I currently have an offset mortgage and also ISA stocks and shares account. The mortgage is only small as the property wasn't expensive and I placed a large deposit (40% of property) down.
I have been able to make over-payments into the offset to benefit from the interest savings (inverse of interest on savings). The 2 year fixed low interest rate has expired and is now around 4.8% (from 2.7%). I haven't re-mortgaged as yet.
My plan was to overpay into the mortgage up to the point where a year is left on the mortgage and keep it that way. So I would remove a year's worth of offset savings and place into the ISA each year, whilst dripping the mortgage payments in.
The reason for doing this would be to keep liquidity if I decided to upgrade to a larger property or some other large expense whilst balancing risk of stock/shares investment. Also, early payment of the mortgage would incur a fee (albeit small in relation to the mortgage).
Although the offset is reducing the interest on the mortgage, is prolonging the loan/debt a bad idea on 4.8%? Instead should I pay the mortgage off early and then use what would be freed up mortgage payments into the ISA?
The problem I see with this option is that you don't then benefit from the growth of the ISA over time.
Effectively I'm comparing ISA growth with Offset mortgage savings benefit with the balance of having liquidity. I'd also like to keep the ISA savings without drawing upon it to sustain the leveraged growth.
Any advise appreciated.