|An ISA mortgage is effectively an
interest only mortgage with an additional investment plan in the
form of an individual savings account (ISA). An ISA is a stockmarket based investment that benefits from tax free growth.
Strictly speaking, an ISA is not an investment but a 'wrapper'
within which an investment can benefit from tax free growth.
Choosing an individual savings account is a subject in itself.
For further information about ISAs.
(Individual savings plans replaced personal equity plans (PEP's)
in the 1999/2000 tax-year, although PEP funds can remain
- If the ISA performs well you may be able to pay off your
morgage early or enjoy a lump sum at the end of the
repayment period, in addition to paying off your mortgage.
- ISAs are potentially tax efficient, particularly for
higher rate taxpayers.
- An ISA can be selected to suit your circumstances and
- Your debt remains constant throughout the morgage
- You have no guarantee that you will have sufficient
funds to pay off the morgage at the end of the repayment
period, as the ISA could perform below expectations. (By
monitoring your ISA's performance, you could make additional
contributions during the repayment period if you felt the
underlying fund was under performing.)