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Use investments to pay mortgage or keep investing?

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Hi, newbie here with a question. Over the last 20+ years we have been saving and 7 years ago put the money into a stocks and shares ISA which has given us a return of approx 7% spread (ups and downs) over the last 7 years. We are currently on a cheap fixed rate mortgage with roughly £85k left to pay when our deal ends early next year. So my question is should we use our ISA savings to pay this off (and save the interest) or continue with our investments and suck up the mortgage price hike (£250 extra per month)? Current mortgage quotes are coming in around 6.2%. Is it as simple as 7% return on investments beats 6.2% interest on mortgage?

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  • Exodi
    Exodi Posts: 3,982 Forumite
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    edited 13 July 2023 at 2:25PM
    While this doesn't constitute financial advice, if it was me, as I base my estimates on future returns of a more modest 5%, I would personally sell up these investments to offset the 6.2% mortgage, though this also depends on how long is left to run on the mortgage and a guesstimate of what the interest rate across the whole life of the mortgage might be (a lengthier mortgage of 10+ years I would probably stay invested as I don't expect mortgage rates to stay above 5%+ in the long term).

    If you believe your investments will continue to return you 7% after OCF and platform fees then it is as simple as 7% > 6.2%.
    Know what you don't
  • r6mile
    r6mile Posts: 258 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    If I were you I would pay off the mortgage as the difference is not great, and of course you have no certainty on that 7% return (whereas the interest rate payable on a fixed-rate mortgage is certain!). 

    Of course the calculation was different when interest rates were sub-2%...
  • Sg28
    Sg28 Posts: 450 Forumite
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    Im paying mine off. 

    The difference is just not big enough. Once paid you can up your monthly investments by the money you would have paid on your mortgage. 
    Ex Sg27 (long forgotten log in details)

    Massive thank you to those on the long since defunct Matched Betting board.
  • boingy
    boingy Posts: 1,919 Forumite
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    Based on mortgage rates today I'd be for paying it off as long as that leaves you enough savings to cope with unexpected life events. Of course, none of us know what the rates will look like when your mortgage ends. The point above is a great one. There is no certainty that the investment will outperform whatever the mortgage rate is over a few years. Over the longer term the investment *should* do so but it's still not guaranteed.

    Pay off your mortgage and make your friends jealous!
  • Albermarle
    Albermarle Posts: 28,058 Forumite
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    Hi, newbie here with a question. Over the last 20+ years we have been saving and 7 years ago put the money into a stocks and shares ISA which has given us a return of approx 7% spread (ups and downs) over the last 7 years. We are currently on a cheap fixed rate mortgage with roughly £85k left to pay when our deal ends early next year. So my question is should we use our ISA savings to pay this off (and save the interest) or continue with our investments and suck up the mortgage price hike (£250 extra per month)? Current mortgage quotes are coming in around 6.2%. Is it as simple as 7% return on investments beats 6.2% interest on mortgage?
    Investment returns during the last decade were very good and were also OK in the first two years of this decade, despite Covid. So as @Exodi says 7% pa looks a bit on the high side for the coming years, but nobody knows of course.
    So from this point of view paying the mortgage seems a better bet.
    However without knowing your full situation ( pension provision, cash savings etc) it is only possible to speculate.
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