What is an ISA mortgage?

An ISA mortgage is a type of interest only mortgage - where you take out an ISA to raise the capital to cover the mortgage capital at the finish of the mortgage term. In the meantime you will be paying the interest off monthly.

So at the same time that you are making monthly payments to your lender to cover the mortgage interest, you will also be paying into an ISA. The advantage to the ISA is that it is extremely flexible product - there are no rules dictating when and how you make your payments, and you can stop and start payments whenever you want. However, there is a limit on how much you can invest in an ISA in each tax-year - £6,000. ISA's are tax-free and they offer high interest rates - so they are a popular choice for investors of all kinds.

Because the ISA is very flexible, you must ensure that you don't take advantage of this too much as if you are short of capital at the end of mortgage term, you will have to find the money from somewhere else.