Would you use your ISA savings to clear the mortgage?

[Dinosaursloveunderpants1]

Just curious to know other people's opinions. I have enough money in my S&S ISA to clear my mortgage.

I currently pay £1000pm, this is comfortable. My ISA isn't yielding great due to the current economy. I probably couldn't encash just yet but would you repay just to be debt free or have money invested instead?

I would commit to saving £500pm into my ISA to restart a new pot.

Just wondering what you'd do.

I would, but it depends on what interest rate you’re paying on your mortgage and you need to avoid any early redemption fees. We did this back in the day of interest only mortgages where you saved into an ISA and only paid the interest on the mortgage to your mortgage company. We paid it off in chunks so as to avoid any fees for overpayment and then when we had more in the ISA than the remaining mortgage, paid off the balance.

Is it a cash or stock isa?

I'd pay it off even if it were more financially advantageous not to simply because of the overwhelming sense of relief you'll feel when it's paid for.

My house and my car are paid for and I can honestly say I don't have a care in the world.

Am building savings back up again.

No, I wouldn't, unless your mortgage rate went through the roof and you couldn't afford it anymore.
It's better to have some savings in case of catastrophic emergency, including involving the property - fire or flood - as insurance will pay but not immediately. The absolutely last thing you'd want when mortgage-free is to have to remortgage in an emergency.

I need to check as I know it's fixed so I'd wait until the fixed rate ends so might not be until 6-12 months.

S&S's. Currently yielding 2% but that's just because of the markets being so volatile.

Depends if the interest in your ISA is more than your mortgage interest rate. What do you mean you're not getting a great return due to economy? You can move to a better rate ISA if it's cash, there are rates available 4%+

That's kind of my thought process. How great it would feel being mortgage free at 40 but does it make financial sense. I'd definitely build the savings back up but not likely to that level.

I would not. There's a limit to how much you can put in an ISA each year, and once withdrawn that years allowance is gone forever.

I want my ISA to build up enough to provide me a lovely tax free side income

It's stocks and shares so the market is quite volatile. I won't pay it off until my fixed rate ends which I think is roughly in a year so hopefully the market improves by then.

I wouldn't take money out of my S+S ISA in the middle of a dip in the market, you'll solidify your losses. I would wait for the market to recover before doing anything.

Is your mortgage fixed? When does it end? What's the balance? Taking money from the S+S ISA isn't likely to be the best financial decision, but there's a feeling of security in paying off the mortgage. Emotion versus logic

I would possibly take some money from the S+S ISA when the fix on my mortgage was up, and use it to reduce but not pay off the balance, with the intention of have a lower loan to value and getting a lower interest rate on a much smaller mortgage.

No, I would continue to pay the mortgage, unless the interest rate is high.

Once you withdraw, you've lost that opportunity to grow that money tax free forever.

The mortgage will eventually pay off by itself and you will still have those funds to top up your income tax free.

(For those asking, OP states it is a S&S ISA).

I should have checked this before starting this thread sorry. My rate doesn't end until 31/12/2029 so it's ages away. I thought it ended next year.

I guess that's a good thing as by the time it ends, markets will hopefully but up more and my mortgage balance will be less so I'll still have some money left over in my ISA as an emergency funds.

Currently yielding 2% over what time period?

S&S are a long haul investment thing not a short term one.

Most financial advice says it’s good to spread your portfolio over a range of stuff, eg. Some cash, some property and some S&S.

It might help to look at things through that lens. What does the current split look like. What might you want it to be. Whats that costing (in mortgage interest).

Remember it’s not all or nothing. You might decide to keep what you’ve got S&S wise but not put any more in, and instead put any extra tha becomes available to mortgage.

You might choose to keep S&S at a certain level and take money out and put into mortgage to bring it back down to that level. (Ie take the gains from the S&S and put into mortgage).

I wouldn’t make any decision now. If you were at the end of your fix now, and looking at some hideous 5.5% rate then probably yes. But in your situation, I’d wait for the end of your fix.

It’s also not all or nothing, you could pay off half and reduce the term of your mortgage. You’d keep a buffer of savings, and still be mortgage free sooner.

Yes sorry don't mean to waste your time. I'll wait till the fixed rate comes to an end. Thanks for everyone's input.

What's it in?

Personally I'd check your funds are good keep buying in (buy the dip).

You could also hedge and do half and half.
I think cashing out long term will cost you

2 years ago my isas were doing 14-16% ypu can expect that every year.

That 2% must be a return over a very short term, as in general market growth is much more than that, have you got it properly invested in an index tracker or balanced portfolio rather than random stocks? How much money are we talking? If under about 6 months salary as your total savings (aside from equity in your house) I would definitely leave that where it is and tbh would probably leave it in the ISA anyway.

In general mortgages are a very safe and low cost way of leveraging your capital.MNetters love to advise people to try and be mortgage free but personally I very rarely think it makes financial sense unless you're already maxed out on other more tax-efficient savings like ISAs and pensions. People say it's for security against job loss, disaster etc but having capital available and (relatively) liquid, rather than tied up and completely inaccessible in a property is for me way better security. As a PP said once the rainy day has come it becomes much more difficult if not impossible to remortgage, so you would only be able to get at that money by selling the house which is precisely the scenario people are trying to avoid by paying off the mortgage in the first place.

Whoa! Zoom out on the timeframe! The 2% is presumably (hopefully) just over the last few months because of the war in Iran. The market has basically dropped back to where it was at the start of the year

If you look at growth of say the last 12 or 24 months, your growth should be much higher than this. In the teens or low twenties? (if it isn't, head over to the money or investments board for outside thoughts, because somethings not quite right) Compare that against your mortgage rate. You need to have a very long term view on investments.

I do understand the emotional side of paying off your mortgage, but it's usually not the best financial choice.

Not right now. If you look at the graph of the value of your ISA, it's likely it's gone down by about 10% in the last couple of months. Taking money out now is crystallising that loss, ie throwing away thousands of pounds.

But seeing as you're in a fix for another 3 years or so, you'd also have to pay a redemption fee, so that's more thousands of pounds to throw away.

What's the rate on your mortgage? Mumsnet is obsessed with clearing mortgages, but it rarely stacks up logically unless you have a shit mortgage rate and make no effort to find a decent savings account.

I don't understand what you mean by a fixed rate? That would suggest it's a cash ISA which acts like a savings account.

A S&S ISA is invested in the stock market and the rate of growth is not fixed.

She means her mortgage fixed rate I think...

Ahhh, I see. That makes more sense. Thanks for clarifying.

And to add to what PP have said, if you cash in your investments now, you are crystallising any recent losses from the war. This is madness.

I know it's off the cards for now (and of course reassess when we get to 2029) but in general this is likely to be a very bad idea unless there's some reason you want to get the mortgage paid off pronto eg retirement.

@TeenagersAngst I think she means the fix on the mortgage.