ISA or current accounts then ISA

tim_n

I'm looking to "pay off" my mortgage. By that I mean saving enough money to pay off my mortgage, but if interest rates are right I'll keep the money and earn off the interest.

To do this, I'm selling my old flat and releasing 50k equity after solicitors etc. (I could have kept this as an investment, but I'm self employed and the mortgage interest rate is 4.5% and as I'm only just self employed with only 6 months earning under my belt, I've been told it's unlikely I'd get a better rate by a broker). The flat isn't in a great area and a tenant soured my experience of letting - it keeps me up a night, so I'd rather get rid. I bought right before the housing crash, so I'm realising about 15k actual gain now the market is recovered.

I have 39k in three 1-2-3 accounts (and their credit card which I'm using and abusing to get the most cashback)

NB the wife is heavily invested in this strategy as well (well, she's coming along for the ride, she dislikes anything to do with finances, but she's also sensible and doesn't spend a lot)

My current thought is to fill the current accounts up first to bursting, leaving 30k and I'm due £9k at the end of the month.

I could fill up two ISA to bursting and any remaining in the new year could go into high interest accounts like those offered by TSB/Nationwide etc and then do lots of transferring to maximise interest.

My current mortgage deal (£173k @ 1.69%) will expire in Jul 17 and I'm not currently overpaying. Instead of an ISA, I could put 10% of the mortgage value in (reducing my ongoing interest payments) once high interest accounts are all full instead of either one or a full ISA.

Ideally I want the money to be available around Jul 17 just in case I fancy just paying it off (and by that I mean, leaving about 10k debt just in case I need to expand it again for a planned extension in a few years)

Thoughts?

ISA, then Savings
Savings, then ISA
Savings, pay 10% off mortgage, then ISA?

jimjames

Cash ISA would be completely at the bottom of any list for me. At least until all available current accounts were filled which would be over £100k for a couple.



Ultimately look at the interest rate and use the best rates first. No point paying into an ISA at 0.5% when you can get 5% in a current account.

However I do use S&S ISAs which are still beneficial in my view.

tim_n

Only real reason for putting away money in an ISA would be the future tax advantage I would have for savings if rates did go up and I was still fixed in to a low rate on the mortgage for 2017-19.

Archi_Bald

What is the likelihood of rates going up significantly by 2019? We will be lucky to see a 0.25% base rate rise before 2017.

jimjames

tim_n wrote: »

Only real reason for putting away money in an ISA would be the future tax advantage I would have for savings if rates did go up and I was still fixed in to a low rate on the mortgage for 2017-19.

How much are you talking about here? If you are filling an ISA every year for 10 years then it may be worthwhile. But most people aren't and over 10 years then it may be worth looking at other options than holding all cash.

tim_n

By end of Jan, I'll have £105k in savings essentially. I hope to increase that to £115 by end of March.

Where should I put that extra £15k? (low risk & all the usual high interest accounts are full...)

Mortgage?
ISA?
A.N.Other?

bigfreddiel

This is all very simple, and you can pay for this advice if you want to.

This next bit is not advice, but this is what you would pay for from an ifa, and as they only give advice it has no guarantee - must be one of the few things you can buy that isn't covered by any sales act, bit like houses, even new ones which are the biggest purchase you will ever make.

Anyway here is how simple it is.

How long do you want to save or invest for? And why are you investing/saving?

Short term, 5 yrs or less, go for the highest interest possible.

Longer than 5 years s&s ISA, cheap simple tracker and gilt etf's

And that's all there is to it.

Cheers fj

enthusiasticsaver

If you need ready access to all of it then current accounts and regular savings in both yours and your wife's names. TSB, Nationwide, Lloyds, BOS, Tesco and if you must Santander 123 but bear in mind that there are fees of £5 per account per January so you might want to consider going down to 2. You can also look at regular savers and shift monthly from the current accounts to those - Nationwide Flexclusive, TSB and First Direct all pay 5 or 6%.


If you can afford to put some away for 5 years or longer then look at stocks and shares isas but personally I would not bother with cash isas. The only one I have is a Coventry building society one fixed term over 4 years at 2.4% but only bother about that if all current accounts/regular savers full.

colsten

bigfreddiel wrote: »

This next bit is not advice, but this is what you would pay for from an ifa, and as they only give advice it has no guarantee - must be one of the few things you can buy that isn't covered by any sales act, bit like houses, even new ones which are the biggest purchase you will ever make.

Oh for goodness sake, can you stop your bile campaign against IFAs. If you think all you get from an IFA is what you described as follows, you clearly don't understand what paid-for advice from an IFA consists of. Before you launch a salvo at me: I am no IFA, and not connected to anyone who is.

bigfreddiel wrote: »

How long do you want to save or invest for? And why are you investing/saving?

Short term, 5 yrs or less, go for the highest interest possible.

Longer than 5 years s&s ISA, cheap simple tracker and gilt etf's

And that's all there is to it.