Pay Off or ISA

colinupton

If I managed to save a considerable lump sum, am I better off opening an ISA for all the family or paying off a lump of the mortgage?

SomeOne_2

I may be wrong here, but I would pay off a lump of the mortgage (unless you're not paying any interest which is unlikely!)
It is always better to pay off your debts first then save.
After all what is the point of earning on average 5% interest if you're paying off a mortgage at a higher rate e.g 7%.
Better to reduce your mortgage as it is secured on your property which could be at risk if at a later date you have difficulty repaying.

I'm sure others would be able to give a better and more detailed reply.

rchddap1

My instinct would be to pay off some of the mortgage, but its important to see if you have any early redeption limits on the mortgage. That is, only allowed to pay an extra x% off the mortgage in any one year on top of the standard payments. Your mortgage provides should be able to tell you quickly if there would be any extra charges to paying off a portion of your mortgage early.

Generally its also a good idea to keep some cash in reserve for unforseen circumstances, as you never know what is going to hit you.

At least those are my thoughts anyway.

dawny10

I had a similar dilemma. I went with saving as could I earn more interest than I am paying on my mortgage. I would look at your mortgage interest rate and compare it to available ISA rates.

grumbler

I have 5.29% mortgage with full flexibility on overpayments. Cash-ISAs now offer 5.4% (A&L) and even 6.25% (FD). And ISA usually gives you easy access to the money in case of emergency, as opposite to mortgage. In my situation I have no doubts - ISA has a priority!