Advice: overpay mortgage from cash ISA reserves?

everton85

Hi all

Hopefully this is the right forum, I usually only participate in the Matched Betting one, so I might be posting this in the wrong one. Apologies if so.

I'd like some advice from you regarding overpaying my mortgage.

I currently have around 60k left to pay on my Capital Repayment Mortgage with Nationwide. It's currently got an interest rate of 2.49% (my mortgage is a tracker of 1.99% above the base rate). My agreed redemption date is June 2037. I've already overpaid £10,500.

I also have £20k in a cash ISA (paying 1.5%) and £10k in a fixed rate eBond (paying 1.8% net).

My question is: would it be in my interests to withdraw the money from the cash ISA and / or the bond (I would incur fees of £130) to make a further overpayment on my mortgage.

I'm struggling to calculate whether it's better to this and save on the interest charges on the mortgage, or whether it's better to keep my ISA balance up.

Grateful for your thoughts.

getmore4less

Are you filling your ISA allowance every year, what tax rate.

You will save money by paying off the mortgage it is at a higher rate but you loose the long terms tax free status of the ISA which is not much now but might be more when rates rise.

If you are not using the full allowence anyway then you can top up the ISA so it is a non issue

everton85

getmore4less wrote: »

Are you filling your ISA allowance every year, what tax rate.

You will save money by paying off the mortgage it is at a higher rate but you loose the long terms tax free status of the ISA which is not much now but might be more when rates rise.

If you are not using the full allowence anyway then you can top up the ISA so it is a non issue

I have been filling my ISA allowance every year but given the changes in the recent budget, I'm unlikely to be able to put £15k in this year, especially if I continue making overpayments on my mortgage.

I was thinking perhaps it's best to overpay as much as I can on the mortgage now whilst rates are still low. I keep reading that the general consensus is that rates will start to go from next April.

dimbo61

Long term tax planning and retirement savings !
Well done on building a good ISA savings so far.
Now if your job is safe ?
I would keep the ISA,s and also overpay the mortgage.
Now if interest rates go up consider paying a lump sum off but keep £16K in ISA savings as an emergency fund. ( think benefits )

Thrugelmir

Keep an emergency fund of say 6 months expenditure. Above this overpay the mortgage. Interest rate rises are on the horizon that's a stone wall certainty. So the more you reduce your debt the less you'll be impacted.

everton85

Any further advice on this?

Given it's unlikely that the ISA allowance will be reduced from £15k, I am thinking I may as well withdraw half of my £20k in ISAs and pay off a lump sum of the mortgage.

My ISA is currently only paying 1.5% where as my mortgage repayment rate is 2.49%.

Yorkie1

Do you also have pension arrangements sorted out?

everton85

Yorkie1 wrote: »

Do you also have pension arrangements sorted out?

Yes. I work in local government and am part of the LGPS Local Government Pensions Scheme, which is one of the better schemes out there.

everton85

Should probably have added that I'm 29 years old

gazter

everton85 wrote: »

Yes. I work in local government and am part of the LGPS Local Government Pensions Scheme, which is one of the better schemes out there.

you are set for life on that.... LGPS is one of the most generous schemes out there, and all shortfalls are met by employer not employee.

everton85

gazter wrote: »

you are set for life on that.... LGPS is one of the most generous schemes out there, and all shortfalls are met by employer not employee.

:beer:

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