Cash ISA vs Mortgage overpayment

[anonymous-user]

What’s best practice these days, keeping your cash “emergency fund” in a cash ISA seems a waste given current rates. Any drawbacks to keeping these funds in your mortgage overpayment account at a higher rate of interest (+is still immediately available?)

[JulianPH]

I think you have answered your own question.

If you can place cash into a mortgage overpayment account - whilst retaining access to it should you need it - and the interest saved is greater than the interested that would be earned from any type of deposit account (including a cash ISA), then this is bit of a no-brainer!

[Somebody]

Do "mortgage overpayment" accounts exist? I've heard of offset mortgages which work this way and I'm aware of mortgage accounts which allows to overpay say up to 10%, but not physical "overpayment" accounts?

[bogie]

Somebody said:

Do "mortgage overpayment" accounts exist? I've heard of offset mortgages which work this way and I'm aware of mortgage accounts which allows to overpay say up to 10%, but not physical "overpayment" accounts?

No that I know of, but lenders keep a track of overpayments so in effect when you are more "in credit " you can take a payment break. Not sure if some will actually refund you and let you have the money back though....need to check on a per lender basis.

I know Lloyds just keep a track and you can ring up and have a payment break for as long as you like if you are enough "in front" of your regular payment

[Baron Greenback]

Been meaning to reply to this (saw at work but cant log on) I went for offset mortgage with barclay and they allowed me to offset my Cash ISA on the house mortgage so I am getting best rates than cash isa while keeping the money in the ISA. Ok can move Cash ISA about for good rate but I am lazy and it gives me a good emergency fund pot and the offset saving is calculated daily so if you have all on credit card and pay off all card on end of month as the same time getting paid you gain more offset benifit. Warning Barclays initial fees are large-ish, was with Intel Finance for while but doing it all by post / online did me head in!

[Mabbs9]

Lots of people use current rates for their isa decisions. It does mean if we see 8% isa rates again, you'll be missing out if your money went elsewhere.

I suppose it's the usual opportunity cost with investments.

[JapanRed]

Having 6 months cash flow is, in my opinion a thing of the past. If the worst came to the worst these days I’m sure most of us could get a loan or similar to bridge a 6m loss of earnings (either that or negotiate a mortgage repayment holiday with the bank).

I’ve just taken £95k in dividends to pay off a big chunk of one of my mortgages. Several people advised me not to but I have to say it feels very very good knowing it’s paid off. It wasn’t giving me any pleasure (or return) seeing it sat in a 1.5% business savings account.

I will probably do the same again after April. If it would make you feel better having it taken off the mortgage do it (as long as it’s not financial suicide).

[Mabbs9]

Could a loan not be very tricky if you have no job?

[SV_WDC]

Mabbs9 said:

Could a loan not be very tricky if you have no job?

Yes. As most lenders specifically ask if you believe your income will change within the next 6 months