Reply With QuoteReduce the mortgage, that’s what I would do, it’s just a great feeling when that big wedge stops going out every month
Hi all,
My mortgage is coming up for renewal in a couple of months and therefore I have an opportunity to reduce the amount outstanding without fees. I've been toying with taking money out my ISA accounts and paying off as much of the mortgage as I can. The mortgage will be around 1.8 or 1.9% interest and the ISAs are a mix of cash and mutual funds. I know the income from the ISAs is protected from tax but it feels wrong paying a higher rate of interest than I'm earning...
All advice gratefully received!
Thanks!
Reduce the mortgage, that’s what I would do, it’s just a great feeling when that big wedge stops going out every month
Reduce borrowings every time. House paid off is a great feeling and brings certainty. Fund prices may fall or plummet!
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Yip, pay the mortgage off or reduce it by as much as you can...
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Depends on your appetite for risk and what your goals are. Paying off the mortgage is the safest option. It will be the cheapest (in interest terms) loan you have though I guess? And yes, funds may plummet. And equally they may rise.
I could pay off my mortgage if I cashed in my stocks and shares ISAs but I find it useful (life needs) to have that much liquidity to hand on top of the share growth that has made good returns in recent years.
YMMV!
This is exactly what I am doing and how I think about my mortgage. The rate on my interest only mortgage is lower than the return on the stocks and shares ISA.Originally Posted by Bondurant
Agreed in the last year it hasn't done brilliantly but as I pay in monthly I am buying cheaper units. I have another 3 years until it has to be cleared and I will try and make the most of it.
If I had a cash ISA I would pay the mortgage off as I have never really seen much point in them with the amount of interest they earn.
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The benefit of the ISA tax-free "wrapper" is very limited now there is a £500/1,000 savings allowance, £2,000 dividend allowance and £12,000 CGT annual allowance.
As suggested, as long as you have a cash contingency fund (minimum 3 months current net income), reducing your mortgage is not a bad idea. However, your risk attitude (as mentioned) and view on the markets short to medium term would influence whether the potential gains on fund investments outweigh the potential interest (and any other costs) saved on your mortgage.
Last edited by David_D; 17th April 2019 at 00:55.
One suggestion that I’d do, if you do pay it off your mortgage, instead of reducing down the monthly payments on the amount the overpayment will make, keep it the same so you’ll pay your mortgage off quicker. For example, of your mortgage is £1,000 and you lump sum off 10%, that would allow your payments to drop to £900. Keep them at the £1,000 and over the years you’ll benefit as the mortgage is cleared so much quicker.
I'm all for getting the mortgage paid up ASAP, but like to have a cash contingency of around 9 months take home salary which I have tied up in Premium Bonds which on average are paying out monthly.
I'd probably advocate Premium Bonds over an ISA, but mortgage/loans settled is the best bet.
For the record I'm no financial advisor, just an average bloke, but the above are my humble opines.
Good luck.
I wouldn’t pay off the mortgage just to have a ‘great feeling’.
Do the calculations and whatever works for you. Can always pay part or pay in future if things change.
Thanks all! Will keep some liquidity and pay the rest into the mortgage
Sensible conclusion
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