Pay a chunk off the mortage, invest... or a car?
Discussion
Mortgage money is very cheap, you can borrow at 1.5% fixed. If you are happy trying to make more from your money than that and fancy your chances (truly shouldn't be very hard, but will have attached risk) then invest, be it a equity index tracker, of commodities fund, or simply bluechip high yield stocks (bp etc).
If you want more involvement and like property then look to development and buy to lets.
Its your choice really, but your first choice should be to make sure you have put yourself in the position to be borrowing as cheaply as possible, then look to better it.
If you want more involvement and like property then look to development and buy to lets.
Its your choice really, but your first choice should be to make sure you have put yourself in the position to be borrowing as cheaply as possible, then look to better it.
gregf40 said:
BoRED S2upid said:
Most people won't be mortgage free until old age and paying the mortgage for a very long time 20 - 30 years if not longer. Being mortgage free at an early age would be a very nice feeling plus think of all that money you will save and what you can spend it on. Take a look at your next mortgage statement how much you have paid in interest and how much you have paid in capital.
Paying the mortgage off is over rated IMO.I'd rather have the money earning more elsewhere.
Even if you just want to avoid shares/ISAs you can easily get decent interest rates if you go looking.
Between you and the mrs you can have £17,500 earning 5%
£15,000 earning 4%.
Remaining £42,500 earning 3%.
OK there's tax to pay on these - but some tax can be saved if your mrs is basic rate or zero rate taxpayer.
gregf40 said:
BoRED S2upid said:
Most people won't be mortgage free until old age and paying the mortgage for a very long time 20 - 30 years if not longer. Being mortgage free at an early age would be a very nice feeling plus think of all that money you will save and what you can spend it on. Take a look at your next mortgage statement how much you have paid in interest and how much you have paid in capital.
Paying the mortgage off is over rated IMO.I'd rather have the money earning more elsewhere.
gibbon said:
Mortgage money is very cheap, you can borrow at 1.5% fixed. If you are happy trying to make more from your money than that and fancy your chances (truly shouldn't be very hard, but will have attached risk) then invest, be it a equity index tracker, of commodities fund, or simply bluechip high yield stocks (bp etc).
This concept of mortgage is 'cheap' money has been brought up a few times...But how many of guys have actually looked at your mortgage statements recently???Currently I pay back £477 per months to Natwest for my 'cheap' mortgage (2.99%), in return Natwest charges me £300 of interest....that's every month, for the life of the mortgage. Show me a investment or finical product that will return £300/month after tax for a £53k lump sum that is risk free (our current outstanding mortgage) and I'll happily stop trying to trying to pay our mortgage off early!! We started with a mortgage of 120k 4 years ago, initial mortgage costs were nearly double what we're paying now, and I estimate we have saved about £5-7k interest in that time period by over paying, again I've never seen any financial product that can return that much interest over that time period without a huge initial pot of cash, or lots of risk.
But for OP, you don't get many opportunities in life to enjoy something nice. So if you have a chance to get a 'dream' car than go for it. Even though I'm determined to be mortgage free ASAP, we are about to drop £32k on a brand new car.
Yes it's a depreciating asset, Yes putting that lump into our mortgage would mean we'll be nearly mortgage free. But my wife loves the car in question, I know she'll keep for it 10 years at least, and finically we are luckily enough to be able to take the new car deprecation 'hit', and stay on track to be mortgage free in 2-3 years time. So essentially for us what makes good financial sense doesn't always translate to what we actually do....After all what good is money if you don't enjoy life a little
Edited by gangzoom on Wednesday 26th November 00:46
I really liked your first two paragraphs then it nose dived at the third :/ Lol.
So you're about to spend over half the current outstanding balance on your mortgage on a depreciating 'asset' (it's not an asset, it's a liability BTW).
Won't your wife like one that's a couple or years old and only £20k? Or 4 years old an £10k?
You've hit the nail on the head with the "mortgage money is cheap" crowd, though, I'll give you that!
So you're about to spend over half the current outstanding balance on your mortgage on a depreciating 'asset' (it's not an asset, it's a liability BTW).
Won't your wife like one that's a couple or years old and only £20k? Or 4 years old an £10k?
You've hit the nail on the head with the "mortgage money is cheap" crowd, though, I'll give you that!
gangzoom said:
This concept of mortgage is 'cheap' money has been brought up a few times...But how many of guys have actually looked at your mortgage statements recently???
Currently I pay back £477 per months to Natwest for my 'cheap' mortgage (2.99%), in return Natwest charges me £300 of interest....that's every month, for the life of the mortgage.
Something wrong with this part of your post.Currently I pay back £477 per months to Natwest for my 'cheap' mortgage (2.99%), in return Natwest charges me £300 of interest....that's every month, for the life of the mortgage.
Edited by gangzoom on Wednesday 26th November 00:46
The interest charged reduces over time on a repayment mortgage which you seem to have so that £300 will reduce over time and the amount that you pay off the capital will increase. That is the reason why it can make sense to pay off chunks/offset.
gangzoom said:
This concept of mortgage is 'cheap' money has been brought up a few times...But how many of guys have actually looked at your mortgage statements recently???
I have. I have borrowed at below inflation (or it was at the time, I think inflation has slowed a touch since however, but its still around that figure). So essentially you are borrowing money for free.Edited by gangzoom on Wednesday 26th November 00:46
One can borrow 500k for around 2k a month repayment, of which circa £1500 a month is paying off the debt. That is, by any current metric, cheap money.
gibbon said:
It's a keen rate but £2k fees are a bit off putting when you take into account that it's only a 2 year deal.Sharted said:
It's a keen rate but £2k fees are a bit off putting when you take into account that it's only a 2 year deal.
Not if you borrow 500k.There are also others with slightly smaller fees I believe, but all have substantial fees that mean the sums don't work out so well for borrowing smaller amounts.
gangzoom said:
Currently I pay back £477 per months to Natwest for my 'cheap' mortgage (2.99%), in return Natwest charges me £300 of interest....that's every month, for the life of the mortgage. Show me a investment or finical product that will return £300/month after tax for a £53k lump sum that is risk free (our current outstanding mortgage) and I'll happily stop trying to trying to pay our mortgage off early!! We started with a mortgage of 120k 4 years ago, initial mortgage costs were nearly double what we're paying now, and I estimate we have saved about £5-7k interest in that time period by over paying, again I've never seen any financial product that can return that much interest over that time period without a huge initial pot of cash, or lots of risk.
Your figures are wrong the interest on 53K at 2.99% would be around £132 a monthSharted said:
Largely true but probably not relevant to the OP.
Sure, see my first post on the thread regarding advice to the OP. However, I was questioned and drawn into debate regarding the 'cheap money' statement and available funding at 1.5%, I was just backing up those comments to be honest.oyster said:
This.
Even if you just want to avoid shares/ISAs you can easily get decent interest rates if you go looking.
Between you and the mrs you can have £17,500 earning 5%
£15,000 earning 4%.
Remaining £42,500 earning 3%.
OK there's tax to pay on these - but some tax can be saved if your mrs is basic rate or zero rate taxpayer.
What? Where?!Even if you just want to avoid shares/ISAs you can easily get decent interest rates if you go looking.
Between you and the mrs you can have £17,500 earning 5%
£15,000 earning 4%.
Remaining £42,500 earning 3%.
OK there's tax to pay on these - but some tax can be saved if your mrs is basic rate or zero rate taxpayer.
Thanks for the various suggestions, I've tried not to think about it too much while the deal actually went through.
However, a payment of £127k was deposited in my account yesterday. This is before the taxman gets anything, so should reduce to around £90k after CGT.
Plan to pay off car loan immediately, then set up an offset mortgage so I can get access to it all when needed.
I have no intention to pay off the mortgage at this stage, nor take on additional borrowing, and want to get instant access to the money. I'm now working for new bosses so whilst my job is the same and the future is reasonably secure, there is a small amount of uncertainty which is why I want easy access to the money.
If there are any other suggestions based on my situation then let me know.
However, a payment of £127k was deposited in my account yesterday. This is before the taxman gets anything, so should reduce to around £90k after CGT.
Plan to pay off car loan immediately, then set up an offset mortgage so I can get access to it all when needed.
I have no intention to pay off the mortgage at this stage, nor take on additional borrowing, and want to get instant access to the money. I'm now working for new bosses so whilst my job is the same and the future is reasonably secure, there is a small amount of uncertainty which is why I want easy access to the money.
If there are any other suggestions based on my situation then let me know.
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