Mortgage connected to an ISA - Advice needed!

weimaranermerlin

Hello there,

I would appreciate some advice. Our current mortgage is splut 50/50 between a repayment and an interest only mortgage linked to an ISA which is supposed to be paying off half of the mortgage. We had the ISA about 5 years and unsurprisingly it is underperforming considerately. I can't really afford to put the whole mortgage on repayment so what is the best thing to do? Keep the ISA and hope? Look for an alternative investment? Cash the ISA, pay of some debts and use the extra cash to pay a lump sum off the mortgage?

Please advice!

Thanks in advance for your help.

Sandra

dunstonh

We had the ISA about 5 years and unsurprisingly it is underperforming considerately.

I would have thought it close to the projections shown on the original illustration. Of course, on a straight line of growth it would be off the mark but when compared with the original illustration, it should be there or thereabouts.

You could consider transferring the ISA to a fund supermarket and doing it on nil commission terms. This will save you around 4% initial charge every month. This means that currently you have to grow around 4% just to break even. By going DIY or using a discount IFA, the initial charge is reduced or sometimes even wiped out.

A repayment mortgage is the nil risk option. The ISA is a risk option. However, in the scheme of things, you are making most of your contributions after a stockmarket crash and its always best to pay in after the crash as you get those units cheaper. An alternative investment is unlikely to do any different as the ISA is the most tax efficient for regular savings. Paying off debts and using the extra cash to pay off lumps on the mortgage could do better but you have to be strong minded as its easy to lose control on that method and make sure you are paying the right amounts to ensure repayment at the end.