Investing or paying a portion of mortgage off?

Investing or paying a portion of mortgage off?

Poll: Investing or paying a portion of mortgage off?

Total Members Polled: 33

Some form of bank/ISA/savings scheme: 15%
Use the cash for a deposit on a BTL property: 6%
Put it all on red at the casino: 9%
Just do what the wife suggests and reduce our: 70%
Author
Discussion

Byff

Original Poster:

4,427 posts

260 months

Sunday 4th October 2015
quotequote all
When me and the missus bought our first house, we had two endowments as was all the rage those days.

When we moved to a larger house, we took out a larger endowment, which covered the difference.

When the whole endowment's are crap erupted, it was around the time we put an extension on the house, so we switched to a part-repayment, part-endowment mortgage of 50/50 proportions to cover any shortfalls to the value of around £100k.

Our first two endowments have matured so we're sitting with nearly £20k in the bank.

The wife wants to pay off some of the mortgage, but as our repayments are so low, I'm thinking is there is a smarter way of doing this?

Could we invest the money in either:
.
a, Some form of bank/ISA/savings scheme until the third endowment matures
b, Use the cash for a deposit on a BTL property
c, Put it all on red at the casino
d, Just do what the wife suggests and reduce our debt.



dingg

3,974 posts

218 months

Sunday 4th October 2015
quotequote all
get another tvr?

egor110

16,818 posts

202 months

Sunday 4th October 2015
quotequote all
reduce the mortgage , why pay someone interest for money you don't need to borrow.

smn159

12,448 posts

216 months

Sunday 4th October 2015
quotequote all
Compare the interest that you're paying on your mortgage to the rate that you can expect from an ISA. Then pay down the mortgage.

Or invest in a TVR smile

bomb

3,691 posts

283 months

Sunday 4th October 2015
quotequote all
Reduce the mortgage

Ozzie Osmond

21,189 posts

245 months

Sunday 4th October 2015
quotequote all
bomb said:
Reduce the mortgage
I agree.

Why? Fundamentally I don't see the point of borrowing money which you've already got.

With investments you MIGHT make more money BUT,
  • You will be running investment RISK, whereas the need to eventually pay off your mortgage is a certainty. In other words, you will be taking a risk which you don't need to take.
  • Don't forget that your investment returns will be TAXED before you actually have the cash to pay off the mortgage. If you just pay off the mortgage you avoid that tax.

AlanH1

90 posts

140 months

Sunday 4th October 2015
quotequote all
Depends on your mortgage interest rate. I paid a lump sum off my mortgage, in hindsight I should have kept it in cash and used it to secure a cheap finance deal on a car.

egor110

16,818 posts

202 months

Sunday 4th October 2015
quotequote all
AlanH1 said:
Depends on your mortgage interest rate. I paid a lump sum off my mortgage, in hindsight I should have kept it in cash and used it to secure a cheap finance deal on a car.
you don't need a expensive car but all property is expensive.

davepoth

29,395 posts

198 months

Sunday 4th October 2015
quotequote all
Pay off the mortgage IMO. You're still buying into property, just your own property.

Ginge R

4,761 posts

218 months

Monday 5th October 2015
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You should always pay down debt as important as that. But think. Are you over 55, or about to hit it?

Is it possible to divert the money into a pension to get an uplift via the tax relief first, then withdraw it to pay off the mortgage? You could either use the tax free cash to get rid of it in one go, or an income stream. All that of course, dependent on your own circumstances, and don't take needless risk with your home.

Byff

Original Poster:

4,427 posts

260 months

Monday 5th October 2015
quotequote all
I forgot the option of blowing it all on coke and hookers, but I'm happy with asprin and babestation these days.

I know that paying it off is the sensible answer, but I'm still only 45 with the remainder of the mortgage due in about three'ish years. I'm no financial wizzkid (hence why I run a Cerbera as a daily) so I don't know if there's any super duper investments out there.

My pension is sorted (LGPS) and my mortgage repayments are easily manageable. I've already got one buy-to-let, bit of a disaster but it pays for itself and I've learned a lot in the process.

I'll probably just pay it off.

sideways sid

1,371 posts

214 months

Monday 5th October 2015
quotequote all
If you can earn a sufficient return net of tax that exceeds the cost of the interest, invest it. If not, spend it or reduce your mortgage.

My personal stance is that whilst interest rates are so low, with a little time and research, its almost impossible NOT to beat the mortgage rate, but it depends on your knowledge, commitment, timeframe and attitude to risk.