Money into ISA or Overpay mortgage

leon20000_3

My current mortgage debt is £30,000 plus an additonal mortgage of £80,000. They are both with Nationwide and the five year fix ends on 31st July 2012 for the £80,000 mortgage at which point the rate falls to 2.5%. The £30,000 mortage falls to 2.5% on 1st November 2012(it will be 5.48% to 31st October 2012). The term remaining on both mortages is 16 years. I have approx £12,000 earning 3.1% in an ISA. I just wondered whether I should put any spare cash in the ISA or put everything into making overpayments. The overpayments will become unlimited from 1st August 2012.

harvey115

Since you are earning more in your ISA, it makes sense to save in your ISA account then to overpay the mortgage.

As soon as you break even/get less interest in your savings account, you should overpay the mortgage.

holly_hobby

I would have already been making overpayments (within permitted annual allowances) - and certainly would make some overpayments off your 30k at 5.48% until 1.11.12.

Once you're on 2.5% and if your ISA remains at 3.1% (or in excess of the mge payrate), and if its all about, getting the most gain out of your monies, then keep investing into tax efficient vehicles in excess of your mge payrate (or those producing a NET return in excess of the mge payrate).

Of course in doing that, you will STILL be paying the same amount of mortgage and be charged interest on the total amount of borrowings, (albeit that you will be earning a sum slightly in excess of the mge interest paid, via your current ISA investment/s and have retained access to the capital).

If you want to keep your excess capital separate and easily accessible from your mge, then you may also wish to consider an offset mortgage arrangement, which may involve a change of lender (remortgage) if your current lender do not market such an arrangment. .

Hope this helps

Holly