any point getting an isa or should i overpay the mortgage instead

haras_nosirrah

hi

i have a btl mortgage at 6.29% i can overpay but can't get the money back and a resi mortgage at 3.03% that if i overpay i can underpay (nationwide)

i had 5k in an isa paying 3% last year but rates are so bad i am debating using the money to overpay mortgages instead probably into the resi so i can get the money back if needed as it is my emergency fund for the btl

is that a stupid idea?

all the debts in my sig are 0% and are being cleared from salary

DragonQ

The general advice is usually to pay off higher rate debts first, rather than earn lower amounts in interest, but keep back enough savings to help you if you encounter hardship.

marathonic

The BTL mortgage interest will have tax advantages but the rate is extremely high. It'd be worth overpaying this as much as possible until the LTV is low enough to re-mortgage to a better deal. Then consider paying down the residential mortgage or investing in a S&S ISA

haras_nosirrah

the only concern I have with overpaying the btl is that the money is then gone. I know it costs me more but I need to have the cushion of some savings incase on non paying tenants. I am tied into this btl mortgage till march 2015 so can't do anything with it at the moment. I fixed it just before it dropped - doh. at 5% erc it isn't worth switching unfortunately.

It's quite sad when the best available savings rate is 2% odd.

marathonic

Well, in that case, work out your monthly expenses including personal expenses and expenses if the BTL were empty, multiply this by 3 and save in a Cash ISA until you reach this figure. Then overpay the BTL mortgage as quickly as possible - bringing you to a low LTV by the time your fixed rate ends..