ISA Mortgages vs Repayment

jhunter13uk

I recently went to a financial advisor and he really pushed me to have an ISA mortgage. However, I've since opted for a repayment as I was worried about the possible shortfall. (He arranged my mortgage through Northern Rock - it was the only one on offer as I had no deposit) The ISA did include critical illness and death cover and was only £578 a month compared with the £628 repayment with insurance (£612 without any insurance)....now I'm worried I should've taken his advice....On the other hand I've been told that it is possible to get basic cover in the event of death through Tesco at only £6 per month and this is much cheaper than the cover he offered me. Could someone advise please as I find the whole business baffling.

dunstonh

NO NO NO.

You do the thing that you feel comfortable with. ISA mortgages are two things, one is an investment, one is an interest only mortgage.

That may sound familiar. Another product combination that did that was endowments. The ISA is just a more tax efficient way of doing it. It still has the same risks associated with it.

If the target growth rate on the ISA was low (say around 4% pa) and was £50pm less than the repayment mortgage equivalant, then the amount of risk is quite low. Especially if you use that £50pm to increase the savings. However, its still a risk and not everyone will appreciate the risk and want to take to it.

As for insurance, you are comparing life and CI with life only. If you dont want to cover yourself for CI, then you should have told the advisor. If you go with the Tesco option, it will be cheap (although as its Norwich Union, don't expect claims to be sorted quickly) but its life only. It will be like going from comprehensive to 3rd party fire and theft (oh god that sounds corny).

jhunter13uk

Thanks for your advice, much appreciated - I'm really new to all this so do you mind telling me what you think of Northern Rock - it is through them that the Financial Advisor arranged the 100% mortgage - it is fixed for five years at 5.99% and afer that at a variable rate...it over 30 years. The advisor said that no other lender "would touch me" as I had no deposit...

herbiesjp

There are other lenders that offer 100% mortgages but it will depend on the loan you are looking for, and what income you have that you can take into account

Plasticman

Do you have a family or live alone? Before I married I didn't bother with death cover as there was nobody to leave the money to!