So what mortgage have you got and why?

[Ozzie Osmond]

e8_pack said:

Yes, but the money you are putting into paying the mortgage can be invested for a better return, keep it accessible and when the market turns you can pay it off if you need too. But you effectively get a very low return for the money you are using to pay it off i.e. 1.99%. That's how i'm seeing it anyway and one reason why i'm not overpaying..

Whilst that is usually the case it's not something I've ever been comfortable to do. To me a house is a home rather than a source of finance.

Returns on cash (building society) are pitifully low so it's not worth doing that. Which brings us to "risk" investments like stocks and shares. Long term returns have been good but there are times when the market drops very sharply - for instance FTSE 100 index was at 7,000 in April 2015 but is below 6,000 today; an alarming 14% fall in just a few months.

If you do manage to make, say, 6% p.a. total return from the stock market you have to pay tax on that. If your marginal tax rate is, say, 33% (combination of income and capital gains) then net after tax you have only made 4%. Yet your mortgage interest has to be paid out of taxed income and is perhaps charged at 3%. So you've taken a risk with your house for a 1% return.

Let's say your house is worth £400k and there was £100k of excess mortgage which you invested in shares, so the 1% net return means you've "made" £1,000 by risking a quarter of your house. But if the market goes down 10% you lose £10,000. To my mind the "risk/return" isn't worthwhile where your home is involved.

At the end of the day it's all a matter of how you feel about "risk".

[e8_pack]

No need to take risks. Santander pay 3%, Lloyds 4%, nationwide 4% standing orders passing cash around cuts out fees. Any decent savings rates I open accounts or current accounts, instant access to cash and mortgage can be paid instantly if rates move considerably.

Meantime, maybe I can do something else with cash, always got that option if the opportunity arises.

[33q]

TSB pays 5% but only on £2000 but it opens the way to a 5% monthly saver.

If you are a couple that can double things up.

You can merry go round standing orders to make up the minimum monthly deposit.

TSB don't require any Direct Debits.

[e8_pack]

33q said:

TSB pays 5% but only on £2000 but it opens the way to a 5% monthly saver.

If you are a couple that can double things up.

You can merry go round standing orders to make up the minimum monthly deposit.

TSB don't require any Direct Debits.

Thanks, only £500 a month required too, just opened one today.

Average interest before tax is now 3.6%, after tax is 2.9%. I'm very close to offsetting my monthly mortgage interest, there's about £35 in it now.

[rossub]

e8_pack said:

No need to take risks. Santander pay 3%, Lloyds 4%, nationwide 4% standing orders passing cash around cuts out fees. Any decent savings rates I open accounts or current accounts, instant access to cash and mortgage can be paid instantly if rates move considerably.

Meantime, maybe I can do something else with cash, always got that option if the opportunity arises.

I can understand going to all the hassle if it's an enormous mortgage and you're able to save up tens of thousands a year. But for most people it's so marginal, it's not worth the hassle.

I can overpay max £10k a year at the moment on a mortgage at 2.59%

Say I get 4% net somewhere, that's an extra of return of £140 a year on £10k. I'd just rather put the £10k into the mortgage to be honest.

[gangzoom]

We repaid our current mortgage like mad, currently £40k left on a 10year policy, have more than enough savings to clear the whole lot. But looking ahead likely to move to a bigger house in 5 years. But have the small matter of me wanting a Tesla Model S in 12 months time.

Have x3 1-2-3 accounts between us for the Tesla fund, it's earning us £100/month in interest even after tax, so will be hard to let all go for a car....Even something as good as a Tesla. If I keep the Leaf and not get the Model S the Santader funds will make it very feasible to buy our current house outright, and still have enough deposit for a move to a much bigger house, whilst earning rent from old house.

Interms of 'returns on investment', I know putting money into bricks and mortar is by far the most sensible thing, but this website is called 'Pistonheads' for a reason

Edited by gangzoom on Saturday 9th January 10:41

[Ozzie Osmond]

gangzoom said:

Interms of 'returns on investment', I know putting money into bricks and mortar is by far the most sensible thing, but this website is called 'Pistonheads' for a reason

Back in the day I took a bigger mortgage than I needed and bought a sodding great sportscar with the money. Cheapest way of buying a car that I could think of - and you're on the property ladder as well.

[egor110]

swerni said:

1.69% above base, life time tracker on a first direct offset.
Don't see the point in messing around with the "high" interest savings account for low or no net gain on small amount of money.
Life's too short

Plus the more mortgage you pay off the better the ltv you have and the better rates you get, combine that with the interest rates going up in the future and you may not have the opportunity in the future.

[Ozzie Osmond]

...and one of the curiosities of paying down debt is that the more you pay off, the more you can afford to pay off.

It's sort of the opposite effect of "compound interest". Put simply, and these figures are NOT real,

• You have a £100,000 mortgage
• You are currently paying £5,000 p.a. for that mortgage
• You have, say, £10,000 of spare cash at the end of the year
• You pay off £10,000 of mortgage
• Your mortgage repayments reduce to £4,500 p.a.
• .... so next year you can pay off £10,500 of mortgage

and so on.

[Revisitph]

e8_pack said:

Thanks, only £500 a month required too, just opened one today.

Average interest before tax is now 3.6%, after tax is 2.9%. I'm very close to offsetting my monthly mortgage interest, there's about £35 in it now.

Only 2.9% at lowest rate tax - at top rate it is 1.98% and at the specially pernicious rate between £100k and a little under £120k it is 1.44% net.

[e8_pack]

swerni said:

Revisitph said:

e8_pack said:

Thanks, only £500 a month required too, just opened one today.

Average interest before tax is now 3.6%, after tax is 2.9%. I'm very close to offsetting my monthly mortgage interest, there's about £35 in it now.

Only 2.9% at lowest rate tax - at top rate it is 1.98% and at the specially pernicious rate between £100k and a little under £120k it is 1.44% net.

That will less than my mortgage rate, where do i sign?

It's rosier on NT. ;-)

[Granfondo]

swerni said:

Revisitph said:

e8_pack said:

Thanks, only £500 a month required too, just opened one today.

Average interest before tax is now 3.6%, after tax is 2.9%. I'm very close to offsetting my monthly mortgage interest, there's about £35 in it now.

Only 2.9% at lowest rate tax - at top rate it is 1.98% and at the specially pernicious rate between £100k and a little under £120k it is 1.44% net.

That will less than my mortgage rate, where do i sign?

That's the beauty of the offset mortgage!