ISA Mortgages UK - Saving and Investment Insurance

ISA mortgages (or individual savings accounts) are a great way to pay off final debt on an interest-only mortgage, and because of this more and more people in the UK are turning to them as insurance for their investments.

What is an ISA?

ISA stands for Individual Savings Account. This type of account is a tax-efficient way of saving money. There are three different types of ISAs on the market, 'cash', 'life insurance' and 'stocks and shares'; an ISA mortgage uses the latter variety.

How can I use an ISA to repay my mortgage?

You can use an individual savings account as a vehicle to pay off your mortgage by making regular or lump sum payments into the account, which are then used to invest in stocks and shares. If your investment is performing particularly well, you may even find that you are able to pay off your mortgage early, for which there are no penalties. As with any kind of investment however share growth is not guaranteed.

Dealing with ISAs can be a complicated business as there are a whole host of rules and regulations related to the scheme. Unless you fully understand the complex workings of the scheme, seek advice from a financial adviser to ensure you are getting the most out of this type of interest-only mortgage.

Main advantage: tax efficient and flexible.

Main disadvantage: can be complex and the final fund value is not guaranteed.

© AskFinancially.com 2008

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