if you could pay off your mortgage would you?
Discussion
No, nothing to be sorry for - it IS your business.
The variables are endless. From the sounds of it, you don't have children so there's nothing there to consider. If you wanted to retire early, and if you have a decent final salary scheme, the 100k may be the icing on the cake. You could start a personal pension and get 20% tax relief added by the g'ment on top of what you put in, to the limit of your earnings. So, if you earn 25k and wanted to put 25k into a personal pension, you (in real terms) would only have to put 20k into the new pension pot.
You can chip away at the existing mortgage, say.. 30k, and then ask yourself what's most important for you. Do you want income from the remaining 50k, or are you prepared to let the capital grow? If so, consider Investment/Income Bonds, equities or the like and there are some useful National Savings Certificates about at the moment, depending of course, on how long you want any sum to be tied up. And of course, throw up to £7200 into a ISA. It might be that an Investment Trust fits the profile - it'll all depend on factors that you may not have even considered yet.
All that is hypothetical - and you should contact ideally, a decent IFA to help you work it all out. Of course, it could be that paying off the mortgage IS the right thing for you to do.. but consider everything first.
Regards,
Al.
The variables are endless. From the sounds of it, you don't have children so there's nothing there to consider. If you wanted to retire early, and if you have a decent final salary scheme, the 100k may be the icing on the cake. You could start a personal pension and get 20% tax relief added by the g'ment on top of what you put in, to the limit of your earnings. So, if you earn 25k and wanted to put 25k into a personal pension, you (in real terms) would only have to put 20k into the new pension pot.
You can chip away at the existing mortgage, say.. 30k, and then ask yourself what's most important for you. Do you want income from the remaining 50k, or are you prepared to let the capital grow? If so, consider Investment/Income Bonds, equities or the like and there are some useful National Savings Certificates about at the moment, depending of course, on how long you want any sum to be tied up. And of course, throw up to £7200 into a ISA. It might be that an Investment Trust fits the profile - it'll all depend on factors that you may not have even considered yet.
All that is hypothetical - and you should contact ideally, a decent IFA to help you work it all out. Of course, it could be that paying off the mortgage IS the right thing for you to do.. but consider everything first.
Regards,
Al.
anonymous said:
[redacted]
I have paid mine off with Yorkshire Bank on their 'all in the middle' type account but keep it open in case I need the £90k I could still draw upon without having to make another unplanned mortgage application in the current financial climate( and being self employed and all).The idea that we only have to earn enough to pay the basic bills is reassuring.
I could have, but I worked out the early payment penalties on my fixed rate and decided to spread bet my wind fall. (Nan's legacy)
Some on tracker bonds, some in high interest savings, some in childrens bonus bonds, some in ISA's, some in a new bathroom, some in paying off a house improvement loan, some on holidays.
Some on tracker bonds, some in high interest savings, some in childrens bonus bonds, some in ISA's, some in a new bathroom, some in paying off a house improvement loan, some on holidays.
My personal example.
Mortgage at ~5.5% and lower rate tax payer.
If I had £50k to throw in to my mortgage or save.
Best savings rate I could get at the moment would be around 6%. This would then have the interest taxed at 20%. So 4.8% net return on my money.
Putting that in to my mortgage with interest of 5.5% would get me a 5.5% net return on my money (interest saved on a loan is the equivalent of interest earned on an investment really).
So I'd be 0.7% better off, £350 a year.
If I was a higher rate tax payer, the savings interest would drop to 3.6% and I'd be 1.9% better off, £950 a year.
So answer is probably, yes, you want to do it if you can.
On the other hand, I've managed to make 10% in a couple of weeks a few times playing the shares game. But thats money I could afford to lose all of without crying
Mortgage at ~5.5% and lower rate tax payer.
If I had £50k to throw in to my mortgage or save.
Best savings rate I could get at the moment would be around 6%. This would then have the interest taxed at 20%. So 4.8% net return on my money.
Putting that in to my mortgage with interest of 5.5% would get me a 5.5% net return on my money (interest saved on a loan is the equivalent of interest earned on an investment really).
So I'd be 0.7% better off, £350 a year.
If I was a higher rate tax payer, the savings interest would drop to 3.6% and I'd be 1.9% better off, £950 a year.
So answer is probably, yes, you want to do it if you can.
On the other hand, I've managed to make 10% in a couple of weeks a few times playing the shares game. But thats money I could afford to lose all of without crying
oily,
I was thinking just now. There are almost infinite needs and possibilities, but (forgetting anything you chuck into a cash ISA), have you considered setting up a series of NSIs? At the moment, looking at the number of issues, you can chuck £90,000 into them at the moment, which would help. Don't forget, the risk is as near as dammit, nil.
http://www.nsandi.com/products/ilsc/rates.jsp
Also, what about an income bond? There are some with a higher rate than these, but these may be drawn on, monthly. You might want to balance your portfolio and use them in conjunction with the above, or as a stand alone device.
The 12 month issue 44 has a guaranteed rate of 4.65% pa and if you put say, £190,000 in you'd get almost £589 a month after tax. Lots of pros and cons which you should seek advice about, but you'll keep the capital intact and simply use the device as a feeder account for your mortgage. If interest rates do fall, it might be a canny move as you'll be waiting to see which way the winds change. You might not want to pay off your mortgage if circumstances change in your favour. Yes, you'll lose capital in real terms and after inflation, but it might be something for you to consider. Seek proper advice.
http://www.nsandi.com/products/gib/calculator.jsp
I was thinking just now. There are almost infinite needs and possibilities, but (forgetting anything you chuck into a cash ISA), have you considered setting up a series of NSIs? At the moment, looking at the number of issues, you can chuck £90,000 into them at the moment, which would help. Don't forget, the risk is as near as dammit, nil.
http://www.nsandi.com/products/ilsc/rates.jsp
Also, what about an income bond? There are some with a higher rate than these, but these may be drawn on, monthly. You might want to balance your portfolio and use them in conjunction with the above, or as a stand alone device.
The 12 month issue 44 has a guaranteed rate of 4.65% pa and if you put say, £190,000 in you'd get almost £589 a month after tax. Lots of pros and cons which you should seek advice about, but you'll keep the capital intact and simply use the device as a feeder account for your mortgage. If interest rates do fall, it might be a canny move as you'll be waiting to see which way the winds change. You might not want to pay off your mortgage if circumstances change in your favour. Yes, you'll lose capital in real terms and after inflation, but it might be something for you to consider. Seek proper advice.
http://www.nsandi.com/products/gib/calculator.jsp
Thanks al, i will reply to your other email this weekend, its been a busy week at work!! I think the best plan will be to keep the mortgage at the moment for atleast the rest of its fixed term and just try and overpay the maximum every month to get it as low as possible and then see whats happening in 18 months time.
Thanks again everyone for the advice
ORM
Thanks again everyone for the advice
ORM
Tim,
There are folk here far better qualified than me to offer insight onto RPI, I'm not an economist. I know that the general impression is that its going to stay bouyant, certainly for the short term so any short term arrangement might be a nice hedge better until the fog of war clears a little and they clear the dead politicians from the battlefield. My existing pension is supposed to getting linked to RPI, if they're going to do it, I hope they bloody hurry up!
As to whether they're a good deal, then yes. But as to whether they're a good deal for you.. thats a potentially different story. Ultimately, it would depend how you want any arrangement to fit into your own circumstances, your priorities, any other investments (to keep things balanced and diversified) and with your needs. That sounds like I've got splinters in my arse from having sat too long on the fence, but for some people they're great - others, not so. They also might turn out be a good deal for you now, but they might not be in a year or so, so weighing up their pros and cons for you, isn't that straight forward and should be the means to an end, and not the end itself.
If you have a specific question in mind mate, don't hesitate to contact me by other means.
Oily,
Hey, no sweat
. It was just a thought that crossed my mind as I was out running before I got in last night, when I was mulling one or two things over thats all. Sad git that I am 
.
Regards all,
Al
There are folk here far better qualified than me to offer insight onto RPI, I'm not an economist. I know that the general impression is that its going to stay bouyant, certainly for the short term so any short term arrangement might be a nice hedge better until the fog of war clears a little and they clear the dead politicians from the battlefield. My existing pension is supposed to getting linked to RPI, if they're going to do it, I hope they bloody hurry up!
As to whether they're a good deal, then yes. But as to whether they're a good deal for you.. thats a potentially different story. Ultimately, it would depend how you want any arrangement to fit into your own circumstances, your priorities, any other investments (to keep things balanced and diversified) and with your needs. That sounds like I've got splinters in my arse from having sat too long on the fence, but for some people they're great - others, not so. They also might turn out be a good deal for you now, but they might not be in a year or so, so weighing up their pros and cons for you, isn't that straight forward and should be the means to an end, and not the end itself.
If you have a specific question in mind mate, don't hesitate to contact me by other means.
Oily,
Hey, no sweat
. It was just a thought that crossed my mind as I was out running before I got in last night, when I was mulling one or two things over thats all. Sad git that I am .Regards all,
Al
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