Paying some off mortgage

todayisagreatday

We are with First Direct on a fix at 3.08% til January 2028 when we should be in a position to pay off the remaining mortgage (circa £120k).

We are saving hard to do this and we both now have the £20k each in a cash ISA at just under 5% we opened July this year and around £5k sitting in our joint account which will be rising each month. We would be taxed on any savings (earnings are around £62k each and I'm wondering what is best to do with any savings outside of the ISA - is it best to pay it off some of the mortgage (the mortgage we are on allow unlimited overpayments but its only been this year we have ever been in a position to save anything/open ISA due to a huge renovation).

Thank you 

silvercar

As higher rate tax payers you have a savings interest allowance of £500 each. Sensible to max that first, assuming you can find an account paying more than 3.08%

 Anything above that would be taxed at 40%.  So if you can find an interest rate above 5.13% it makes sense to save the money and pay the tax, as you will earn more on the money than you will pay in interest on your mortgage. If you can’t then it makes sense to reduce your mortgage.