Would you pay off your mortgage or leave the money in an ISA?

[Blondiebeachbabe]

Our mortgage deal (currently 1.54%) ends next year. From what I can see, at that point if we negotiated a new deal, the interest rate would be about 4.3%. The balance will be £22k, which I will have sitting in an ISA, that pays around 4.1%

Part of me thinks it would be best to just repay the mortgage in full when the 1.54% rate ends, since the ISA interest rate is lower than the new mortgage rate, but are there are disadvantages to waving goodbye to that cash, as once it's gone to the mortgage, I can't get it back?

Probably the technically financial answer would be you'd be best to let the cash sit there, making more interest but the emotional one often says it's lovely clear the mortgage and have that freedom. How much other savings do you have? Enough for an emergency? Would you be able to put the freed up funds from the mortgage to build up your ISA again? I think it's how you feel about it really.

Oh sorry just saw the new mortgage rate would be higher so it's just basically about having a savings buffer in that case and whether you would have enough in an emergency I'd guess.

Of course pay off the mortgage. No brainer. Just save a buffer for emergencies. Then use the money that you would have been paying on the mortgage to build up your savings again.

I’m with Flora. Pay it off.

Definitely pay off the mortgage, and whatever your monthly direct debit for your mortgage is you continue to put away into savings.

We are in this postion and we are keeping The ISA because in an emergency we could access The ISA (we have savings as well but we are both SE) and also because its a S&S ISA and not only does DH do really well making money in it but he enjoys it

Depends if you have other savings for emergencies. I wouldn’t leave yourself with no savings buffer.

Will you retain some cash liquidity for emergencies etc? Paying off mortgage is nice but if it then leaves you vulnerable with no savings while you have to rebuild then it can be a bit of a risk if all your money is tied up in the house. And you have to then be disciplined about money saved on mortgage going into savings, instead of just lifestyle creep absorbing it.

We are in the fortunate position where we can afford to pay off our mortgage at remortgage time but I am probably going to keep a small mortgage on it so I can keep a decent cash sum available.

Thanks for replies. Yes, I would still have other savings for emergencies. That's a good point about redirecting the mortgage payment to savings, bizarrely I had forgotten that when we aren't paying the mortgage anymore that frees up that amount to go into savings!! Doh!

We paid our mortgage off a couple of years ago, at every renewal I had been paying off another "chunk", eg 10k to reduce the balance left us enough emergency funds then we paid off as much extra as we could every month. At the last renewal we just cleared it completely

Clear the mortgage and save the mortgage payment.

Definitely pay off your mortgage! God, to be mortgage free will just be amazing.

Keep 6 months worth of outgoings in the ISA, then put the balance towards the mortgage.

Best thing ever having no mortgage.

So say you set up a 5 year mortgage for £22000 at 4.3% it would cost you £408 per month, plus fees to set up,

if you paid off indtead using money you have in savings

and put the £408 a month away - in 4 years and one month youd have saved £20k

so youd be happy to give away £4488 over 5 years? Thats the wuestion you need to ask

If you need to remortgage next year. I'd save what I can this year before paying of the balance next year.

I'm in this position too. I'm deciding to pay the mortgage off, but ensuring I've got 3 months' expenses elsewhere liquid (which in practice means I'm paying all but one month of the mortgage off). And then as others have said, will be putting mortgage payments, half to pension AVCs (as there are tax benefits there), quarter to s+s isa and quarter to cash savings.