Pay Mortgage or take out ISA

I currently have 2 mortgages:
One fixed at 4.79% which is going to change from November to 5.98%, I can make an overpayment of whatever amount I wish before my new deal starts in November
My second is a variable at 6.24%.

Which of the following would be the best option for my financially.
* Invest £3k in a 6.30% AER National Savings Direct ISA
* Pay £3k on my first mortgage before November which will reduce the length of my mortgage further before the new deal kicks in.
* Pay £3k into my 2nd mortgage which is at the higher rate of 6.24%

I already have an isa in place but my partner doesn't so I was going to put the money into their Isa if I selected that option.
My maths is average but I suspect the 2nd option would be best, any advice on the above would be appreciated? As I have been told that the 3rd option would be best as you should always pay off your highest interest rate debts first?




I'd say the third option.

If both mortgages are variable then chances are they'll only be going up in the near future, making paying some off the highest rate best. Is the saving rate fixed?


It depends on what you want to use the money for in the first place.

If you have no use for this money then paying it off of your mortgage will give immediate benefit that you will keep on benefitting from until the term of your mortgage. However you will not see a massive effect on your mortgage statement, it will benefit you in the long run, as you will not need to pay interest on that 3k for the rest of the term of your mortgage. However if you need to use this money one 'rainy day' trying to withdraw from your mortgage account will be costly and difficult.

If you pay into a savings account you will see the interest on a monthly or yearly basis, however the effect will not be as instant, and you will only benefit for the length of time the money remains in the account.

As mentioned if you need this money for a rainy day I would recommend the savings account option as it will be easier to access at a later day.

I would ask if you have any loan or credit card debt, if so your money will work better for you by paying into one of those accounts. The interest charged on these accounts outweigh that that can be earned in a savings account.

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Original Poster

Thanks for the responses.

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