Money after sale of house, savings or mortgage?
Discussion
Hi folks,
I've sold my house after renovating it, bought something cheaper and after paying a few bills and fees etc. I'll have around £20k left, apart from blowing it on cars what would the mighty brains of PH recommend?
I don't have any savings to speak of at the moment so I could fill up an ISA and sit on the rest, alternatively I could reduce my mortgage to around £100k. The money I would have been paying on my CC and loan I could then use to start filling up a savings account (this would require some will power though).
Over to you
I've sold my house after renovating it, bought something cheaper and after paying a few bills and fees etc. I'll have around £20k left, apart from blowing it on cars what would the mighty brains of PH recommend?
I don't have any savings to speak of at the moment so I could fill up an ISA and sit on the rest, alternatively I could reduce my mortgage to around £100k. The money I would have been paying on my CC and loan I could then use to start filling up a savings account (this would require some will power though).
Over to you
Retire debt from highest rate to lowest
Assuming no penalties for early repayment.
You need to look at what the debt is costing you in after tax pounds compared to what you can earn in pre tax pounds from investment and select the best option.
Its not too difficult, but will require some poking around with fee's etc.
I also assume you have 3 months of expenses saved for emergencies!? (If not start there in an ISA wrap)
My 2p
Assuming no penalties for early repayment.
You need to look at what the debt is costing you in after tax pounds compared to what you can earn in pre tax pounds from investment and select the best option.
Its not too difficult, but will require some poking around with fee's etc.
I also assume you have 3 months of expenses saved for emergencies!? (If not start there in an ISA wrap)
My 2p
No, no three month worth of wages as a backup, just what sits in my current account.
After the sale/purchase goes through that's exactly all I'll have, £120k mortgage and around £20k left over. No car finance, no loans or credit cards etc.
I guess its worth setting 3-6 months worth of wages aside and keep the mortgage as it is. I can always overpay the mortgage.
After the sale/purchase goes through that's exactly all I'll have, £120k mortgage and around £20k left over. No car finance, no loans or credit cards etc.
I guess its worth setting 3-6 months worth of wages aside and keep the mortgage as it is. I can always overpay the mortgage.
The way to answer this question is to look at it the other way around.
If you had a £100,000 mortgage today and not that 'spare' £20K, would you remortgage for an extra £20K just to have it 'spare'? If the answer is no, then you know what to do.
It's nice to feel you've got £20K sitting about, I get that completely, but it's illusionary whilst you have more than that in debt.
It's just extra borrowing that you don't want or need.
If you had a £100,000 mortgage today and not that 'spare' £20K, would you remortgage for an extra £20K just to have it 'spare'? If the answer is no, then you know what to do.
It's nice to feel you've got £20K sitting about, I get that completely, but it's illusionary whilst you have more than that in debt.
It's just extra borrowing that you don't want or need.
FWIW said:
I had in mind an FT 250 or S&P500 tracker.
I wasn’t trying to compare like for like, it’s just an alternative to paying the mortgage off.
Same applies. If you had a £100K mortgage, would you extend it to £120K and stick the £20K into a tracker hoping to gain a better return? I'm not sure I would! I wasn’t trying to compare like for like, it’s just an alternative to paying the mortgage off.
Ari said:
Same applies. If you had a £100K mortgage, would you extend it to £120K and stick the £20K into a tracker hoping to gain a better return? I'm not sure I would!
A good question! Borrow at c.2% to get a possible 5% return. Perhaps if you'd maxed your mortgage, would you pay it off or invest? You're saying pay it off...I'm not sure I would (and haven't!).FWIW said:
Ari said:
Same applies. If you had a £100K mortgage, would you extend it to £120K and stick the £20K into a tracker hoping to gain a better return? I'm not sure I would!
A good question! Borrow at c.2% to get a possible 5% return. Perhaps if you'd maxed your mortgage, would you pay it off or invest? You're saying pay it off...I'm not sure I would (and haven't!).Each to their own I guess. But I overpay my mortgage as well on a monthly basis.
No point having savings if they are earning less interest than the interest rate your paying on any debts you have. I would sink it all into your mortgage as this will save you from paying lots of interest payments. If you can't pay into mortgage yet due to any early payment fees, then invest it elsewhere until you can. Or use it to start a pension if you don't already have one.
supercommuter said:
FWIW said:
Ari said:
Same applies. If you had a £100K mortgage, would you extend it to £120K and stick the £20K into a tracker hoping to gain a better return? I'm not sure I would!
A good question! Borrow at c.2% to get a possible 5% return. Perhaps if you'd maxed your mortgage, would you pay it off or invest? You're saying pay it off...I'm not sure I would (and haven't!).Each to their own I guess. But I overpay my mortgage as well on a monthly basis.
i shoved my 'mortgage' payoff fund into SJP stuff on the markets nearly 2 years ago. IR on mortgage has now gone up to 1.19 from 0.94 but returns on investments are still around 10% so it seems sensible to leave it as it stands at the moment making a reasonable return.
FWIW said:
Ari said:
Same applies. If you had a £100K mortgage, would you extend it to £120K and stick the £20K into a tracker hoping to gain a better return? I'm not sure I would!
A good question! Borrow at c.2% to get a possible 5% return. Perhaps if you'd maxed your mortgage, would you pay it off or invest? You're saying pay it off...I'm not sure I would (and haven't!).All those who have investments and mortgages claiming this is preferable, presumably you've maxed out your mortgage to as much as you can possibly borrow? Because if you've decided it is prudent to have multiples of £10,000 borrowed and invested then the same applies to the next £10,000 you could borrow and the one after that?
Ari said:
FWIW said:
Ari said:
Same applies. If you had a £100K mortgage, would you extend it to £120K and stick the £20K into a tracker hoping to gain a better return? I'm not sure I would!
A good question! Borrow at c.2% to get a possible 5% return. Perhaps if you'd maxed your mortgage, would you pay it off or invest? You're saying pay it off...I'm not sure I would (and haven't!).All those who have investments and mortgages claiming this is preferable, presumably you've maxed out your mortgage to as much as you can possibly borrow? Because if you've decided it is prudent to have multiples of £10,000 borrowed and invested then the same applies to the next £10,000 you could borrow and the one after that?
This is money I have accumulated through savings, investments and bonuses etc whilst still paying down my mortgage capital amount owed with over payments.
I don't know why you are being obtuse with this? It is simple leverage. Carried out by thousands of people and organisations who have a financial brain cell.
Save for emergency cash but...
20k on a BTL interest only mortgage will probably pay your own mortgage as well, in the end of term you still get your 20k back plus and got yourself out of the rat race early. Granted 100k house for BTL you need to choose smart but can give you £700 a month on rent in the right place. Plough that extra income in your own mortgage and if your mortgage is only £150k you will probably will be able to pay most of it and be virtually mortgage free. Not all is roses and there are risks with BTLs, do your research and maths but its perfectably doable. In your current situation with no savings maybe don't risk it and save it.
Plough it into your mortgage, it is safe but it is not going to get much return from it. Those 20k now on the mortgage will reduce your monthly payments slightly, but you only get them back if/when you sell your house.
Anyway, go for safest perhaps, which is reduce your debt. I wouldn't do that myself but for bottom line advice it's the best.
20k on a BTL interest only mortgage will probably pay your own mortgage as well, in the end of term you still get your 20k back plus and got yourself out of the rat race early. Granted 100k house for BTL you need to choose smart but can give you £700 a month on rent in the right place. Plough that extra income in your own mortgage and if your mortgage is only £150k you will probably will be able to pay most of it and be virtually mortgage free. Not all is roses and there are risks with BTLs, do your research and maths but its perfectably doable. In your current situation with no savings maybe don't risk it and save it.
Plough it into your mortgage, it is safe but it is not going to get much return from it. Those 20k now on the mortgage will reduce your monthly payments slightly, but you only get them back if/when you sell your house.
Anyway, go for safest perhaps, which is reduce your debt. I wouldn't do that myself but for bottom line advice it's the best.
supercommuter said:
No, you have assumed wrong.
This is money I have accumulated through savings, investments and bonuses etc whilst still paying down my mortgage capital amount owed with over payments.
I don't know why you are being obtuse with this? It is simple leverage. Carried out by thousands of people and organisations who have a financial brain cell.
It doesn't matter how you've accumulated it. It's very simple, whilst you owe more than you have saved, those savings are effectively borrowed money (even if you've not actually gone out and arranged a loan to get them). This is money I have accumulated through savings, investments and bonuses etc whilst still paying down my mortgage capital amount owed with over payments.
I don't know why you are being obtuse with this? It is simple leverage. Carried out by thousands of people and organisations who have a financial brain cell.
Simply, there is no difference having £100K mortgage, extending it by £20K and then investing that £20K compared to 'accumulating' £20K and having £120K left to pay on your mortgage. You have £120K of borrowing and £20K invested either way.
Now if you feel you can get a better return on that £20K by investing it than the cost of borrowing it, happy days, totally understand why you would, makes total sense.
However if you truly believe that to be the case, why not extend your mortgage to £150K or £200K or a million, however far you can take it, since you have a way of making more than it costs you to borrow it?
You have in essence, a magic money tree, why not maximise it?
CrgT16 said:
Save for emergency cash but...
20k on a BTL interest only mortgage will probably pay your own mortgage as well, in the end of term you still get your 20k back plus and got yourself out of the rat race early. Granted 100k house for BTL you need to choose smart but can give you £700 a month on rent in the right place. Plough that extra income in your own mortgage and if your mortgage is only £150k you will probably will be able to pay most of it and be virtually mortgage free. Not all is roses and there are risks with BTLs, do your research and maths but its perfectably doable. In your current situation with no savings maybe don't risk it and save it.
Plough it into your mortgage, it is safe but it is not going to get much return from it. Those 20k now on the mortgage will reduce your monthly payments slightly, but you only get them back if/when you sell your house.
Anyway, go for safest perhaps, which is reduce your debt. I wouldn't do that myself but for bottom line advice it's the best.
Oh bloody hell, now you've gone and done it haven't you? 20k on a BTL interest only mortgage will probably pay your own mortgage as well, in the end of term you still get your 20k back plus and got yourself out of the rat race early. Granted 100k house for BTL you need to choose smart but can give you £700 a month on rent in the right place. Plough that extra income in your own mortgage and if your mortgage is only £150k you will probably will be able to pay most of it and be virtually mortgage free. Not all is roses and there are risks with BTLs, do your research and maths but its perfectably doable. In your current situation with no savings maybe don't risk it and save it.
Plough it into your mortgage, it is safe but it is not going to get much return from it. Those 20k now on the mortgage will reduce your monthly payments slightly, but you only get them back if/when you sell your house.
Anyway, go for safest perhaps, which is reduce your debt. I wouldn't do that myself but for bottom line advice it's the best.
I regret selling my last BTL but I was an 'accidental landlord' and owned it with my ex-wife so it had to go. Didn't even consider getting another one, a quick search on Rightmove tells me I can get a 2 bed flat for £100k... a few 1 beds are even coming up in the 60's...
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