cashing in ISA to pay mortgage ?

ourjulie

Hi , Can anyone please offer an opinion ? A number of years ago I invested £12k redundancy money in a multi -pep (now ISA )

This has doubled to £24k which is the balance of my mortgage

If I continue to pay my mortgage over the next 10 years ,based on current interest rate ,I will be paying an additional £8k

Should I cash in the ISA and pay off my mortgage ?

[Deleted User]

You don't say how much you're currently paying for your mortgage or what is the interest rate, but I would have thought that you may be better off to pay off your mortgage and start a new iSA with the mortgage amount you'l be saving. You may find that over the 10 years, you could end up with more than the 8K especially if the mortgage interest rate goes up during that same period.

It may also help to know if your mortgage is a repayment or interest only

eskbanker

If it's a repayment mortgage, paying an average of £800/year in interest on what will be an average balance of £12K would be 6.7% interest, horrendous!

Even £800/year interest on the full current £24K balance (if interest-only) would be 3.3%, and would suggest that OP has some unmentioned but significant investment via which to repay the mortgage in ten years time.

Either way, cashing in the ISA seems sensible, especially if redirecting that monthly payment to a new one....

ourjulie

Hi thanks for your reply. The mortgage is repayment only .I'm not on any fixed rate and the monthly payment is £267

Albermarle

This has doubled to £24k which is the balance of my mortgage

If you leave the ISA for another 10 years , it could be worth £60 K or £10K , or any figure inbetween
So it is an unknown whereas paying off your mortgage gives you a quantifiable gain now .

xylophone

You might consider paying off the mortgage and investing the freed up monthly payment into a stocks and shares ISA.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

https://monevator.com/using-vanguard-lifestrategy-funds-life/

Alexland

ourjulie wrote: »

Hi thanks for your reply. The mortgage is repayment only .I'm not on any fixed rate and the monthly payment is £267

I just plumbed your £24k mortgage over 120 months at £267 per month into an amortization calculator and it tells me your interest rate is 6% which is high.

I also plummed your £12k doubling over 20 years into a compound interest calculator and it tells my your average return was just over 3% which is low.

So on the basis you have an expensive mortgage and a low growth investment then it would make more sense to pay down the mortgage. The decision might be different if you had more attractive products. Of course it's always worth ensuring you retain a suitable cash emergency buffer.

Alex

AnotherJoe

I agree to clear the mortgage and then invest what woudl have been the the mortgage payments in your pension which hopefully will have a better strategy than what seems like a very poor choice of investments in your ISA.
How did you end up with such a horrendous mortgage rate?

And who picked the funds you invested in the ISA?

ourjulie

Hi thanks for replies everyone. The Isa is split between my husband and I. We both have 14k . He tells me that the mortgage is now £18k (we pay different bills I hadn't checked for a while) . We had an endowment policy and switched to repayment and haven't considered other mortgages to be honest ,as in mid 50's .
I could cash in my isa and pay £4 from my savings which would clear the mortgage. We could then keep one isa and add to it.The investments are spread over 4 companies (this product was called a multipep when we bought it with Old Mutual this was on advice from a financial adviser ).I'm concerned about the effect of Brexit on the British companies where my money is invested.I know no one can be sure but I'm feeling that I should cash them both in.I have a pension of 18 years from BT which is frozen , I was told i shouldn't touch this .I have a pension of 16yrs from Aviva ( I worked part time). I'm currently in a Coop staff pension where I have worked for 2 years.Coop insurance have been sold so I'll be revisiting my pension in the near future ,

eskbanker

ourjulie wrote: »

The mortgage is repayment only .I'm not on any fixed rate and the monthly payment is £267

ourjulie wrote: »

the mortgage is now £18k (we pay different bills I hadn't checked for a while) . We had an endowment policy and switched to repayment and haven't considered other mortgages to be honest ,as in mid 50's .

The smaller mortgage balance means that the deal sounds even less competitive and worth escaping from at the earliest opportunity!

Are you really going to be paying another £32K in total for a debt of £18K or is the repayment plan variable in some way? If repayments are constant that would be an annual interest rate of about 13%, which I find hard to believe....