What does ISA Mortgage mean?

Although not the most suitable way of paying back your mortgage, the ISA (Individual Savings Account) is still taken into account by many borrowers on the market. Here is how it simply work: first of all you need to opt for an interest only type of mortgage, as by saving money through ISA, it involves that for the term of the loan you will be paying back towards the lender only the interest, while through the ISA account you save up in order to be able to pay back the whole borrowed amount to the lender at the end of your mortgage term.

For example if your loan is say £300,000 for a term of 25 years, you will pay to your lender only the interest as a monthly payment, while saving through the ISA account so that at the end of those 25 years you will be able to pay back in one lump sum the loan. However, having in mind that anything related to the stock market is not on sure grounds, your lender might require an additional life insurance from you, so that in case anything happens, he still gets covered for his loss.

Moreover, there are certain ‘restrictions’ if you choose ISA, like the fact that you have a maximum monthly allowed sum you can save through this type of arrangement (for example, the maximum might be set at £300/month), and in this case you need carefully make your own calculations so that to make sure with such a monthly payment, at the end of your mortgage term there will be enough funds generated so that you can pay off your mortgage in full; otherwise it has no sense really choosing an ISA mortgage.