Fund home improvements via ISA or mortgage?

pjbennett

Hello
I am looking to have a porch built on my house. I am likely to need to finance the £4,000 cost via my shares ISA or via my mortgage.

My mortgage is £29,000 and tracks the base rates plus 1%. I have heavily overpaid my mortgage and have a borrow back facility so there is no penalty for additional borrowing, the interest that I pay each month will just go up.

I am not sure which would be the most efficient form of borrowing, using my ISA or my mortgage.

I would more than likely pay the money back in 6 months. Saving up is not an option as I have an impatient wife

One of the issues that I have with using my mortgage is probably psychological as I love being ahead with my mortgage and want it gone ASAP!

Does anyone have any thoughts?

Thanks in advance.

colsten

The easy option: If the interest you get from your ISA will be more than the additional interest you will have to pay for your mortgage, use the mortgage. If not, use the ISA.

The more sophisticated option: review whether you should have any money in a cash ISA at all, or whether you could earn a lot more money by shifting your ISA cash to current/Regular Saver accounts. As all of these pay a lot more than BR + 1%, and as this is unlikely to change for some considerable time yet, move your ISA savings to these better accounts, and use your mortgage for the porch.

jimjames

colsten wrote: »

The easy option: If the interest you get from your ISA will be more than the additional interest you will have to pay for your mortgage, use the mortgage. If not, use the ISA.

Not sure if it's been amended but the OP said shares ISA so interest wouldn't be payable and this is one where current accounts aren't appropriate.

pjbennett wrote: »

Hello
I am looking to have a porch built on my house. I am likely to need to finance the £4,000 cost via my shares ISA or via my mortgage.

Does anyone have any thoughts?

Personally I would (and have myself) used the mortgage to borrow for building works. To me it's a no brainer comparing an investment to being able to borrow at 1.5%. Long term you should easily be able to exceed the 1.5% interest with growth from the investments.

I know it's nice to see a mortgage disappear but I find it even nicer to know I've now got a sum invested that could pay off the mortgage 3x over if I so wished.

BTW you may also want to consider that now is unlikely to be a great time to cash in investments with the markets having fallen a bit. So even more reason to use the mortgage money even if you did decide to put it back by selling shares at a later date.