Overpayment v S&S ISA

DireEmblem

How long do you intend the mortgage to run, if over 10 years, keep the funds in a S&S ISA. The longer the term, the more likely a cheap global equity tracker should beat the savings on your mortgage interest, so you could ultimately end up being mortgage free quicker.

steampowered

Given your circumstances (young age, under 60% LTV mortgage) it would be madness to focus on overpayments IMHO. The benefits of investing into a S&S ISA or a pension are too great. 

Especially if you are a higher rate tax payer?

geocatwest said:

I know, 'traditionally' the rate of return in this is likely to be higher. I put around £200-300 respectively away in different ETF's. 

Given your age, I assume we are looking at a 20 year plus investment horizon. The rate of return on stocks & shares over that sort of period is almost certainly going to be higher - we are talking a 99% plus probability. The average return generated by the stock markets is about 7.5% per year.

geocatwest said:

I'm thinking of being more savvy and would like to think about maximising my returns for paying off the mortgage much earlier, as you can make a case that putting overpayments into a mortgage (whilst you may see your value go down quicker, you do not gain any interest from it.

Most banks calculate the interest added to your mortgage balance monthly (not annually).

geocatwest said:

are there any  'consequences' to taking out money from the S&S ISA on a 'regular' basis, i.e. 3-6 month intervals and then putting it into the overpayment (i.e. interest gained from that period of time)

There are no particular consequences to withdrawing money from a S&S ISA, aside from the following:
- You may have to pay dealing fees each time you buy or sell, which might eat into your returns a bit if you do it frequently.
- You are giving up the investment returns generated by an S&S ISA (on average 7.5% per year if invested fully into equities).
- You are giving up the tax benefits associated with having investments in an ISA wrapper.