Keep money in an ISA and pay less deposit on Mortgage, or lay down bigger deposit

h1n1

Hello
I have approx 170,000 in an ISA. A property may be becoming up on the market for say around 300K. With my partner's savings, we could have 230,000 in savings. 
Would it be better to lay down the money on a deposit, or would it be better to keep some in my ISA?
Just wondering if having money kept in ISA would off set mortgage interest, and it being in a ISA (which has taken years and years to build!) would continue to provide income after mortgage is paid off. 

I was thinking that the income of the ISA or bonds, would off-set the higher monthly cost (as the deposit wouldn't be as big) and then once paid off, the sum would continue to provide income and not be subjected to tax as it would be in an ISA still 

any ideas welcome 

Mark_d

To get the lowest mortgage interest rate I think you generally need a 60% LTV.  So I'd suggest you and your partner put down £60k each as deposit.   The property would then be equal between the two of you, you would get the best mortgage rate, and you would still have £110k in ISA savings.

eskbanker

One of the key factors in any such mortgage v savings decision is relative rates, i.e. do your savings deliver interest at a higher rate than you'd pay on your mortgage?

Veteransaver

eskbanker said:

One of the key factors in any such mortgage v savings decision is relative rates, i.e. do your savings deliver interest at a higher rate than you'd pay on your mortgage?

That is true, though it's worth considering the impact of losing several years of ISA contributions from a future taxation perspective, ie money in the ISA wrapper has a greater value than simply the difference between interest rates. particularly in light of potentially the op taking a relatively smallish mortgage which could be cleared fairly quickly.

RogerPensionGuy

I'm always glass half empty. 

I do wonder if they will pull the plug on ISAs or just negatively tinker with them in the future. 

I wish I had ploughed more cash into ISAs over the years. 

I would try and keep ISA well stocked if possible. 

It's all about juggling I guessing. 

I wonder if any lenders do a mortgage offset that can include an ISA.

That 170K ISA chunk being left well alone could in hindsight could be a very shrewd position. 

h1n1

Thanks for the thoughts. 
I was told by my bank that the 170K in my ISA, ( which will be 180K once the new tax year starts), is very good - particularly because of the tax-free element ... this will continue to grow each month. 
I am very reluctant to touch it because of the value of it being held in ISA and whether it would be more worthwhile calculating the 'income' of it each month to offset a mortgage ... so if I could say afford 1000PM repayment, over 10 years, if the ISA generated say 500 a month, I could shorten the years I'm paying without touching it. However, I would have to ensure the ISA would be in a savings account that was 'fixed' - particularly if the BoE start reducing it. 
Anyone know of anywhere to get specialist advice? -- I am very doubtful the guru himself - Martin Lewis - is going to see this and respond; would be so cool if he did #MartinLewis

eskbanker

h1n1 said:

I was told by my bank that the 170K in my ISA, ( which will be 180K once the new tax year starts), is very good - particularly because of the tax-free element ... this will continue to grow each month. 
I am very reluctant to touch it because of the value of it being held in ISA...

Obviously in generic terms it's better to have £170K than not to have it, but that's not really the point - the crux of your issue is whether it's better to leave it there while paying a larger mortgage or to use it to reduce the size of the mortgage.

It is true that there's inherent value in having money within tax wrappers like ISAs, but in itself that doesn't mean it's more sensible to take out a larger mortgage in order to retain that - the point of saving money is generally to use it for something worthwhile rather than taking on debt (such as a mortgage)!

I maintain that you need to consider the relative interest rates in order to make an informed financial decision, rather than being unduly swayed by meaningless platitudes from bank employees - in terms of who to ask, even if Martin Lewis was reading/listening, he'd need to know significantly more detail of your situation in order to offer any tailored guidance, but you might as well share more information on here so that knowledgeable posters can contribute relevant ideas....

h1n1

eskbanker said:

h1n1 said:

I was told by my bank that the 170K in my ISA, ( which will be 180K once the new tax year starts), is very good - particularly because of the tax-free element ... this will continue to grow each month. 
I am very reluctant to touch it because of the value of it being held in ISA...

Obviously in generic terms it's better to have £170K than not to have it, but that's not really the point - the crux of your issue is whether it's better to leave it there while paying a larger mortgage or to use it to reduce the size of the mortgage.

It is true that there's inherent value in having money within tax wrappers like ISAs, but in itself that doesn't mean it's more sensible to take out a larger mortgage in order to retain that - the point of saving money is generally to use it for something worthwhile rather than taking on debt (such as a mortgage)!

I maintain that you need to consider the relative interest rates in order to make an informed financial decision, rather than being unduly swayed by meaningless platitudes from bank employees - in terms of who to ask, even if Martin Lewis was reading/listening, he'd need to know significantly more detail of your situation in order to offer any tailored guidance, but you might as well share more information on here so that knowledgeable posters can contribute relevant ideas....

thank you for your thoughts. certainly something to consider to ensure best option is taken. I would be more than happy to give ML more info  

parchedpeas

Barclays do an offset mortgage that you could put your ISAs against:

https://www.barclays.co.uk/help/savings-and-investments/isas/offset-savings/

26left

h1n1 said:

Hello
I have approx 170,000 in an ISA. A property may be becoming up on the market for say around 300K. With my partner's savings, we could have 230,000 in savings. 
Would it be better to lay down the money on a deposit, or would it be better to keep some in my ISA?
Just wondering if having money kept in ISA would off set mortgage interest, and it being in a ISA (which has taken years and years to build!) would continue to provide income after mortgage is paid off. 

I was thinking that the income of the ISA or bonds, would off-set the higher monthly cost (as the deposit wouldn't be as big) and then once paid off, the sum would continue to provide income and not be subjected to tax as it would be in an ISA still 

any ideas welcome 

Drawing down your ISA is bad because you lose your accumulated allowance - BUT you could use a flexible ISA with an offset mortgage to maintain and grow your isa allowances so you have it for later in life when you have more money and need the tax protection.

So by moving the ISA money you need for a deposit into a Flexible ISA, and then remove it after April 6th to use as a deposit with an offset mortgage. You then have until the end of the tax year to put it back. That way you keep your ISA allowances. Every year you can put money in to the offset mortgage account, and at end of the tax year you put it back into the flexible iSA to maintain your accumualted allowance, and then take it back againa few days later into the start of the tax new year.

There are a few blogs about this - I can't post links yet but try googling "In praise of the Flexible ISA" 

26left

PS - try also zainp dot com + harvest-your-isa-allowance