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

Answered by

Boring Money