Mortgage v isa savings 29 February 2008 at 1:46PM in Mortgage-free wannabe 7 replies 988 views

clarko_2

I have a mortgage of 27500 at a rate of 6.5 %. isa savings to more than cover this am i best to pay of my mortgage.
Then using free'd monies to reinvest into new isa's so that i'm using the tax free element of my savings .I have worked out that i would be saving approx £8500 in intrest at today's rates which would be reinvested into isa's does that sound like a good investment ??

setmefree2

Hi,

I am NOT an expert so you should check others opinions.:money:

Is your ISA achieving 6.5% at the moment? There are deals that do - Lloyds TSB & Barclays, Icesave, etc for example - see SAVINGS board (ISAs). So you can achieve 6.5% on your ISA.

Whether you pay of your mortgage will depend on a number of things:-
1)Do you have any other savings?
2) How quickly will your savings build if you are not paying your mortgage?
3)How much does your mortgage allow you to pay off?

Once your ISA is gone, your ability to have a tax free investment of £27500 has also gone. So in the future you will be better off keeping hold of your ISA as it will produce a tax free stream of income. However, you need to get your ISA to match your mortgage rate or beat it.

I think that's right....maybe you should check on the savings board and Tax board to.
or maybe someone will confirm or dispute this info.

All the Best

SMF2

Kaz2904

SMF is right about losing your tax free benefits.
Presumably you have no redemption penalties if you are considering paying off your mortgage. Have you thought about an offset mortgage which includes your isa? Then you can gradually transfer ISA money out to better paying providers.

clarko_2

Many thanks for advice, had thought of using free'd monies to reinvest into new isa's so that i'm using the tax free element of my savings . have worked out that i would be saving approx £8500 in intrest at today's rates which would be reinvested into isa's does that sound like a good investment ??

kingkano

clarko wrote: »

Many thanks for advice, had thought of using free'd monies to reinvest into new isa's so that i'm using the tax free element of my savings . have worked out that i would be saving approx £8500 in intrest at today's rates which would be reinvested into isa's does that sound like a good investment ??

You can only invest £3600 per year into a cash isa (as of next tax year - currently 3000 at the moment). So it won't matter you have 'available' £8500 to save. As such its 9 years ISAs to get your savings back. (unless your a couple in which case its half that time - 1 ISA each)

tomstickland

If your ISA rates are lower than the mortgage then it's losing you money and you'll be better off paying off the mortgage.
Pay off your mortgage with the lowest rate savings you have.

dimbo61

hi clarko if you can transfer all your ISA,s into the lloydstsb6.5% ISA then you are getting the same rate of interest from your savings ( this year !) as
you pay on your mortgage. check if you can overpay on your mortgage and how much each month/year and get overpaying also try and pay £3600 into an ISA this year.
try to keep your ISA,s as there are few TAX free saving vehicles for your future plans / retirement. GOOD LUCK

Dithering_Dad

THere are some mortgage providers that allow you to offset ISAs against your mortgage (I think Intelligent Finance are one of them). If you could do this, it would mean that all of your mortgage interest would be offset and so 100% of your monthly mortgage repayments would go to paying off the mortgage.

The advantage is that once the mortgage is paid off you will still have the tax free ISAs.