Would you advise focussing on paying off the mortgage early, opening an ISA of some description and saving, or a combination of both?
18 March 2022
Question by Helen
Hi,
I am self-employed and have an annual income of £25k. I have a LISA but would like to invest some money elsewhere, possibly a stocks and shares ISA. However, I still have £180k owing on my mortgage with 13 years remaining and an interest rate of 1.4%.
Would you advise focussing on paying off the mortgage early, opening an ISA of some description and saving, or a combination of both?
Thanks,
Helen
Answered by Boring Money
Hi Helen,
That's a great Financial Planning question.
From a purely mathematical point of view, you would probably be better off investing the money, as over the 13 years period, your investments should grow by more than 1.£% per year.
However, your mortgage is more than seven times your income, which is quite a high multiple. As interest rates increase, your mortgage payments are going to take up a large part of your income, leaving less for other things.
Therefore, at a high level, clearing the mortgage to a lower income multiple seems sensible.
I hope that helps!
Josh
