ISA help

jcjkisaac

I have an interest only mortgage which I will be currently be in a position to start paying off some of the capital, I have been looking at the mortgage calculators and the ISA calculators and it seems to me that I would be better putting my money in an ISA and carry on paying the interest, but I can't quite believe this would be true. Is there anyone there who can give me some advice in a simple way! Thanks!

innovate

What APR do you pay for your mortgage?

Are you basic or higher rate tax payer?

jcjkisaac

Just to add if you need any details, my mortgage is £165000, I want it paid within 27 years, Im currently paying £397 interest a month and I will shortly have an extra £350 a month on top of that!

jcjkisaac

Im a basic rate tax payer

innovate

What is the interest rate (APR) you pay for your mortgage?

And are you allowed to make overpayments without any penalty?

jcjkisaac

I'm currently paying 2.88%, I'm not sure about the penalties but if it pays I would look into changing my mortgage.

innovate

OK, so you could get marginally more (around 3 - 3.05%) for your £350 in an instant access ISA at current interest rates, and quite a bit more on longer term ones. However, the longer term ones are probably out of the question since you can usually make just one deposit into them.
https://forums.moneysavingexpert.com/discussion/401374

Might be worth taking out an instant cash ISA now, to put your £350/mth in. It will only be a few pennies extra each month for you, but come March/April, we might see better rates again (top one this year was 4.25% with Nationwide) for the new ISA season. You may or may not be able to transfer your existing ISA into a better interest rate paying one next year, but you have started on getting yourself an ISA balance which will earn tax-free interest. And you can, of course, start a new ISA in April 2013.

More sensibly, though, you could look at a combination of ISA and a top Regular Saver - - max £300 a month into the First Direct 8% one would be top of my list. Then, on maturity (12 months), pay the entire balance into an ISA. You can probably start a new Regular Saver when the old one matures - so far, this has been possible, and hopefully they will keep it going.

You could then put your other £50 into a 6% Regular Saver, e.g. at Nationwide or HSBC. As with the First Direct One, you can use the money to put into an ISA at some stage.

Use the Regular Saver calculator to work out the interest you can get.

xylophone

Are you already saving into a repayment vehicle?