Advise Needed

johncolescarr

Hi,

My Fiance and I have taken out a 100% mortgage for £138,000 in May 07 over a 35 year term fixed at 5.39% for 3 years as this what we could (reasonably) comfortably afford. I intend on remortgaging in 3 years to a 22-25 year term. We are both young (26 and 25), we are both fully employed and at the start of our careers. Although the mortgage is affordable and we save money each month, its not loads (between £50-200 a month, this may go up depending on promotion/pay rises). We plough all of our savings into cash ISAs at 6.05%, as you can see, we don't reach our tax free limit. We have both managed to pay off our loans (and my credit card), prompted by this amazing site. :money:

Should we pay off our mortgage with this money instead? We have a flexible mortgage and we can overpay 10% of the value per year (we will never be able to reach this!), or should we try to save. On paper, the cash ISAs should give us a better return, but I am very worried that if we want to move in 3 years time that we will be unable to do so as we made a bit of a mistake by buying a nice new house on a bit of a run down area and I fear that we may have trouble selling, possibly negitive equity. However, I am worried that we would not have a safety net if anything were to happen, as we have no significant savings. Please could you offer some advise.

Thanks

John

Moneygoes2money

johncolescarr wrote: »

Hi,

My Fiance and I have taken out a 100% mortgage for £138,000 in May 07 over a 35 year term fixed at 5.39% for 3 years as this what we could (reasonably) comfortably afford. I intend on remortgaging in 3 years to a 22-25 year term. We are both young (26 and 25), we are both fully employed and at the start of our careers. Although the mortgage is affordable and we save money each month, its not loads (between £50-200 a month, this may go up depending on promotion/pay rises). We plough all of our savings into cash ISAs at 6.05%, as you can see, we don't reach our tax free limit. We have both managed to pay off our loans (and my credit card), prompted by this amazing site. :money:

Should we pay off our mortgage with this money instead? We have a flexible mortgage and we can overpay 10% of the value per year (we will never be able to reach this!), or should we try to save. On paper, the cash ISAs should give us a better return, but I am very worried that if we want to move in 3 years time that we will be unable to do so as we made a bit of a mistake by buying a nice new house on a bit of a run down area and I fear that we may have trouble selling, possibly negitive equity. However, I am worried that we would not have a safety net if anything were to happen, as we have no significant savings. Please could you offer some advise.

Thanks

John

As your ISA rate is higher than your mortgage rate, I would pay into cash ISAs until you are both maxed out for the current tax year then overpay the mortgage. Then review the situation at the start of the next tax year, if the ISA rate is still higher than mortgage rate then pay into ISAs.