pay off mortgage or save in ISA

clairejk

I've read all the articles and a fair few posts but I'm still not sure.

The article is based on having spare cash after you've filled your monthly ISA allowance.

Well that is £600 between us and I've given up work to look after babies so there is no way we have anything over that!

So do we overpay on the mortgage or put the money in the ISA? And if it's the latter do we pay off the mortgage in full when we've saved enough?

thriftybabe

It depends on your other circumstances. Do you have money for a rainy day? Is your OH job fairly secure? My aim was to pay off my mortgage as soon as possible and I put absolutely everything into it. We paid it off three years later and are now mortgage free - thank goodness. My OH works in the building trade and things may get bleak soon. I do not have the worry now of having to find our mortgage money. In addition I have been putting away my mortgage money plus a bit extra every month for our rainy day!

jfk247

Thanks for all your advice!

webmasterpolo

Hi

Because you say "I really need some good financial advice on the best option" it sounds like you need to talk to a Financial Advisor as they are the only people who can offer this.

The rest of us can only really give you tips and guesses as we can't assess your situation in detail.

I know nothing about US property purchasing so I can't possibily guess at A,B or C for you. So I would put it somewhere safe with high interest and get financial advice.

-Web

comping_cat

I think it depends on your circumstances and interest rates.

If you have a low mortgage rate, and can find a high ISA rate, then you would be better putting the money in the ISA (i believe Martin has a calculator on the site you can use). Obviously if your mortgage rate is a bit higher then you would get more benefit out of paying the mortgage off before saving.

It is always a good idea to have some 'rainy day savings', but again, it depends on your mortgage. My mortgage allows me to borrow back any overpayments i make (will be in my chosen account within 48 hours) so there is no point in having a seperate savings account, i would rather see my mortgage go down, safe in the knowledge i could borrow any if needed. It also stops me dipping into a savings account, as i have to make more of an effort to get my savings, if i needed them.

Jonbvn

jfk247 wrote: »

Meanwhile,I've managed a cash saving of about £30,000 which I haven't figure out the best way to regenerate extra profit with - I have not invested it and neither is it in a high paying interest savings account.

Put the money in a instant access high interest account immediately. What were you waiting for to do this?

jfk247 wrote: »

a) Do I pay in the cash saving into my mortgage to reduce my capital & interest payment come 10 August 2008? If so what if things got really bad and negative equity befalls me or worst still I couldn't be
able to sell off the property within a year time.

Given the state of the UK property market I would say that it is fairly likely that you will find it difficult to sell a property in a year, unless you are offering it at a knock-down price.

jfk247 wrote: »

b) Invest the cash saving into putting a deposit on a new mortgage in the US ( to take advantage of the high foreclosures/repossession rates and cheaper cost of property) and in so doing, prepared myself
ahead for the decision to migrate there sometimes b/w October 08 - Sept 09

I really don't think the US property market is even close to the bottom yet.

jfk247 wrote: »

c) Or alternatively is there any high yielding investment option you would suggest I put the money in that would create a greater return thereby offsetting any interest that I'm currently paying in terms of
the balance on my UK mortgage?

Many cash ISA's are currently paying higher than some mortgage rates. However, the difference is marginal. Outside of this you are looking at riskier investments, such as stocks and shares etc.

Please understand that the above is my opinion only. It may be complete cojones!

getmore4less

The key here is the move.

If you are definately going to have to move then I would eliminate the house from the timing and try to sell now, waiting till nearer the time is just going to potentialy cause you problems especialy if you have not sold by the time you have to move.

ailuro2

clairejk wrote: »

Well that is £600 between us and I've given up work to look after babies so there is no way we have anything over that!

So do we overpay on the mortgage or put the money in the ISA?

It depends on the interest rates involved. If you can add to a mortgage overpayment fund and not have to pay it off the balance forever, then I think of that as the equivalent of using your mortgage as a savings account - what it doesn't pay you in interest it saves you on interest, iyswim, so it works out the same in the end.

If you want to use the money for really long term savings, then the tax free money in an ISA is only available in amounts of £3600 per year, or £7200 for both of you.

If you want to get rid of the mortgage to give you security, then you can do that too.

If you want to buy a bigger house at some point, then go with whatever is the best rate of interest.

Hope that's not too confusing!



For the other poster with £30,000 sitting losing money, pay it into your mortgage's overpayment fund. It is accessible, but will earn you 5 to 7% while you make up your mind about moving to the US.That's not 'good financial advice' that's common sense. Stashing the money in an accessible account that pays the best rate of interest.;)

JonnyBravo

getmore4less wrote: »

The key here is the move.

If you area definately going to have to move then I would eliminate the house from the timing and try to sell now, waiting till nearer the time is just going to potentialy cause you problems especialy if you have not sold by the time you have to move.

Spot on.

If the move to the US has to go ahead then you should look to sell now and rent til you move IMHO.
Otherwise, you face the very real possibility of not having sold your property come the time to move.