Re-mortgage - Payoff or Not?

AuntyJean

Have re-mortgage on own home of £30,000 paying interest only of £120 pm and £155 into an ISA.

Am about to come into some money. Should I pay off the mortgage (and keept the ISA going) or should I just invest the lot and keep the mortgage going?

ReportInvestor

You can't immediately invest all of a £30K inheritance tax free in an ISA, as you know.

So to cover a 5% mortgage interest payment you need a 6.25% gross return on an interest bearing account @ 20% tax. So I'd pay off the mortgage if your investments are cash and you are by nature a cash investor. [I've not considered any impact on any possible future state benefits in this assessment.]

If your ISA investment would be in shares then you might beat your mortgage rate or you might not. So do you want the security of owning your own home outright? Or do you want the chance of making a bit more money, which also comes with the possibility that you will have to pay more if there is an economic shock or your investments don't perform?

zzzLazyDaisy

I paid my mortgage off, and then diverted the monthly mortgage payments into a regular saver. There are some high paying ones around at the moment.

It was the best thing I ever did.

ReportInvestor

If you invested all the £30K capital in the stock market at once that would place it at some risk.

By paying off the mortgage you could free up your monthly mortgage interest money and use it to drip feed investment into the stock market which is a way of reducing risk for those less confident of equity investment.

And Lazy D's dead right about those regular savers .