Leave in cash ISA or overpay mortgage

paulcalf_2

Thanks for the replies. The reason the mortgage is small, but with an 8 year term is because i have spent ages massively overpaying. I took out a 25 year mortgage about 8 years ago. I had got it down to less than 4 years, but my income is not what it used to be so I extended the term upwards to reduce my payments.

This exercise is about making my limited funds work as hard as possible. I think it is stupid to pay out more mortgage interest than my savings earn, if i could overpay my mortgage now but draw the cash back as and when required. I have again been told by Nationwide that I can have access to my cash when required, but i will ask for it in writing.

Once the mortgage is paid off, I will re start saving in whatever gives the best return: be it stocks and shares ISA, another house etc. I can't put it into a Stocks and shares ISA at moment as i may actually need the cash.

Hope this information is useful in letting people know what my plan is:
Reduce how much I pay out in interest and maximise my reduced income, whilst still having access to the cash as and when i may need it

jimjames

PeacefulWaters wrote: »

I have read on the mortgages forum that they now telephone interview to assess affordability before release of funds.

With Nationwide?

If the money is your overpayment then their T&Cs state that it can be repaid whenever you want which they have done so for me on several occasions including within the last 6 months.

Trentenders wrote: »

That's some assumption.... I'm on 2.5% (base + 2%) and I'm not with N/wide.

My assumption wasn't just based on the rate but the overpayments too. Looks like it was correct though.

Alisha2008

"The best ISA rate that allows transfers is 1.75% (so i'd earn 350 pa tax free) "


Could you tell me which one is this?


I have my isa with HSBC and their rate is also dropping to 1% in April..

paulcalf_2

Alisha

I think it was britannia, there is a full list of best rates under 'savings' on the money saving expert website. They change fairly frequently.

Alisha2008 wrote: »

"The best ISA rate that allows transfers is 1.75% (so i'd earn 350 pa tax free) "


Could you tell me which one is this?


I have my isa with HSBC and their rate is also dropping to 1% in April..

atush

have you got a pension? how much is the pot?

paulcalf_2

Atush

My pension pot is !!!! poor.
My plan is to pay off this house ASAP, then start saving money in whatever is the best option, possibly another house that i could use as future pension income.
Thanks

Paul

atush wrote: »

have you got a pension? how much is the pot?

kingrulzuk

paulcalf wrote: »

Atush

My pension pot is !!!! poor.
My plan is to pay off this house ASAP, then start saving money in whatever is the best option, possibly another house that i could use as future pension income.
Thanks

Paul

Agree. Pay off ur house.

F1F93

I've done some figures on the MSE calculator, a 28K mortgage at 2.5% over 8 years works out at around £330 a month. If you paid it off, and kept your payments the same, an 8K mortgage would be paid off in about 2 years. So yes, you'd lose your tax-free wrapper, but you'd be mortgage free in 2 years, and could then pay the £330 into building up an ISA again. So, when rates do rise, you'd be able to build up your fund a lot quicker than you could now. Assuming you didn't save into your ISA at all, and started again when you finished the mortgage, you'd build the 20K back up again in just 5 years - even quicker if you paid more than the mortgage payments.


If you don't want to invest in S&S, I'd pay off the mortgage.

guymo

F1F93 wrote: »

I've done some figures on the MSE calculator, a 28K mortgage at 2.5% over 8 years works out at around £330 a month. If you paid it off, and kept your payments the same, an 8K mortgage would be paid off in about 2 years.

Heh, I was going to suggest paying off the £20k but keeping the term the same on lower payments. This way OP retains the option of redrawing the overpayment for the full period of the mortgage and can make use of the extra monthly money for whatever purpose.

paulcalf_2

guymo & Fif93 & kingrulzuk

Thanks for the replies

I think that is what i will do. I will leave the term the same for more flexibility with borrowing back my cash in the future.

Thanks

Paul