Leave money in ISAs or use to pay of IO portion early?

pjapk

I'm almost 15yrs into 1 20yr mortgage, 5yrs 7m to finish.

Original was IO of £26k, later added to with a £30k repayment. Current total balance is £43k (so around £17k of which is remaining repayment portion).

For financial reasons I stopped paying into original Shares ISA after a few years & never got back into paying it but glad I didn't as the value of it dropped significantly in the 2008 crash anyway!

Since then I've hit better times & over the last few years have accumulated around £11/12k in Cash ISA and have around £2700-ish (last time I looked) in the shares ISA so lets say around £14k in ISAs.

Mortgage is currently on SVR 3.99% with Halifax, & no early repayment issues as I'm "out of contract" or whatever it's called in mortgage-speak! Looking at Halifax site it looks like I might even be able to get that a bit lower with 0% fees as well but need to double-check & possibly have a chat with them (to save messing with valuations etc.)

It has occurred to me that ISAs really aren't paying much interest, certainly not 3.99%, and /probably/ aren't likely to jump that significantly in the next few years either.

On that basis, is it worth me just pulling out what I currently have in ISAs now & paying that portion off of the IO part or is that just stupid?

I'm not too worried about the remaining portion of the IO as I'm planning on side-lining another £3-5k this year, either into the ISA or into the mortgage directly.

I'm a contractor of 3yrs, earning well ATM so wanting to make the most of things while I'm able but don't want to eat into the war-chest (of around £23k, currently sitting in the business account) at this stage as it's likely I'll be finishing the current contract before the end of this (calendar) year. I'm also a higher-rate tax payer.

The only thing niggling me is feeling that over-payments tend to work much better early in a mortgages life rather than later so I'm not sure if it's likely to prove beneficial after all, just seems a "waste" leaving it in the ISA doing not alot with current rates.

Any suggestions/ideas would be gratefully appreciated, i.e. what would YOU do in my position?

TrickyDicky101

3.99% is costing you 3.99% irrespective of what point in the mortgage term you are.

Assuming you don't need the ISA cash for a rainy day fund (which is effectively your business account by the sounds of it) then, if I was in your shoes, I would pay down the ISA against the mortgage.

A guaranteed return of 3.99% is very good IMO.

Thrugelmir

pjapk wrote: »

The only thing niggling me is feeling that over-payments tend to work much better early in a mortgages life rather than later so I'm not sure if it's likely to prove beneficial after all,

Money is money.

As Einstein famously said about compound interest. "He who understands it receives it, he doesn't pays it".

Choice is yours.

getmore4less

Subject to penalties

I would look for what options the lender has.
then depending on if I could keep the I/O portion overpay the repayment, reduce the contractual payment and save/overpay to a level at least enough to pay of the loan on contractual term, knowing I could reduce the payment if needed.