No hurry to pay off the mortgage

No hurry to pay off the mortgage

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Discussion

Ari

19,328 posts

214 months

Friday 23rd October 2020
quotequote all
ILikeCake said:
What I don't get about the logic, is that why aren't you remortgaging to invest in one of these pistonheads money tree funds?

I doubt anyone who has paid off their mortgage will be doing that, or similarly going from 80% to 60% LTV to invest in the markets. You'd be bonkers and/or have a mega risk appetite.
Exactly!

Why are none of these people borrowing to the hilt to fund investments? scratchchin

Ari

19,328 posts

214 months

Friday 23rd October 2020
quotequote all
pincher said:
Ari said:
Precisely this. I put everything into my mortgage, hammered away at it until it was (just about) gone. Then got made redundant. Used some of the redundancy payment to clear what was left, bought a car (had a company car) and a little left over. With utilities running at about £250/month, £200/month for food and no mortgage, no car loan, no debt at all, I was free to do what I wanted provided I could find about £500/month.

What I did was start a freelance career doing something I loved and working from home. Took a long time to build but now earns me considerably more than I had previously been earning. If I'd had mortgage payments to find, I'd have had to grab any job going and carry on plugging away, there is no way I could have taken the chance that I did.

Getting the mortgage gone really opened up the options for me, and was beneficial not only in terms of where I ended up financially but in terms of quality of life. Makes me shudder to think where I'd be now if I'd not focussed so hard on clearing the mortgage.
Hey Nick wavey

Glad to see stuff worked out for you - have seen a couple of your vids - very impressive beer

Keep doing your thing thumbup
Hey there! Thank you! smile

p1stonhead

25,489 posts

166 months

Friday 23rd October 2020
quotequote all
Ari said:
Enut said:
It all depends on your attitude to risk and personal situation really. If you are cautious then pay your mortgage off. If you are prepared to take a long term view, a decent approach to risk and can easily afford to pay your mortgage payments then why would you pay it off early when you could invest instead and probably get a better return? Although, of course, there is no guarantee of that and investments can fall as well as rise and you may not get back as much as you invested, especially in the early years.(I'd be a fair bit richer if I got a pound for every time I've written that over the years!)

I could have paid my mortgage off long ago but I haven't, although it is on a repayment basis so is decreasing each year. Currently it is about £85,000 outstanding and I am paying an interest rate of 1.09%, so it is an extremely cheap debt. I have just checked the main part of my investment portfolio (ISA and pension) and it has averaged 16.19% per annum over the last 5 years. That's no made up mythical figure, that's fact. I do however own my cars outright (GT86 and Audi A4 estate, so nothing flash) and am not a multi millionaire, although I am comfortably off.
If what you claim is true, why aren't you a multi millionaire? You claim to have a foolproof way of earning a higher rate than you can borrow it at. That's basically financial alchemy.

Why haven't you got £100m borrowed earning you millions a year? Could it be because it doesn't actually work like that in reality? smile
It’s not magic. You just have to look long term and leave it alone in most instances.

One of my funds per year has done the below. I’ve only been in it since 2015 but still good.

Put money in, leave it for 20 years.

My company pays straight into my SIPP each month I never even see it.



Edited by p1stonhead on Friday 23 October 17:39

xeny

4,270 posts

77 months

Friday 23rd October 2020
quotequote all
p1stonhead said:
It’s not magic. You just have to look long term and leave it alone in most instances.

One of my funds per year has done the below. I’ve only been in it since 2015 but still good.

Put money in, leave it for 20 years.



Wonder which one that is. I know which one this is:

2020:13.5 to the end of September
2019:25.6
2018:2.2
2017:22.0
2016:28.2
2015:15.7
2014:23.3
2013:25.3
2012:12.5
2011:8.4

Average since inception (2010) of 18.2%


GT03ROB

13,207 posts

220 months

Friday 23rd October 2020
quotequote all
xeny said:
p1stonhead said:
It’s not magic. You just have to look long term and leave it alone in most instances.

One of my funds per year has done the below. I’ve only been in it since 2015 but still good.

Put money in, leave it for 20 years.



Wonder which one that is. I know which one this is:

2020:13.5 to the end of September
2019:25.6
2018:2.2
2017:22.0
2016:28.2
2015:15.7
2014:23.3
2013:25.3
2012:12.5
2011:8.4

Average since inception (2010) of 18.2%
Picking a single fund shows what could be done. But for many that simply is like looking for a needle in a haystack. I have a 10 fund portfolio. It's performed as follows:
2010 +18%
2011 -18%
2012 +15%
2013 +25%
2014 +11%
2015 +8%
2016 +18%
2017 +19%
2018 - 8%
2019 +19%
2020 ??

So I understand what many are saying but I wouldn't want to need that level of performance to repay my mortgage!

p1stonhead

25,489 posts

166 months

Friday 23rd October 2020
quotequote all
GT03ROB said:
xeny said:
p1stonhead said:
It’s not magic. You just have to look long term and leave it alone in most instances.

One of my funds per year has done the below. I’ve only been in it since 2015 but still good.

Put money in, leave it for 20 years.



Wonder which one that is. I know which one this is:

2020:13.5 to the end of September
2019:25.6
2018:2.2
2017:22.0
2016:28.2
2015:15.7
2014:23.3
2013:25.3
2012:12.5
2011:8.4

Average since inception (2010) of 18.2%
Picking a single fund shows what could be done. But for many that simply is like looking for a needle in a haystack. I have a 10 fund portfolio. It's performed as follows:
2010 +18%
2011 -18%
2012 +15%
2013 +25%
2014 +11%
2015 +8%
2016 +18%
2017 +19%
2018 - 8%
2019 +19%
2020 ??

So I understand what many are saying but I wouldn't want to need that level of performance to repay my mortgage!
I don’t think anyone is suggesting investing to have enough returns to pay your mortgage....

It was a question about overpaying vs investing somewhere else.

xeny

4,270 posts

77 months

Friday 23rd October 2020
quotequote all
p1stonhead said:
It was a question about overpaying vs investing somewhere else.
This, I lost several years ISA and Pension allowance by concentrating on overpaying fairly heavily. In retrospect I should have at the least gone with a more balanced approach.

GT03ROB

13,207 posts

220 months

Friday 23rd October 2020
quotequote all
anonymous said:
[redacted]
...and for clarity I think I'm agreeing with you all.... my only issue was that some are posting returns that are way over a prudent level to be dependent on to repay.

xeny

4,270 posts

77 months

Friday 23rd October 2020
quotequote all
GT03ROB said:
my only issue was that some are posting returns that are way over a prudent level to be dependent on to repay.
Agreed. I'm not suggesting minimising (or interest only) mortgage payments and relying on investment returns to pay it off, more paying the mortgage at a reasonable rate (such that it will be cleared without depending on investment return) and investing the surplus.

I'd consider a strategy of clearing the last of the mortgage with say a pension commencement lump sum built up and kept in cash (or similar low risk options) for say the last couple of years before retiring.

One of the things I wish I'd realised earlier is that investing over say 20 years is significantly lower risk than over 10, and balancing mortgage and investing rather than concentrating on the mortgage makes that possible.

Which really is the subject of the thread - no hurry to pay off the mortgage.

GT03ROB

13,207 posts

220 months

Friday 23rd October 2020
quotequote all
xeny said:
I'd consider a strategy of clearing the last of the mortgage with say a pension commencement lump sum built up and kept in cash (or similar low risk options) for say the last couple of years before retiring.

One of the things I wish I'd realised earlier is that investing over say 20 years is significantly lower risk than over 10, and balancing mortgage and investing rather than concentrating on the mortgage makes that possible.

Which really is the subject of the thread - no hurry to pay off the mortgage.
Over the last couple of months I've come up with my approach for retirement. I have a figure the pension pot needs to be at. Which assumes the mortgage on the main residence is gone. The mortgage will be cleared early based on investments I hope!

Looking at the 2 criteria to retire clearing the mortgage on the main residence will take the longest! So from that perspective for me there may be a hurry!


Dwh8611

148 posts

51 months

Saturday 24th October 2020
quotequote all
xeny said:
GT03ROB said:
my only issue was that some are posting returns that are way over a prudent level to be dependent on to repay.
Agreed. I'm not suggesting minimising (or interest only) mortgage payments and relying on investment returns to pay it off, more paying the mortgage at a reasonable rate (such that it will be cleared without depending on investment return) and investing the surplus.

I'd consider a strategy of clearing the last of the mortgage with say a pension commencement lump sum built up and kept in cash (or similar low risk options) for say the last couple of years before retiring.

One of the things I wish I'd realised earlier is that investing over say 20 years is significantly lower risk than over 10, and balancing mortgage and investing rather than concentrating on the mortgage makes that possible.

Which really is the subject of the thread - no hurry to pay off the mortgage.
What if you overpay your mortgage fast (early), so you are debt free (stress free) and then look to invest for 20 years before retirement?

Loving the investment rates above.
(Just need a heads up where to invest now) wink

LeadFarmer

7,411 posts

130 months

Saturday 24th October 2020
quotequote all
Personally, the pleasure of reducing and paying off the mortgage trumps the chance of possible future pleasure (that may or may not happen) from obtaining a higher return on that money if invested instead.

GT03ROB

13,207 posts

220 months

Saturday 24th October 2020
quotequote all
Dwh8611 said:
What if you overpay your mortgage fast (early), so you are debt free (stress free) and then look to invest for 20 years before retirement?

Loving the investment rates above.
(Just need a heads up where to invest now) wink
Well you won't get returns like I posted being conservative! My approach is look for long terms trends, back them & stay invested. My best example of this is up 450% over 10yrs. But also recognise when the trend has changed & bail... one such example for me was property.... if I'd held that I would still be down 10% over 10yrs.

xeny

4,270 posts

77 months

Saturday 24th October 2020
quotequote all
GT03ROB said:
Looking at the 2 criteria to retire clearing the mortgage on the main residence will take the longest! So from that perspective for me there may be a hurry!

If you're a 40% tax payer and anticipate being a basic rate tax payer in retirement, consider making the last couple of years of excess mortgage payments into your pension, and leaving them uninvested. When you retire, you can take the cash out of the pension at 25% tax (having paid in at as a 40% tax payer) or tax free as part of the pension commencement lump sum and kill off the last of the mortgage with that.

xeny

4,270 posts

77 months

Saturday 24th October 2020
quotequote all
Dwh8611 said:
What if you overpay your mortgage fast (early), so you are debt free (stress free) and then look to invest for 20 years before retirement?
That's what I did, and it is nice on the stress front.

The downside of it is you waste the ISA allowance and potentially some pension allowance in those early years, and the odds are you'll get better investment returns than you're paying in mortgage interest, so from a long term net worth perspective it is a negative.

Condi

17,089 posts

170 months

Saturday 24th October 2020
quotequote all
Here's a question then, at 30 years old with a 50k lump sum and £130k left on the mortgage would you...

Pay the 50k off the mortgage?
Invest in a BTL for the future?
Put as much as possible in a pension, offsetting the 40% tax?

The mortgage repayments currently are not an issue, (500 quid) and pension is reasonable, no other debts to worry about and enough accessible savings for what I need.

GT03ROB

13,207 posts

220 months

Saturday 24th October 2020
quotequote all
xeny said:
GT03ROB said:
Looking at the 2 criteria to retire clearing the mortgage on the main residence will take the longest! So from that perspective for me there may be a hurry!

If you're a 40% tax payer and anticipate being a basic rate tax payer in retirement, consider making the last couple of years of excess mortgage payments into your pension, and leaving them uninvested. When you retire, you can take the cash out of the pension at 25% tax (having paid in at as a 40% tax payer) or tax free as part of the pension commencement lump sum and kill off the last of the mortgage with that.
Unfortunately that won't work in my case as I will have the LTA in play.

xeny

4,270 posts

77 months

Saturday 24th October 2020
quotequote all
Condi said:
Pay the 50k off the mortgage?
Invest in a BTL for the future?
Put as much as possible in a pension, offsetting the 40% tax?
No

More likely to be an S&S ISA for me - BTL seems to be too much hassle, and not convinced there's much scope for capital appreciation.

Some, but look into the future and see if the LTA is likely to be an issue.

vulture1

12,127 posts

178 months

Saturday 24th October 2020
quotequote all
Condi said:
Here's a question then, at 30 years old with a 50k lump sum and £130k left on the mortgage would you...

Pay the 50k off the mortgage?
Invest in a BTL for the future?
Put as much as possible in a pension, offsetting the 40% tax?

The mortgage repayments currently are not an issue, (500 quid) and pension is reasonable, no other debts to worry about and enough accessible savings for what I need.
If your job isn't very safe i'd have the cash ready and available jsut in case.

If your job is safe, your finances are fine then go buy a skyline or an aston martin. This is pistonheads after all. smile

djc206

12,245 posts

124 months

Saturday 24th October 2020
quotequote all
Dwh8611 said:
What if you overpay your mortgage fast (early), so you are debt free (stress free) and then look to invest for 20 years before retirement?

Loving the investment rates above.
(Just need a heads up where to invest now) wink
I don’t see how having a mortgage is stressful tbh. So long as you haven’t gone overboard and mortgaged yourself up to eyeballs it’s really not a worry, it just sits there in the background slowly ticking down secured against an asset that unless you’re unlucky will more than cover the debt should anything go awry. I’m really not seeing where stress comes into it