mortgage payoff or ISA?

james3333

hi guys,
simple question, which is best for me?
i have 74k outstanding on my mortgage@ (4.34%)
i have 10k in my ISA (which i want to keep in there for emergencies)@ 3%

i can overpay/save £200 per month, but whats best... overpay or save tax free? ( figures would be great if anyone can illustrates this for me!

thanks!

InsertWittyName

There's not really enough information to go off really...

• What other retirement provisions do you have?
• By 'best' do you mean cheapest?
• What are your long term goals?

Generally, I would do a little of both and overpay some and save some.

james3333

InsertWittyName wrote: »

There's not really enough information to go off really...

• What other retirement provisions do you have?
• By 'best' do you mean cheapest?
• What are your long term goals?

Generally, I would do a little of both and overpay some and save some.

• got a pension with work
• yesh to make the most of the money im saving/overpaying
• to have lots of cash and no mortgage! :j

CLAPTON

generally speaking if you are paying a higher interest rate on your debts than you can gain on your savings, then pay off debt, otherwise save

dunstonh

the use of the ISA allowance can be more beneficial over the long term. It is a use it or lose it allowance. You cannot claw back past years allowances if you miss them. That is one of the reasons why so many people pay in the max £11,280 each year (or whatever the annual limit is). It is possible that the rate of return is lower in the short term than the mortgage but you have to consider the long term.

e.g. £100k in an ISA in retirement can pay 5% tax free. Outside of an ISA it would be 4%. and you lose £1000 a year.

So, you have to balance long term gain with short term gain on the mortgage. Especially whilst mortgage rates are so low.

james3333

dunstonh wrote: »

the use of the ISA allowance can be more beneficial over the long term. It is a use it or lose it allowance. You cannot claw back past years allowances if you miss them. That is one of the reasons why so many people pay in the max £11,280 each year (or whatever the annual limit is). It is possible that the rate of return is lower in the short term than the mortgage but you have to consider the long term.

e.g. £100k in an ISA in retirement can pay 5% tax free. Outside of an ISA it would be 4%. and you lose £1000 a year.

So, you have to balance long term gain with short term gain on the mortgage. Especially whilst mortgage rates are so low.

THANKS, thats a good way of seeing it. i do like to cut lumps off the mortgage every month, but i also like to know i have some good savings...decisions, decisions....

InsertWittyName

Don't put all your eggs in one basket

• Use your ISA allowance each year.
• Maximise employer pension contributions.
• Overpay your mortgage.

Variety is the key.

james3333

InsertWittyName wrote: »

Don't put all your eggs in one basket

• Use your ISA allowance each year.
• Maximise employer pension contributions.
• Overpay your mortgage.

Variety is the key.

ok, thats what i will do thanks!
just wanted to make sure i wasnt missing a trick!:money:

michaels

If overpaying (and even using some of your existing savings) put you in to a better ltv band you might find you could then remortgage and pay a much lower rate on the entire mortgage balance which would be of much greater value than any interest you make on the savings.

james3333

michaels wrote: »

If overpaying (and even using some of your existing savings) put you in to a better ltv band you might find you could then remortgage and pay a much lower rate on the entire mortgage balance which would be of much greater value than any interest you make on the savings.

mmm...yes, interesting angle to take on it...... i do plan on moving soon ( 1-2years) mortgaged 91k -74k left to pay...

Thrugelmir

If you plan on moving. Then paying down the mortgage is the better option.

Providing you maintain a sufficient emergency reserve.