Better to save or pay off some of mortgage.

gunboat4

Hi. Our mortgage is half repayment half interest. In total still owe 65k . On repayment side we have Isa to hopefully reach £41k target. Target time fast approaching. However I don’t know if it’s best to put the £41k into a high interest account 5%? and don’t touch it for 2 yrs building a nice bit of interest or would I be financially better off just paying the £41k off to the building society. The Isa matures in 2 yrs where as the mortgage still has 4 yrs to go. Sorry if this is not explained well but any advice would be appreciated. Thankyou

ian1246

Is the interest rate on the mortgage higher than the interest rate on the ISA? If so, provided there are no Early Repayment Charges you'll be better off paying the mortgage off.

On the flip side - a higher interest on savings means you'd be worse off paying off the mortgage.

Worth also mentioning pension - if your nearing retirement, it may be worth putting the £41,000 into it & getting 25% tax relief back - then withdraw it once you hit pension age & use to pay off the mortgage.