£3000 in Isa or pay off some mortgage?

Joseyjo_2

Hi All,

Sorry if this has been discussed before, but I haven't been able to find an appropriate answer in all the threads I've read.

I have £3000 to spend and want to know whether I would be better off investing in a mini cash Isa or putting it towards my mortgage and reducing my monthly payments. I do have another Isa with A&L for £3000, which I was going to leave where it is.

Any advice would be appreciated.

Many thanks and Merry Christmas to all! :beer:

kenshaz

I would always pay off debt ,especially secured debt,remember your home is at risk .Also you will be saving a lot of money in interest,the ISA rate will not match the rate you are paying towards your mortgage .

tom188

kenshaz wrote:

I would always pay off debt ,especially secured debt,remember your home is at risk .Also you will be saving a lot of money in interest,the ISA rate will not match the rate you are paying towards your mortgage .

It could potentially match the rate if you are on a discounted deal.

Remember it is good to have at least 6 months of your salary kept in savings in case for example you are made redundant. If you dont have enough in savings and find the worse happens you could find yourself not being able to pay your mortgage or having enough to live on.

The_Bear_6

Without knowing your financial situation I can only advise you to work out the financial implications of both actions in a spreadsheet format. Find the best short term and long term plan, if they are the same then your option is obvious, if they arent analyse your circumstances currently and in the future (with regards to future investment/repayment options) to pick the most cost effective solution.

jamesd

If the ISA interest rate beats the mortgage interest rate you will be better off. If youput the money towards your mortgage and reduced the payments instead of keeping them the same and shortening the term, that would reduce the benefit of overpaying on the mortgage, making saving look a bit more atractive.

This probably means that you'll have ample money for emergencies, so the next step would probably be stocks and shares ISA and investing in a range of funds (6 or more, in different areas) instead of saving.

roswell

my view is paying off your mortgage is a certainty you know the monry has gone somewhere and you can account for it, if you have to much money in ISA`s you will loose out on state assistance if you become unemployed, if this isnt a issue then go for saving or if you feel the risks are worth it go for investing.

kenshaz

tom188 wrote:

It could potentially match the rate if you are on a discounted deal.

Remember it is good to have at least 6 months of your salary kept in savings in case for example you are made redundant. If you dont have enough in savings and find the worse happens you could find yourself not being able to pay your mortgage or having enough to live on.

I am sorry but you miss my point,get rid of debt when you can,the balance between the two rates ''the debt rate '' and what you might of got if invested in savings is immaterial from my perspective ,the elimination of the debt is my aim.

Emergency salary .I use credit cards at zero balance as emergency cash sources .

We should be thinking about bringing down the debt level of this individual ,not encouraging him/her to consider revenue from savings.

jamesd

kenshaz, throwing money away by not paying mortgage interest at a lower interest rate than the rate you can earn from savings is not moneysaving. Some people do prefer it, and that's entirely fine since it is a personal choice, but it is worth noting that it does lose you money.

roswell, yes, that's a potential cost of saving instead of paying off the mortgage. A big issue for some people, sadly.

A_Nice_Englishman

How likely is it that mortgage interest rates will consistently be below savings rates? Banks have to make a living/profit.

jamesd

A Nice Englishman, does it matter? It's possible now and has been for a while and if it's ever unprofitable the money can be put into the mortgage instead. Personally, I expect that competition will continue to keep the best unsecured savings rates above the best secured mortgage rates for many years.

Critical to it is the availability of tax-free savings accounts. Otherwise it would only work for introductory deals paying well above base rate.

tom188

kenshaz wrote:

We should be thinking about bringing down the debt level of this individual ,not encouraging him/her to consider revenue from savings.

Why?

They are reducing their net debt after all - provided they dont spend their savings they will be able to repay when necessary, whilst earning extra money in the process. If it becomes uncompetitive, just pay the money into the mortgage. Providing the savings are offset against the mortgage in the OPs favour i cant see what the problem is.