Cash ISA to overpay mortgage?

davidscot

Hopefully posted this on the correct board ( with luck I will be on the Mortgage free board sooner rather than later:j)
Anyway I was doing a wee review of my cash outgoings/incomings etc and had a look at my fixed rate 2.6% cash ISA and was wondering if it would be better putting this towards my mortgage to get this finished quicker. We currently overpay mortgage by £100 a month but have checked and can have unlimited overpayments so ok there. Mortgage is currently 2.5% plus base rate. If we were to use this cash ISA to do this,is it possible to withdraw the lump sum invested if it was needed for any emergency etc.
What happens to this at the end of the mortgage? or do I have to withdraw it before mortgage ends to get it back?
Hopefully ive explained this properly and someone can help please:beer:
Thanks

Lokolo

You will be able to access the ISA but there will be a penalty for doing so. Your mortgage is currently 3% so I would continue to overpay some but also save some.

You need some sort of emergency savings so I wouldn't withdraw it all to overpay.

thumshie

If we were to use this cash ISA to do this,is it possible to withdraw the lump sum invested if it was needed for any emergency etc.
What happens to this at the end of the mortgage? or do I have to withdraw it before mortgage ends to get it back?

Do you mean if you overpay your mortgage with your isa money can you get it back out of the mortgage?? This will vary by lender and what your mortgage is :

• Some(most) will allow no access to the overpayments
• Some allow you to take payment holidays upto the amount already overpaid..
• If its and offset mortgage you can 'usually' access this money at anytime for emergencies...

R_P_W

I think Nationwide allow access to any overpayments but not sure about others.

What do you mean when you say' what happens to it at the end of the mortgage? do i have to withdraw it before the mortgage ends to get it back'?

If you withrdraw overpayments they are no longer overpayments so your mortgage wont end. The whole point of overpaying is to pay the capital you borrowed and reduce the interest you pay on that balance by reducing it as much as possible. If you overpayed £10k on a mortgage of 50k (so have a balance of 40) and then you take the 10 back your balance goes back up again.

R_P_W

Are you maybe getting confused with an 'offset' mortgage?

lisyloo

Mathematically the answer is simple.
2.6% is greater than 2.5% so you are better off keeping the ISA.
Also bear in mind that ISAs are tax free for LIFE which is a very vaulable benefit.

is it possible to withdraw the lump sum invested if it was needed for any emergency etc.

That depends on whether you have a flexible mortgage.
If your mortgageis flexible then yes you can withdraw it.
If it's a more traditional mortgage then no, you'd have to apply to increase the mortgage, this means - get quotes, key facts, survey etc. which would take around 4 weeks and have some costs associated.

What happens to this at the end of the mortgage? or do I have to withdraw it before mortgage ends to get it back?

If you are using it to reduce your mortgage, then the money pays off the mortgage and you finish the term quicker.
If your mortgage is flexible you could withdraw, but generally the point of overpaying is to save interest and reach the end quicker, so the money simply reduces your balance either leaving you with a lower monthly bill or getting to the end quicker.
You may be able to chose which.

thumshie

lisyloo wrote: »

Mathematically the answer is simple.
2.6% is greater than 2.5% so you are better off keeping the ISA.

Except It's 2.5%+BASE RATE so 3.0%

lisyloo

Except It's 2.5%+BASE RATE so 3.0%

Oops sorry missed that completely.
The maths is still a direct comparison.

The issues now are
1) liquidity i.e. potentially losing access to the money
2) Losing the ISA benefits permanently.

I think you need to find out whether you can get access to the money.
If you might need it for an emergency and you can't get access then I'd suggest you are still better off keeping it in an ISA.
If you fall on hard times you will find it harder to get a loan so you need to have access to "rainy day" money.

davidscot

A few points to clarify things I hope.
Yes Nationwide allow overpayments to be repaid back.
Yes I did mean that at the end of the mortgage can I access the lump sum, although now I see the point the op makes regards it wont be the end of the mortgage as the lump sum helps the balance reduce. Was more thinking that if needed could I access the lump sum but in the meantime use it to reduce the term of the mortgage
Must agree I dont think ive explained myself very well here:sad: but hopefully everyone gets the gist of the post