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  1. #1

    Empty ISA into my mortgage?

    I currently have about 11k in an ISA, - it's not doing much as you can imagine at the current rates.

    I keep it there in case I get made redundant and just to have some savings (not that I have any reason to think that this will happen).

    However, I have worked at the same company for 19 years now, so, given that if they WERE to make me redundant, I SHOULD get a reasonable redundancy package, shall I place half of what's in my ISA, into my mortgage? To save on interest?

    I am currently overpaying my mortgage by around 750 a month. I guess I could drastically decrease this for a number of months and slowly build up some savings.... - saving some interest in the meantime?

    My mortgage rate is 1.74%. My ISA is about 0.5%

  2. #2
    Obviously it's a personal balance of having a safety net if anything happens to your job, but I did this last year, when a 2-year fixed ISA at a (semi) reasonable rate matured, and it's nice to put a decent dent in the mortgage.

    At the time, I had saved about six months expenditure at current (fully-employed) spending rates, and after looking at my finances I decided I only really need to keep about three months income to hand; I'm well qualified and know the job market in my area well, so i'm pretty confident that i'd find a new job within that time (also, if you keep your eyes open there are usually warning signs that jobs are at risk, so there's time to tighten your belt and get searching). So when the ISA matured I decided to take a year off the mortgage rather than roll the ISA over into low rate savings (my mortgage is 2.69%, so higher than yours). Plus with only a few years to run on the mortgage at current (over)payment rates, it made an appreciable difference to the mortgage-free day

    I'd have a look at worst-case plans - if you made the overpayment, then lost your job and took six months to find another, could you stip your monthly budget to the bone and get by? what might the redundancy package be - some companies do statutory minimums, others are more generous? If the worst-case looks like something you can live with, then i'd go for the overpayment.

  3. #3
    Can only say what I done, which was exactly that. Just kept what I was comfortable with as a fall back for savings and o/p paid the rest.

    If you o/p by 750 a month, then as you say, you can reduce that amount for a few months to let savings build up again, which is what I thought, only thing is I still managed to o/p my same amount and still managed to save monthly - then once the 1st of Jan hit, I brought my savings back down to the original comfortable amount I had the year previous.

    Hope you can follow that.

  4. #4
    Many thanks for thoughts and time - it's much appreciated got a few sums to do... I think, roughly speaking, depending, the saving for me will be about 30 - 100 over 10 months....

  5. #5
    Just another thought for you, depending on when your mortgage fix ends.

    I added the saving 's in interest (by paying the lump sum) and the saving I got when re-mortgaging to a lower rate, onto the monthly mortgage payment I could afford, thus reducing the mortgage a lot quicker.

    Ought to point out though, make sure you are within your limits allowed to o/p without penalties.

    I again, paid my 10% allowance up to Sept, then paid as much as I could before re-mortgaging, then had another 10% allowance up to end Dec, all in the same year Then started with a new 10% allowance from the 1st January for the next year


 

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