortage for the past 4 years and paying into an investment ISA as a repayment vehicle.

It struck me that we could end up in trouble if this doesnt work out and am considering cashing in the ISA and reducing the mortage.

The figures are as so -

Loan amount £135 K
LTV - 85%
Current interest rate - 2.5% as on nationwides BMR

I potentially have 20K in the ISA.

Over 10 years total invested is 22200 but I withdrew 7,157 some years ago leaving the total invested minus the withdrewl at £15043.

The current value is £16,818.

This means that its only earnt 1775 in 10 years.

Would it not be wiser to cash in and reduce our LTV and the capital on the mortage ?

Many thanks in advance of any replies.

smcqis

it depends on your interest rate of ISA but i would say its unlikely to be paying more than the interest on your mortage

dunstonh

Would it not be wiser to cash in and reduce our LTV and the capital on the mortage ?

You havent told us anything about the ISA, your tax position, the target growth rate and what the current likely projections are.

RocketRonnieRadox

Thanks for the replies so far.

The ISA is an S&S one with sterling . So it all depends on the performance of the stock market and does not have a fixed interest rate.

It pays into the following funds

AXA Fram Eq Income
INVESCO Perpetual Corp Bond
INVESCO Perpetual High Income
Neptune income

I have no idea about the target growth rate or how to find out about it.

As to tax position - I am on 527L but I do have another house that I rent out and declare so my tax code may change to over 40% next year.

As it stands if we try to find a mortgage deal we cant get better than 6.5 % due to the LTV so were thinking to reduce the LTV by cashing in the ISA.
If we were to pay 20K off it we could get 3.99%

Meeper

Depending on the percentages, the vast majority of your ISA is invested in UK Shares. This is not the way to construct a portfolio as there should be elements of other asset sectors involved as opposed to being so weighted to UK Shares.

If you use all of your ISA funds to pay the mortgage off, would this leave you with no savings at all and therefore no emergency fund to fall back on if the worst were to happen? If so, then it's not a simple numbers game, there is an inherent risk in using up all of your savings in this way.

RocketRonnieRadox

Meeper wrote: »

Depending on the percentages, the vast majority of your ISA is invested in UK Shares. This is not the way to construct a portfolio as there should be elements of other asset sectors involved as opposed to being so weighted to UK Shares.

If you use all of your ISA funds to pay the mortgage off, would this leave you with no savings at all and therefore no emergency fund to fall back on if the worst were to happen? If so, then it's not a simple numbers game, there is an inherent risk in using up all of your savings in this way.

Hi Meeper, thanks for the comment.

Well I have a little more to fall back on in my other property accound, about 6K after tax so it would not be all of it but quite a bit.

The thing that worries me is that we have only been paying the interest off and none of the capital over the past 4 years, this in combination with the interest rates we can get with the high LTV is driving me to do this.

We can then overpay whilst the rate is low and reduce the mortage further.

In a bit of a dilema here ...