Mortgage or ISA? Confused!!

steve.baxter

I currently have an Abbey (Santander) eMortgage that is offset against an attached savings account & that I have been regularly over-paying, leaving me a nice little nest egg. Now that we are in the new financial year, I am trying to work out whether I am better off leaving this money where it is or transferring some of it to a new ISA but have managed to completely confuse myself!

Without getting into exact amounts, can somebody help clear this confusion up by explaining how the interest for both these products (mortgage/ISA) works? The current rate I am paying on my mortgage is 1.09% whilst the ISA that I am considering quotes 3.50%. However I have got myself confused by being charged monthly on the mortgage but only receiving one annual interest payment on the ISA. Can someone please explain how this works in simple terms so that I can make a better informed decision?

RosieTiger

The rate on the ISA is greater than the mortgage payment. If you put the max into the ISA you will earn more in interest than you will pay in interest for not having the same amount offset against the mortgage.
Take the ISA.