Savings -v- extra mortgage payments

sfewell

I've recently taken out a large interest-only mortgage (£100k+) and have £50 per month to save for at least the next two years. Any advice as to whether I should save this £50/month in a Cash ISA or other savings account or whether I should pay this off my mortgage each month (presumably decreasing the actual sum borrowed) would be greatly appreciated. What would benefit me most?

kingkano

whats your mortgage interest rate? Do you have any other savings?

sfewell

Hi. The interest rate is 5.39% fixed for 2 years and I've very little savings at the mo.

homer_j_3

the answer to me would be to pay it off your mortgage if they (the lender) charge interest on a daily or monthly basis.

If they charge on an annual basis then I would say that putting it in cash based isa would be better.

I am not a financial adviser though so maybe it is worth considering speaking to one.

kingkano

Id look at it from a different angle and say you havent got much in the way of savings, so a cash ISA would be better. Just in case. Once you've built a decent rainy day fund, pay it towards your mortgage only if you dont have a better ISA rate (there is plenty paying 5.5%).