Paying Mortgage Capital with Cash ISA's

redmarcus999

Hello, im a newbie....

I've have posted this question in frustration of my mortgage provider, C&G

I have had an interest free mortgage for 4 years, 2 years at 0.89% and the last 2 years at 2.5%
Total borrowing is 270K over 25years

Here's the question that i hope someone will be able to answer:

"if i were on a repayment mortgage at the same rates, what would my total amount of capital repaid been over the last 4 years?"

Now, I'm not a fanatical wiz or anything but i find it difficult to understand why C&G cant give me a figure?
I did a "back of fag packet calculation" and i make it around 40k, how far out am i??

I buy 2 max cash ISA's a year to repay the mortgage capital, I'm self employed so this helps me if for any reason i need cash quickly, at the moment i have not had to touch any of the ISA's, and i believe its a better way of paying the mortgage rather than simply "giving" the money back to the lender never to see it again until you "downsize"?

Any financial wizz's out there?!

cheers marcus
247 (my first 3)

CLAPTON

can one one assume you mean 'interest only' rather than 'interest free'?

Let_Us_See

I take it you mean interest only and not interest free? Between you and me I just can't be bothered to work out your query (same as C & G), but I would be amazed if the repaid capital would be anywhere near £40k, as in the inital years almost of monthly mortgage payment would consist of interest and very little capital. In fact with a 25 year term I believe it is around the 17th year that the capital element of your mortgage payment becomes greater than the interest element. Finally, why are you asking this question now? You should of considered this 4 years ago.

kingstreet

£270k over 25 years would see a balance of c£238,386 after four years.

dimbo61

Even at an interest rate of 2.5% you will pay £363,379 so your plan to save two cash ISA,s each year will not be enough.
Many lenders are now asking for borrowers who are on Interest only mortgages have to show how they are going to repay the mortgage !!!
You may find the ISA,s are not enough

JimmyTheWig

Ok, so lets use http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator and see what we can do.

Originally you owed £270,000 on a 25 year mortgage at 0.89% interest.
If that was repayment then after two years you would owe £250,541. You'd be paying £1,004 a month (rather than the £200 a month you were paying).

Now lets plug those numbers back into the calculator.
Debt is 250541.
Remaining term is 23 years.
Interest rate is 2.5%.
On a repayment basis you would owe £234,007 after 2 years. You'd be paying £1,195 a month (rather than the £563 a month you were paying).

So if you'd have been on a repayment mortgage your balance after 4 years would have been £234,007. I.e. you'd have paid off nearly £36k.

So you need £36,000 in your repayment vehicle right now to be on target to pay the mortgage off at term.

kingstreet

FWIW I just ran £270k over 25 years through Mortgage Brain and used the Co-Op 2.79% fix, so I'm not doing it quite as accurately as the other two.

redmarcus999

That's great, jimmythewig
i have way more than £36k so looks like IIm fine.
Also earning all that tax free interest as well.

JimmyTheWig

redmarcus999 wrote: »

Also earning all that tax free interest as well.

Obviously if the money had come off your mortgage balance then you'd be paying less mortgage interest - which, in effect, would be tax free as you're not earning it.
But either way you seem to be doing ok.