£7k to pay off mortgage or add to ISA

[dude69]

How do you get paid?

Dividends?

Do you go into higher rate allowance?

For most contractors, paying into the ISA will be the better option.

A cash ISA will beat mortgage payments in the medium term purely because of the relative value of the tax shelter (40% income tax) versus the marginal tax rate on dividends (either zero, or 25% at most).

Shares will certainly beat a normal mortgage rate (<6%) in the long-term, but if you are paying 25% tax to pay of the mortgage, then the difference will be marginal and the risk-free return of the mortgage may well be slightly lower.

[ChimpMaster]

You only get to open 1 ISA every year. If you miss a year, that's it - no more chance to have a 7k tax-free investment. I always use my 7k as I see it as a significant part of my passive income in later years.

You're only paying £30 a month mortgage interest... let it ride and pay it off in smaller chunks whenever you have some cash handy.

[LazyFan]

If you pay off the mortgage except for £1k or £500, you then always have the option of increasing it again should you need some more money.
Say an extension to the property? Redeceration? It's easier to do that when you have an existing mortgage than having to open a new one.

Keep the option alive but reduce it to almost nil, but not quite. A guy who I work with pays £2 a month .

[oracleslave]

If you pay off the mortgage except for £1k or £500, you then always have the option of increasing it again should you need some more money.
Say an extension to the property? Redeceration? It's easier to do that when you have an existing mortgage than having to open a new one.

Keep the option alive but reduce it to almost nil, but not quite. A guy who I work with pays £2 a month .