minis, maxis and mortgages - help!

bamboozled_2

I have been paying £80/month into a maxi ISA (Norwich Union ethical fund) for the last 3 years, as savings to back up my interest only mortgage. I also pay £250/month into a Halifax regular saver account. I recently read an article which suggested that this is daft - much better to pay into a mini shares ISA, and then you are free to put your savings into a mini cash ISA instead of an ordinary savings account (although this second bit prob doesn't apply at the moment as the interest rate on the reg saver is 7% for 12 months).

My questions are:

1. is a mini shares ISA a suitable investment to go with an interest only mortgage?
2. is there any reason I would have been advised to take out a maxi rather than a mini?
3. if I switch, what should I do with the maxi I already have (which as far as I can make out has been doing fairly rubbishly) - leave it be and see if it perks up, or put the money into the new ISA?
4. would it be better just to switch to a repayment mortgage and forget all about the shares???

Thank you!

isasmurf

bamboozled wrote:

My questions are:

1. is a mini shares ISA a suitable investment to go with an interest only mortgage?

My own opinion is no. ISAs are only guaranteed to exist until 2010, so you may not be able to pay into the ISa after then. However, an ISA is just a wrapper. The underlying fund would be the same in or out of the ISA.

2. is there any reason I would have been advised to take out a maxi rather than a mini?

The ONLY reason to take out a Maxi ISA is if you want to invest more than £3000 per year in the Stocks ISA (or £4000 per year from 6th April). If you invest less than £3000 then investing in a Mini Stocks&Shares is a better option leaving you with a choice of Mini Cash accounts. In the Maxi ISA you are limited to the Cash ISA that your Maxi provider is offering.

3. if I switch, what should I do with the maxi I already have (which as far as I can make out has been doing fairly rubbishly) - leave it be and see if it perks up, or put the money into the new ISA?

That is up to you. You could transfer it to the Mini Stocks & Shares ISA if you wanted to. If you are to invest in a Mini Stocks & Shares ISA you must decide before you make your first payment after the 6th April. You could ask Norwich Union that you wish to continue paying into your current ISA on the basis that it is a Mini ISA.

bamboozled_2

Thanks for the advice isasmurf. One more question - if an ISA is not the right sort of investment to go along with an interest-only mortgage - what is? I'm seriously considering switching to repayment when I next remortgage as this investment business is all so complicated! Any thoughts appreciated... altho praps I should be asking this question in the mortgages forum...

dunstonh

It should be pointed out that isasmurf is stating an opinion and it is not advice. Nothing in these forums should be classed as advice.

A mini equity ISA IS suitable to back up an interest only mortgage. Should the ISA ever cease (which is likely at some point), then an alternative arrangement would be put in place. If no tax free offering is available, then it would just revert to a unit trust/OEIC which is basically what the ISA is.

However, the more important consideration is whether the interest only mortgage with an investment link is most suitable for you. The capital and repayment option may be more suitable.

Paul_Varjak

I agrree with isasmurf that investing less than £3,000 into am maxi ISA is a bit pointless.

Switch to mini stocks and Sahres ISA if you can. This will also allow you to open up a mini cash ISA and, when your Halifax Regular Saver matures, you can transfer £3,000 from the regular saver into your mini-cash ISA.

I reiterate what isasmurf says:

IF YOU PUT ANY MONEY INTO YOUR MAXI ISA AFTER APRIL 6TH YOU CANNOT OPEN UP ANY MINI ISA THIS TAX YEAR!