Borrow or cash in Cash/S&S ISAs?

Innys

Hi all

I have a dilemma which I'm wrestling with. I intend to do some building work on my house and it will be EXPENSIVE.

I plan to do the work next year and am saving like mad. Even so, I won't be able to save enough and there will be a shortfall between what is in my easy access saving accounts and what is required.

I could make up that shortfall by cashing in some Cash ISAs and/or S&S ISAs. Or I could borrow against the value of the house - my mortgage is less than half the value of the house.

As a higher rate tax payer I am loath to lose the ISA benefits, but they always say use savings before borrowing. What would you suggest?

Thanks

dunstonh

The ISA allowances can be far more valuable to you in the long run. Plus if you have a decent investment spread you would be aiming for 10%-15% p.a. average on the returns. That is better than cost of borrowing.

If you have the ISAs poorly invested, such a balanced managed fund or FTSE100/all share tracker then you may want to use the money as they dont offer great potential for growth and you would be much closer to the interest rate any borrowing.

plonkee

Broadly speaking, I agree with dunstonh (although I wouldn't describe a diversified set of index trackers as poorly invested - maybe conservatively invested). The other thing to bear in mind is your attitude to debt and risk.

From the question, I imagine that you are happy with taking on debt, so that shouldn't be a problem.

There is always a risk that you if you keep the money in investments, they might not do as well as the interest rate on the mortgage. If you are happy to take on that level of risk (I would be for example) then thats ok, if it would cause you sleepless nights, then cash in and don't borrow.