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AyBee
5,323 posts
72 months
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pidsy said: of course its relative.
if i earnt a 7 figure salary, i would still jump at the chance to reduce a 300k mortgage. 200k off your mortgage still represents being £200k better off. Really? Mortgages (some) offer a much better borrowing rate than you'd get elsewhere (hence why so many people remortgaged before the crash to buy things they didn't need!), why pay off the mortgage if it's perfectly manageable, not a ridiculous interest rate and you'd like to do something else with the money like invest in a business or buy a holiday home etc. If I earned a 7 figure salary and only had a £300k mortgage, I'd think I needed an upgrade 
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cerbfan
795 posts
97 months
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chibbard said: einsign said: jdw1234 said: Why not pay £200k off the mortgage? Because that would be too simple and dare I say boring! As boring as it is, surely this is the most sensible thing to do. I don't know how people sleep at night with a 300k mortgage. Why?
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VinceFox
14,798 posts
42 months
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See, this is interesting to me. The value of property relative to income aside, i think of quality of life and what defines it. To me, knowing i actually owned my home and cant have it taken away by anyone would far outweigh anything else. Knowing i didnt need to earn a certain amount to pay for the mortgage, that would be an amazing thing.
Each to their own i suppose tho.
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pidsy
1,997 posts
27 months
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VinceFox said: See, this is interesting to me. The value of property relative to income aside, i think of quality of life and what defines it. To me, knowing i actually owned my home and cant have it taken away by anyone would far outweigh anything else. Knowing i didnt need to earn a certain amount to pay for the mortgage, that would be an amazing thing.
Each to their own i suppose tho. Thats the point i was trying to put accross. (not very well apparently)
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eztiger
639 posts
50 months
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Or you could, presumably, use the lump sum to get a return that would cover your mortgage repayments. Repayments are now 'free', your mortgage is reducing, you have more monthly income spare and you still have the 200k which is hopefully growing a little as well. Though I now live in fear of the wrath of the finance forum 
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raptor600
1,356 posts
16 months
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coyft said: thegman said: coyft said: Not much chance of you ever earning a 6 figure salary let alone a 7 figure salary with your flawed logic.
Choosing to pay off your mortgage doesn't make you better off. I think any accountant would tell you that you were better off having less liabilities and more assets One that can't add up would.
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hornet
5,527 posts
120 months
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VinceFox said: See, this is interesting to me. The value of property relative to income aside, i think of quality of life and what defines it. To me, knowing i actually owned my home and cant have it taken away by anyone would far outweigh anything else. Knowing i didnt need to earn a certain amount to pay for the mortgage, that would be an amazing thing.
Each to their own i suppose tho. I'd tend towards this point of view as well. My attitude would be "I can afford it now, but what if things change?", but then I've always been a bit of a worrier when it comes to finances. My approach would be (and is) to reduce the mortgage to a level I'm happy with, have savings in reserve to cover x months of repayment if things go pear shaped and then see what to do with any leftover cash. I accept that's not maximising return on your money, but I'm also of the "less stress" school of thought. Having a lower mortgage payment to me would mean the opportunity to scale down at some point in the future. That's where the quality of life vs standard of living arguments comes into things. Some people are happy with debt and want bigger and better things, some people just want shot of it!
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jdw1234
4,352 posts
85 months
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hornet said: VinceFox said: See, this is interesting to me. The value of property relative to income aside, i think of quality of life and what defines it. To me, knowing i actually owned my home and cant have it taken away by anyone would far outweigh anything else. Knowing i didnt need to earn a certain amount to pay for the mortgage, that would be an amazing thing.
Each to their own i suppose tho. I'd tend towards this point of view as well. My attitude would be "I can afford it now, but what if things change?", but then I've always been a bit of a worrier when it comes to finances. My approach would be (and is) to reduce the mortgage to a level I'm happy with, have savings in reserve to cover x months of repayment if things go pear shaped and then see what to do with any leftover cash. I accept that's not maximising return on your money, but I'm also of the "less stress" school of thought. Having a lower mortgage payment to me would mean the opportunity to scale down at some point in the future. That's where the quality of life vs standard of living arguments comes into things. Some people are happy with debt and want bigger and better things, some people just want shot of it! I'm with you guys.
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Cheib
6,503 posts
45 months
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In times like we have now it's not a bad thing to have debt as long as that debt is being used to buy things that are inflating in price.
One of the reasons (in fact the main reason) we currently have relatively high inflation is that the government is trying to inflate away our debt as a % of GDP. Thus the deficit is "reduced" even though in nominal terms it stays the same.
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Welshbeef
13,180 posts
68 months
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Personally if I had a £300k mortgage tat would roughly equate to £1500pcm repayments for 23-25years. If you dumped in £200k and then continued at £1,500pcm you would be mortgage free is c5 years. So this chap will be 44 mortgage free. Now if he has personal loans or credit card debt that should be cleared first and foremost. Of course this option is the risk free route. He could choose to invest it or hold it in cash - these contain risk he could win he could lose. This is an inheritance I'd say having the forever knowledge that their inheritance reduced your mortgage by 20 years giving your family total security would be a lovely memory. It's not just about returns. Note I had a £70k inheritance from my grandad I held it in Northern rock lost everything and I even had the dividends on auto reinvest so I f  ked up big time nothing to show for it. I wish I'd bought an E type series one instead I have f k all. I also wish I'd paid it into the mortgage but sadly I made an investment choice - Northern Rock was his old employer for 30 years. I'd be cautious about holding cash over £85k currently as if things go pop in Europe well that may vanish. If you have an offset mortgage it's dead easy to take back out. You could buy an XJ220 and put the remaining £70k into mortgage the car will not lose money or even an EB110
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Mermaid
12,697 posts
41 months
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Set off mortgage, and stick the money on deposit to use and when you want - reduces mortgage interest, and no tax on the interest.
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Welshbeef
13,180 posts
68 months
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Mermaid said: Set off mortgage, and stick the money on deposit to use and when you want - reduces mortgage interest, and no tax on the interest. Offset mortgage. Fixed for you.
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Mermaid
12,697 posts
41 months
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Welshbeef said: Mermaid said: Set off mortgage, and stick the money on deposit to use and when you want - reduces mortgage interest, and no tax on the interest. Offset mortgage. Fixed for you. So we agree 
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groak
3,254 posts
49 months
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eztiger said: Or you could, presumably, use the lump sum to get a return that would cover your mortgage repayments. Repayments are now 'free', your mortgage is reducing, you have more monthly income spare and you still have the 200k which is hopefully growing a little as well. Though I now live in fear of the wrath of the finance forum I'd certainly do a version of this.
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walm
3,458 posts
72 months
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groak said: eztiger said: Or you could, presumably, use the lump sum to get a return that would cover your mortgage repayments. Repayments are now 'free', your mortgage is reducing, you have more monthly income spare and you still have the 200k which is hopefully growing a little as well. Though I now live in fear of the wrath of the finance forum I'd certainly do a version of this. Banks usually try to make money. The way they do it, is to take money from savers and give them a crappy return while lending it out to people for a higher rate. They pocket the difference. This is called the spread. For 95% of the time it is positive. (They also make plenty of money on the admin fees too of course.) If you nailed a VERY low variable rate mortgage during the height of the credit crunch then you MIGHT be able to do what you suggest. I don't think it is a long term solution. In particular the principal + interest REPAYMENTS are often WAY more than the interest only part (obviously). So to have such a substantial interest income rate on the £200k ABOVE the mortgage rate is VERY unusual. However for the time being it is probably the safest bet in terms of capital protection and maximising returns.
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eztiger
639 posts
50 months
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Would depend on how you define 'return' on the 200k. If you see that as just chucking it in a savings account then yes it wouldn't be much good - but I imagine those in the know could make it work much much harder for a better return though you would of course have to balance the risk. And, as you say, would all depend on how the rest of the numbers fall out. 5% on 200k (which, with my complete lack of knowledge, is a ball park figure I think would be achievable for the financially astute if not perhaps even the financially braindead like me presuming careful choice of product) would cover my mortgage repayments for the year... But I'm far from a financial whiz so I once again await an education Personally, if it were me it would be a case of do as I say not what I do. I'd be skint within a week
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hornet
5,527 posts
120 months
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How about splitting the lump sum into various pots and then having a different objective for each one? Pot A could be a fixed rate ISA or bond giving monthly interest. Won't cover your mortgage payment, but it will give a steady contribution running in the background, meaning you have less to find to cover the full repayment. You can use riskier methods to try and cover the rest. As long as you stay disciplined, I'm sure you could make decent inroads.
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einsign
Original Poster
2,950 posts
116 months
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What is the best deal out there at the moment on an alternative lender, after clearing down a large portion of the balance?
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NorthDave
387 posts
102 months
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groak said: I'd certainly do a version of this. I wouldn't, there is no point. Investing money in the hope of covering your mortgage means you have some risk. Paying it a chunk off introduces no risk and makes the person richer every month by the amount saved in mortgage payments. You can't value that security. If the scenario were different I could see the value in paying off the majority and then investing the rest but as a one off wind fall for a chap with a steady income then no.
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walm
3,458 posts
72 months
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NorthDave said: groak said: I'd certainly do a version of this. I wouldn't, there is no point. Investing money in the hope of covering your mortgage means you have some risk. Paying it a chunk off introduces no risk and makes the person richer every month by the amount saved in mortgage payments. You can't value that security. If the scenario were different I could see the value in paying off the majority and then investing the rest but as a one off wind fall for a chap with a steady income then no. Some people are on a variable rate mortgage of say 0.5% above base so are paying 1% on their mortgage. You can invest 4x £50k in plain vanilla savings accounts that will yield 3%+. So for now it is possible to make your £200k cash produce MORE income RISK FREE than your current mortgage costs. So it would be irrational to pay off that mortgage early (which may indeed even incur fees!). However, as I said, this is pretty far from the norm otherwise banks couldn't make money.
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