ISA Mortgage

A ISA mortgage is a type of interest-only mortgage. As with all flexible mortgages the monthly payments consist of interest. The provision for the payment of the capital amount at the end of the mortgage term is the balance of the ISA (Individual Savings Account).

There are two types of ISA’s that you can attach to a mortgage. One is the regular type of saving account and the other is a equity savings account that is used by your financial provider for investments on the stock market.

If you wish to attach a equity savings account to your interest-only mortgage be aware of the risk that your equity investments could come short of the performance projections and leave you with a considerable gap between the account balance and the capital sum at the end of the mortgage.

The attraction of ISA, which is a saving scheme particular to the UK, is that, up to a certain amount, the interest earned is tax-free. The tax exemptions applicable to a equity ISA are a bit more complex and may not be worthwhile for the average consumer but regular ISA’s are well worth a look.

When opting for ISA mortgage consider whether you can be a disciplined saver or not and always shop around for the best deal both for the interest rate applied and for the equity investment strategy.