Questions of cash: The Isa mortgage; Abbey on-line; Paying for extensions
Saturday 17 November 2001
We have a 25-year, £75,000 mortgage paid for by a Pep/Isa, which, with 15 years to go, we are worried may not realise the sum borrowed. We have paid £75 to £100 monthly and returns have been weak. £5,068 was invested in the Pep and £2,796 in the Isa. The Pep has gained £1,100 and the Isa has lost £400. Should we cut our losses and take out a repayment mortgage for the remaining 15 years, or wait for an upturn in the market and stay with our Isa? MOH, Middlesex.
Q: We have a 25-year, £75,000 mortgage paid for by a Pep/Isa, which, with 15 years to go, we are worried may not realise the sum borrowed. We have paid £75 to £100 monthly and returns have been weak. £5,068 was invested in the Pep and £2,796 in the Isa. The Pep has gained £1,100 and the Isa has lost £400. Should we cut our losses and take out a repayment mortgage for the remaining 15 years, or wait for an upturn in the market and stay with our Isa? MOH, Middlesex.
A: This is a common concern. The weak performance of stocks mean that Pep/Isa savings plans may not fully repay mortgages. It is too soon to panic, but a good moment to exercise caution by putting in place a failsafe plan. Steve Herbert of Select Mortgages and Loans suggests your best option is probably to stick with the ISA as a savings plan, but without assuming it will pay off your mortgage. You could take out a repayment mortgage for part of the balance and maintain your ISA. Most people in this situation are choosing to hold on to their existing savings plans in the hope of improved performance, without putting anything more into them.
Q: On 3 November you listed the web-based Abbey National e-Saver as one of the best no-notice postal accounts. The application form warns that an Apple Mac computer does not support their system. What should I do? NB, Sevenoaks.
A: Abbey National tells us there has been a misunderstanding. Apple Mac users have normal access to the site like any PC user, including the e-banking element. There are 'glitches' affecting Apple Mac customers, but Abbey National says these are easy to solve. Advice is contained on the web site and there is a back-up helpline (0845 600 4388).
Q: We are planning to extend our house to accommodate our expanding family, at a cost of £60,000. This is also the market value of a flat we own and rent out, receiving £350 rent a month. What is the best way to finance the extension? The flat is not likely to increase in value greatly over the next five years and will require expensive maintenance. What are the implications of capital gains tax? The flat is in my wife's name and our home is in both our names. JF, St Albans.
A: Simon Jones of Savills Private Finance says: "The easiest way to finance this is by the sale of the flat, especially as it won't make a profit. The CGT liability will depend on how long the flat was lived in as a main residence as well as the time that it has been used as an investment property. The cost of borrowing £60,000 over 25 years on a repayment basis at a rate of 6 per cent would be around £390 per month."
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