Pay it off early with ISA?

[Deleted User]

Not sure which Mortgage forum to put this.
We have a high rate (5.8%) repayment fixed for 10 years ending 2019 (for£59,000 +- a few quid I think). Yes I know, my crystal ball was a cheap and as you can tell, I am a financial whiz......

However, overpayment over the last few years has us in reach of November to pay off without using savings, actual time end at this rate of overpaying following this course, Jan 2017 I think. We have a few cash ISA's that will pay off what is left, around £10,777 owing (£10785 as of today). Redemption 5%, £539 and £30 paper work.

Obviously this takes away a chunk of savings but we are then free to re invest the mortgage of £627 and overpayment of £499 every month. And the cover that we have for mortgage payments, critical illness etc. £130 or so.

At the moment the cash ISA are not doing anything, I was being being a tad lax with them, they are on a minimum deal not wanting to tie them in to a long term deal forgot about them.

No other debts. Cards etc. at zero. Nothing on the cars. Some other savings in shares, as we had the ISA's, all the spare loot was going into overpayments.

A spread sheet that was borrowed from the Internet somewhere seems to indicate around £500 saving in interest doing it now. Is this going to be a wise move, my head says yes? Worst case cash needed after using the ISA, some shares can cover. After 8-10 months we will be back up to what we spend now but without this anvil around our necks.

One more month will have us with a nice safety net from the ISA. No job issues on the horizon.

I am in the high rate tax bracket as well. Big step, is it right?

getmore4less

Can you be clear where you are.

How much per month is the contractual payment?
How much could you pay per month total
How much do you owe now?
What is the ERC now, does it change in the future if it does when and what rates including the end of fix where it drops to zero.
What are your ERC free overpayment terms
How much do you have in cash now.

[Deleted User]

Sorry, rambled a bit. Thanks for the reply.
629 (not 627) per month for the mortgage.
499 max per month for overpayment. Add these two for month total able to pay, it the max allowed.
ERC 5% at the moment
ERC free is the last year so that will be 2018-19.

10788 owing today. 12600 ish in the ISA.

Extra 1£30 or so a month to cover mortgage being payed at the moment to critical illness cover, that can be stopped and added to monthly savings.

Edit. ERC final years is not zero. Need to double check, think it decreases but not past 1%. Last year it was 6%

getmore4less

if you owe £10788 today @ 5.8% erc 5% is £540

you can pay £629pm + £499pm

£10788 @5.8 % paying £629pm paid off in 18 months £501 interest.
£10788 @5.8 % paying £1028pm paid off in 11 months
£310 interest.

Just max your payments cheaper than the ERC.
doing an ERC payable overpayment table(rounded to £1)
Op.....ERC.interest.total.
£0000 £000 £310 £310
£0500 £025 £283 £308
£1000 £050 £257 £307
£1500 £075 £232 £307
£2000 £100 £209 £309

depending on exact timings of payments there will be an optimum overpayment with ERC now, probably around the £1k and will save an extra £3-£4 if you can be bothered

[Deleted User]

Thanks, I have it now you have laid it out.

Tantalising to pay it off for the hell of it, the pay back to balance out the 310 will be re arranging the critical illness cover from the existing deal but keep something just in case. Wrong figure in the first post for critical illness. 79 a month. It is a belt and braces one to look after the mortgage etc. taken out many more moons ago that this 10 year deal.

A pondering time indeed, its like a siren just out of reach.

Thank you.