Spoiled for choice

By THIS IS MONEY
Updated:

 

WE have a Halifax fixed-rate ISA mortgage whose five-year term is up next year. I have £5,000 I could pay into our Halifax ISA or use to pay off a chunk of our £80,000 mortgage next June. AJ, Fochabers.

David Hollingworth of mortgage brokers London & Country says: First check whether you can pay £5,000 into the ISA, as the maximum that can be paid into an equity ISA each year is £7,000.

If you can pay it into the ISA then your decision depends on your attitude to risk, as results will depend on how the investment performs.

If growth outstrips the interest being paid on the mortgage then the ISA route will work well. But there are no guarantees.

The safer route is to pay it straight off the capital, which will give an effective net return on the £5,000 of the mortgage rate.

If you opt for this route, put the £5,000 somewhere where it will earn a reasonable rate of interest in the meantime.

Whichever path you take, remember to start looking for a new mortgage deal a couple of months before the end of the current fix so you can switch seamlessly to a better deal.

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