Pay extra to mortgage or open s & s ISA?

chalky2011

Hi wee bit advice needed, I was thinking of opening a stocks and shares ISA but I have just realised if I put the £1200 a year into my mortgage I should pay it off in 5 year rather than 6. What would you guys advise. I have a balance of circa £38000 on the mortgage and I pay £496 per month then overpay another £100 per month already, interest rate is 2.2% are my maths correct?any advice appreciated

Chalky2011

csgohan4

can you get an ISA that delivers more than 2.2% if not consider putting it into a mortgage if you have enough emergency funds

chalky2011

The stocks and shares ISA would not give any guaranteed return so I was just enquiring in case any one on the forum had previous experience with the likes of this

Chalky

Thrugelmir

Investing in stocks and shares should be viewed as long term. Markets are volatile. The inherent risk being that at the time you wish to cash in, the value of the shares would have fallen.

Being debt free is a great feeling. Once free then you can turn your attention to longer term objectives such as pension provision.

Only you know your personal circumstances and what level of risk you are comfortable with. The one certainty of overpaying the mortgage is that it offers a risk free guaranteed return.

ValiantSon

There is no right or wrong answer here. Clearing the mortgage faster will obviously save interest, and the benefit of no longer having the commitment every month frees up capital for you to invest. However, as it will only reduce the term by one year, and you are very close to clearing it anyway, then you might consider investing now. Picking a suitable investment might return more than your mortgage rate, but of course nothing is certain when it comes to investments.

In your circumstances, you should ask yourself whether you are willing to bet that the growth in an investment over the next five years will exceed the extra interest that you will pay on the mortgage. My guess is that it will, but I may be completely wrong (and if I am, I will be rather miffed about the returns on my own investments!).

chalky2011

Thanks to both replies above, I am kind of between the 2 options and I am now considering a third option of investing the money and even if I got no growth at all over the 5 years I still should have enough to clear the mortgage anyway as long as fund doesn't decrease by more than Say 20%.
I realise the value of stocks and shares can go down but I guess I will just need to decide on my degree of risk and take it from there.

The_Real_Cheddar_Bob

You need to look at what you think will give you the most flexibility. Your money in your control is far better than in the mortgage company's hands.

AnotherJoe

Will there be any extra charge for redeeming your mortgage a year earlier ?
How old are you, and what is your pension provision like ?
Are you a high rate taxpayer ?