scoobypreza

Had this letter this morning …..don’t know what to do next……

Here’s a bit of back ground first of all….

We bought our house April 2000 after paying deposit the mortgage amount was £52,250. (good investment by the way house is worth £150,000 now )
We didn’t know what type of mortgage to go for and took advice from the financial adviser. We ended up going for the recommended interest only mortgage payments and a Tracker ISA paying £77 a month.

So today this arrives……


What I’m worried about is we are only 4 years in and we’ve got a short fall already.
The fund is actally less than I’ve paid in?? Is that right???
I really don’t know what to do. I’ve made an appointment with but they couldn’t fit us in for a couple of weeks. I’m really worried about this now
Its all we need at the moment with a baby on the way I know its not mega money as we could have a much bigger mortgage but we still need to sort it out.

I’ve pretty much decided that we should swap to a repayment mortgage.
Wish I’d done that in the first place.

But……..
What should I do with the ISA?
Should I keep paying in see how it goes?
Can I cash it in now?
Will I get less back than I’ve paid in?
Is it stupid to keep it going and treat it like savings??
Do I pay tax on the money I get in the end?

I realise now that I haven’t got a soddin clue about this ISA.
I don’t think I really understand what an ISA is.

If you’ve got a minute can any of you financially clued up scoobynetters give me some help please???

I feel like such a thicko at the moment!

Thanks in advance
Cath

ProperCharlie

if you do switch your mortgage to repayment, then i would suggest keeping the isa, as it's value at the moment is negligable. it's quite common for the value of investments to be less than the amount paid in over the first few years, due to the effects of the commision paid to fund managers, and the fluctuations of the stock market. not sure what the tax situation is if you repay the mortgage by other means and are left with the isa as a "windfall".

civictyper

You're not a thicko. You probably made the best choice open to you at the time but unfortunately the market has moved the wrong way.

Changing from intrest only to repayment is definately a good move.

If you cash in your ISA you won't get hardly anything back too so it's probably not worth it. PC is right. There are a lot of up-front charges so keep it going and it will perk up in time IMO.

Buzzer

I agree

I am in the same situation (just different numbers) dont worry about it, forget about your ISA's for a few years yet, i'm sure they'll give you a good return

douglasb

As your ISA is a tracker, each month the fund managers use your £77 to buy a selection of stocks and shares with the intention of following the FTSE index. They will receive dividends on these shares and will reinvest these in buying more shares.

When the FTSE goes down, the value of your ISA will go down by about the same amount. Equally, when the FTSE rises, the value of your ISA will rise. When you started your ISA the FTSE was around the 6000 mark; today, it's around 4400, so £600 invested in April 2000 is now worth £440 (£77 would be worth £56.46) . However, the FTSE reached a low of about 3300 around a year ago. £77 invested at that time is now worth £102.66.

If the amount that your ISA is currently worth is less than you have paid in, it isn't a good idea to cash it in. Should you switch to a repayment mortgage you don't have to cash in your ISA. Another option is to stop paying in and hope that the FTSE continues to rise. Past experience suggests that it will eventually rise in the long term; an ISA should be treated as a long term investment.

It isn't stupid to keep it going and treat it as savings, because that's exactly what it is. Don't worry about tax as the proceeds of the ISA whenever you cash it in will be free of Income and Capital Gains Tax.

Doug

scoobypreza

Thanks everyone.
I don't feel quite so stupid now.

Proper Charile........
Hope you don't mind me asking but have you done anything like a baby bond for your new baby??

ProperCharlie

Cath - not yet, but one of my relatives has kindly offered to buy one for her tbh i don't really know what they are

I intend to set up sopme kind of saving scheme for her in any case, where i will pay in a little bit each month








and when she's 15 i'll use it to buy myself a new car

just joking - i'm gonna look into what the best tax options are for starting her savings. i'll let you know what we decide on.

all the best for yours.

TelBoy

PC - they're basically investment plans like any other, with all the usual tax breaks. However, many building societies do tax-free accounts for younger savers, so this might be worth investigating if you don't want additional risk at the mercy of the stock markets....

ProperCharlie

ahh Tel - you've come out of hiding

that seems straight forward enough. i would have thought the stock market would be a fairly good risk over a term of 20 years or so.

TelBoy

Probably. But periods like the last 5 years do tend to put people off, usually until the markets are well on the road to recovery and much of the upmove has been missed. If you look at the charts for the last ten years, there's still a *lot* of potential upside...

paulr

I'd go for the repayment and keep the ISA until it recovers,if you can.

scoobypreza

Thanks

what would scooby do

I had an ISA tracker mortgage and switched to repayment though.

I kept the ISA running, I tip a bit of money into it now and then just for fun..

scoobypreza

you mean you make extra payments into it??
I didn't know I could do that.
Seeing as your not going to use the money to pay your mortgage have you found out if you'll pay any tax on it when you cash it in ??

what would scooby do

Nope - it's an ISA after all - tax free like all other ISA's upto the max you can pay in.

Just because you bought an ISA mortgage doesn't mean it has to go to pay the mortgage.

Edited to add - whatever amount you are paying in monthly now - just cancel the DD or reduce it to a comfortable amount & make additional payments when you can afford it

scoobypreza

Good advice thanks