£3000 in Isa or pay off some mortgage?

kenshaz

tom188 wrote:

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 favor i cant see what the problem is.

No one is suggesting that it is not feasible,I am just expressing an opinion ,it is different from yours ,is that OK.

Jamesd always promotes squeezing every little bit of interest out of the situation ,that is fine,I personally like the feeling of being free of shackles ,a small about of extra interest will not tempt me back into the stocks.

Jamesd will always produce the differential statistics,but they are fluctuating and need constant assessment ,so just like tarting not for the complacent.

tom188

absolutely fine by me. i like every other forum member have my own opinions and am fully open to others having a different point of view.

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

this quote just irritated me as it suggested "we" on the forum should have some sort of party line to tow, whether or not you agree with it personally.

whambamboo

jamesd wrote:

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.

And not just that, but by putting money in the ISA, you take advantage of a tax-free allowance which you can keep for many years. So even if mortgage rate is say 5.5% and ISA is 5.25%, depending on amount of mortgage, term outstanding, etc.

If there's five years left, the difference is

3000 * 1.055^5 - 3000*1.0525^5

only £46.24

yet

the tax on the interest on the savings would be £40 that year alone - and so the 5 years of slightly higher rates would be made up in tax saved in under 2 years.

Obviously it's ridiculous to pay off the mortgage when the rate is below the ISA interest rate, because if you save in an ISA now, it doesn't stop you paying into the mortgage in 2 year's time (or when the rate changes), all of which time you've been making money on the ISA, and have had the security of having savings for a rainy day.

roswell

At the end of the day it comes down to personal choice, there`s nothign to say the next goverment will keep ISA`s tax free, just the same no one can say if we are goign to hit mass unemployment in the next 12 months or global recession etc its all about risk but a certainty is that if you pay £3000 off your mortgage now you wont have interest to pay on that £3000 for the rest of the mortgage term.

UK007BullDog

Another point to consider is that the mortgage has come to the end of its "deal or offer" time and that overpayments are not charged with a penalty.

Also if the mortgage is overpaid the monthly payments are the same only the lengths of the whole mortgage term is shortened, unless it is a true remortgage, but again this only will work well if the interest rate is the same as before.

So for £3K I would keep it in the ISA or if it is very important to pay off the mortgage do overpayments. As it is a "small" amount its quite difficult to say without knowing much more about the poster. ISA's are good if you suspect your pension will be small to supplement it tax free.

yanchuga

roswell is right

kenshaz

reported against code of conduct

dunstonh

ISAs are a use it or lose it allowance. It can be far more beneficial in the long run to utilise the ISA allowance than repay the mortgage. Paritculary if you are a higher rate taxpayer or will be earning over the age allowance limit after age 65 (ISAs do not go towards that limit).

zag2me

To sum it all up, there is very little difference between paying off your mortgage and saving it in an isa

Ariadne_3

I am in a similar situation but we decided to go with putting it on the mortgage.

Our mortgage is in two parts (due to moving house, and getting a "top-up" mortgage). The first part is @ 5.49% interest, so we're putting a chunk into that part, whereas the second part is 4.49% so we'd be better off putting it in an ISA. Anyway it will (in January, when we pay it in, as that's the month we can "overpay" without any penalty) reduce our mortgage term by over 4 years, so we figured we'd be better off doing that.

You have to look at your own individual circumstances and make the decision you're most comfortable with.

As to savings, we are putting some in an ISA, and we have about 3 credit cards with nil balances (no cards have balances on them!) and approx £15k of credit available if we absolutely needed to, but I hope we don't!