Don't know what is best. Wait and save or use ISA?

davesw6

Hi. My situation is better than most I know but still want to make the right call.

We currently have £22100 to pay off our mortgage and have a fixed for life interest rate of 0.89 above the base rate. Currently paying £750 per month instead of the minimum £379. At the current rates we should pay off our mortgage in just 2 and a half years. We have £15000 in ISA savings. We want to make some home improvements that will cost £20000 and have been offered a loan at 4.9% over 60 months. We are due to have a savings policy mature in August 2016 that will pay out approx £11000.

We do not want to completely empty our savings as having security makes sense to us. We have no loans (not one!!) but don't know whether to use part of our savings and lower our mortgage payments until we get to August 2016 then have sufficient for the home improvements, take out the loan, or just continue to overpay and then start saving once the mortgage is done.

We are not desperate for the home improvements and know we can afford them....just don't know which way is the best.

We are 46 year old couple, one teenage son with a family income of approx £58k pa.

edinburgher

There's absolutely no point in taking out a loan that's something like 3% higher than your mortgage rate, that would seem to be self defeating.

Personally? I'd do whatever was the most efficient use of your money, which is probably going to be either waiting, or a combination of cutting back OPs and using some savings.

Hurdler

I would agree with Edinburgher - if you don't need the improvements and can hang on for a bit that would seem the best option. I truly look forward to the day my mortgage gets that low - well done!

edinburgher

Absolutely, sounds like a lovely place to be

someday_soon

Hi There

I understand the security blanket thing, and I am sure that this cash is outperforming any savings you might make on your mortgage interest. If you need/want to borrow then you need to do this at the best available rate to you which is clearly the mortgage rate unless you want to 'borrow' from the policy due to mature from your current savings IYSWIM

Good luck with your future plans

Someday Soon

davesw6

Thank you for your posts. We have decided to overpay more money on the mortgage and will up it to about £1000 per month. At Christmas next year we will pay off any remainder of the mortgage from the ISA and continue to save £1000 pm until August 2016 when the savings policy matures. This will give us the £20k that we need and only made a minor dint in the ISA (if any). Looking at it this way we will be mortgage free by Dec 2015.
That will be a good Christmas.:beer:

Thanks for the replies. :T

getmore4less

Why on earth are you overpaying when you can get more interest from savings?