Money on Mortage or ISA?

freyahu

Hi everyone,

I just want your opinion on how what's the best way to put my salary. Would you recommend to put it in ISA and use the interest to slowly pay off the mortage as per the monthly minimum payment or all in mortage for overpayment since my interest rate is only under 1.5% (purchase during the pandemic). Thanks!

silvercar

if you are self disciplined enough to not spend the money elsewhere, I’d put it in an ISA.

BridgetTheCat

if your ISA interest rate is higher than the mortgage rate, put it in the ISA. Use the mortgage overpayment calculator on this site to compare with savings and work out the break-even point.

I used this method for 5 years and paid off my mortgage a couple of weeks ago 🥳

penners324

S&S ISA?

How are your pension contributions looking?

Pension is the best option financially. But paying down the mortgage can be very beneficial

Exodi

It depends, what is the interest rate on your mortgage and what is the expected rate of the Cash ISA?

It makes little financial sense overpaying the mortgage at all if you are achieving a rate than the mortgage.

Personally, I would argue neither options are optimal. Mortgages are generally taken out over the long term, and investments usually return more than savings or mortgages over the long term. Personally I'd consider a S&S ISA as the second best option.

From a financial standpoint, the best option is typically increasing your contribution to your pension for most people, but of course is a longer term strategy.