Invest savings or pay down offset mortgage balance?

I have £105k offset mortgage balance, £40k in the joined savings account, so  paying interest on the £65k balance. I need to pay off the mortgage in 5 years. I have £45k in ISA/other fixed term savings. I'm trying to work out if it is better to use that £45k and future savings to pay down the offset balance or continue investing/saving and pay off the mortgage later.

I appreciate any guidance on how to do that calculation, etc.



  • Mark_d
    Mark_d Posts: 292
    First Post Name Dropper
    What interest rate do you pay on your mortgage?  And what net interest rate/rate of return are you making on your ISA and other fixed term savings?  If you make a better rate than you pay on your mortgage, then I'd pay off the mortgage later
  • Assuming the offset mortgage isn't at a decent fixed rate (not sure if you can get fixed rate offset mortgages now anyway) then the mortgage rate is likely higher than what you'd get in savings interest, so paying off/offsetting the mortgage would probably make most sense. If it's an offset then you can always get it back out too.
    Only consideration is that obviously by withdrawing from the ISAs you have lost that potential perpetual tax free income stream in the future, which does have some additional value, though is difficult to calculate.
    Especially as once you are mortgage free you may have excess savings and find it difficult to shelter more than £20k a year in ISAs.
    If the difference between using the ISAs to offset or carrying on with the mortgage isn't huge, it may make some sense to just continue the mortgage.

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