New ISA or pay off mortgage?

[Pythia]

Can anyone advise me which makes best financial sense - to put my £5k savings into a new ISA at 3% or to use it to pay off some mortgage? The mortgage is at 1.05% but I owe them £14k. I just can't get my head round the sums.
Thank you

[237SJ]

I`m not sure about the sums but I would be inclined to pay off some of the mortgage but leave the monthly mortgage payments the same which will reduce the term. Obviously if you`re saving more than £150 which would be the ISA interest, then it`s worth it.

[Hymie]

With the percentages you quote – put the money in an ISA at 3%, and you will be just under £100 p.a. better off than paying off some of the mortgage.

Even if your mortgage were 5% and the ISA 3%, I would still advise you to invest the money in the ISA and not pay off the mortgage. My reason for this is that it is wise to have reserve capital for emergencies (unemployment, unexpected household repair, car repairs etc).

If you were to pay off the mortgage and find you suddenly needed to borrow £5,000 – you would be hard pressed to find someone willing to lend you the money (un-secured) at less than 10% interest.

I would also recommend you contemplate how you will enjoy this £5,000 – that is what it is for.

[237SJ]

By the way is it the Halifax ISA you`re looking at? It`s a good one if you have previous years ISAs to transfer. Not many of them let you transfer in at that rate. Santander have a flexible one at 3.3% if you don`t have anything to transfer. Just a thought..

[factor-fiction]

Based on what you say, I'd put it in an ISA, although my recommendation would change if your cheap mortgage deal is only a short term deal such that the rate will increase soon.

[Postdog]

Can't do sums, but if it was me, mortgage every time - a debt is a debt whatever rate your paying

[boxtops]

A mortgage is surely still one of the cheapest rates of borrowing - I'd save the £5K for a rainy day.

[gingejbee]

Postdog: there's good debt and there's bad debt...A mortgage at 1.05% is a good debt.