ISA or Pay of some of mortgage?

californiaballroom

I have just received £12,500 from a savings account. Should I reinvest in an ISA or pay off some of my mortgage which is approx £109,000. This is a buy to let mortgage with 14 years left on it.

missile

You have not given us much info to comment on


1.What rate do you expect to get from ISA?
2.What interest rate do you pay on BTL mortgage?
3.Can you offset interest against income?
4.What is your strategy for BTL?
i.e. When do you intend to sell / buy another?
5.Are you high rate tax payer?


Some points to ponder:
1.Once you pay off part mortgage that money will be tied up.
2.If you invest in ISA you can access the cash.
3.Other savings options offer better rates of return than ISA.

californiaballroom

I'm not HR..

BTL is fixed at 4.19% until December this year, then 13 years variable currently 4.84%.
This is an interest only mortgage, so the aim would be to sell the house at the end of term.

The £12,500.. If paying off the mortgage isn't an option, then I was thinking of putting it into as easy access account for the time being, rather than locking it away for years.

atush

Is this your only cash? Do you have a pension?

If you have other cash for emergencies and to cover the costs of your rental, given the interest is a deduction for tax purposes i'd consider putting some if not all the money into a pension. If some, i'd consider a S&S isa for the rest.

Snakey

californiaballroom wrote: »

If paying off the mortgage isn't an option, then I was thinking of putting it into as easy access account for the time being, rather than locking it away for years.

You're going round in circles a bit here. Do you need immediate access to this money or not? If you think you might, then you shouldn't be using it to pay down mortgage capital. Whatever circumstance change you have in mind that would leave you needing that money, might also be a barrier to being able to remortgage - meaning that to access the money you would need to sell the property, which could take a year or more with tenants in situ and/or if the market has dropped as well as being a sledgehammer to crack a nut.

You should work out what you might need as a disaster fund or for planned short-term spending/investment, and put that amount into a 123 account or an ISA (depending on what you've already got and where). Then start weighing up your options for the remainder.

atush

Cash emergency fund. Pension.

Then think about overpaying (the house where you live not BTL) then think about S&S isas.

enthusiasticsaver

You are not going to get 4.19% interest on a savings account and definitely not into a cash isa so if you definitely do not need access to it and there is no penalty for paying it off the mortgage that would be my preference. Putting it in stocks and shares gives you no guarantee it will outperform 4.19% especially in the short term and it is not readily accessible. Saying that you should always keep some cash back for emergencies so if you have no other savings you might want to consider keeping some back. On many fixed rate mortgages there is a limit to what you can overpay anyway so you should double check that.

sue_marie

Do you get income tax relief on your Buy to Let mortgage interest?