No hurry to pay off the mortgage
Discussion
xeny said:
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.
LTA? 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.
Putting the money in S&S seems a bit pointless, if it's going to be saved for the long term and I want exposure to shares then pension is far better. I already a comfortable amount of accessable funds (cash and stocks ISA) and so surely the money would be better invested in something more likely to create a steady return or pay off the mortgage? At least in a BTL or pension it's untouchable.
Otherwise as someone else has said, it may as well go on a 1960s Mustang or Aston Martin.
Condi said:
LTA?
Putting the money in S&S seems a bit pointless, if it's going to be saved for the long term and I want exposure to shares then pension is far better. I already a comfortable amount of accessable funds (cash and stocks ISA) and so surely the money would be better invested in something more likely to create a steady return or pay off the mortgage? At least in a BTL or pension it's untouchable.
Otherwise as someone else has said, it may as well go on a 1960s Mustang or Aston Martin.
Lifetime allowance (my 1st world problem as pointed out by Mr Chicken). Or the limit you pension can be worth before getting into very high tax rates. If there is a chance you may run over this figure then a pension is not a good use of spare funds.Putting the money in S&S seems a bit pointless, if it's going to be saved for the long term and I want exposure to shares then pension is far better. I already a comfortable amount of accessable funds (cash and stocks ISA) and so surely the money would be better invested in something more likely to create a steady return or pay off the mortgage? At least in a BTL or pension it's untouchable.
Otherwise as someone else has said, it may as well go on a 1960s Mustang or Aston Martin.
Condi said:
Putting the money in S&S seems a bit pointless, if it's going to be saved for the long term and I want exposure to shares then pension is far better..
Depends on your goals - I don't want to wait for minimum pension age to retire, and if you've spare pension allowance you can later move money into a pension wrapper. It's rather harder to go the other way.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. 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.
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?
There are a number of reasons why doing what you suggest is not possible. The main one being that no lender would lend large amounts of money secured or unsecured for someone to invest, they just wouldn't do it. The FCA also frowns upon borrowing money to invest, although interestingly they are quite happy for people to get heavily in debt to fund buy to let investments, but that's another topic.
As I have already stated I am under no illusion that 16% + is sustainable long term, it almost certainly is not, but the chances of my portfolio outperforming the 1.09% I am paying on my mortgage debt long term is highly probable.
Financial Alchemy? No, the phrase is the risk premium.
djc206 said:
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)
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 itLoving the investment rates above.
(Just need a heads up where to invest now)
In hindsight I should have maxed out pension (or at least matched the amount my company would contribute towards) when I first took on the mortgage and then paid mortgage off
at a slightly slower pace.
Dwh8611 said:
Everyone’s different and I didn’t find debt stressful when i first started out but as i got older and had more outgoings like wedding/honeymoon and then kids to pay for, the mortgage was a big debt that I could do without. As the song goes “life is a rollercoaster” and all that and I just found sometimes you find yourself well off and other times you are in the sh*t so paying mortgage off early released a lot of money for me and gave me the opportunity to build up reserves, spend more on fun things/times and relax a bit on the job front.
In hindsight I should have maxed out pension (or at least matched the amount my company would contribute towards) when I first took on the mortgage and then paid mortgage off
at a slightly slower pace.
Hindsight is 20:20 as they say. I’ve never really considered my mortgage it’s just there but then I’ve had a mortgage or rent for 16 years so it’s one of life’s constants.In hindsight I should have maxed out pension (or at least matched the amount my company would contribute towards) when I first took on the mortgage and then paid mortgage off
at a slightly slower pace.
Dwh8611 said:
In hindsight I should have maxed out pension (or at least matched the amount my company would contribute towards) when I first took on the mortgage and then paid mortgage off
at a slightly slower pace.
One of the things I like about the uk personal finance subreddit's flow chart is that it catches decisions like this. It obviously prioritizes essential bills, but after that it makes sure you at least make enough pension contribution to benefit from any employer contributions.at a slightly slower pace.
https://flowchart.ukpersonal.finance/
Condi said:
At 30 years old with a 30k pension pot I'm really not worried about running into the £1m limit! Only £970,000 of headroom.
Play around with a compound interest calculator, you may be surprised. If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
covmutley said:
Play around with a compound interest calculator, you may be surprised.
If you add £5k per year for the next 33 years, so retiring at 33, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
If you perceive your getting close pump more into the mars/Wife’s pension If you add £5k per year for the next 33 years, so retiring at 33, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
Plus buy up any missing NI years to maximise state pension.
Welshbeef said:
I’m not sure why people think staying single and not having children is a good thing.
As a man who has been married for 30 years and has 2 grown up kids, I'm sure I could think of 300 times when I did wonder why the f
k I bothered. It's not all bad though. I once got a decent Xmas present. covmutley said:
Play around with a compound interest calculator, you may be surprised.
If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
Is 8% pension pot growth realistic? I tend to use a way lower figure when making projections. What % do people here typically use when estimating their future pot value?If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
Fusion777 said:
covmutley said:
Play around with a compound interest calculator, you may be surprised.
If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
Is 8% pension pot growth realistic? I tend to use a way lower figure when making projections. What % do people here typically use when estimating their future pot value?If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
7% may actually be closer to what’s average to be fair I think.
covmutley said:
Play around with a compound interest calculator, you may be surprised.
If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
Bear in mind the pension limit increases each year based on inflation, £1m pension limit now will be way higher in 33 years. If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
You are still correct though compound interest will surprise people.
p1stonhead said:
Fusion777 said:
covmutley said:
Play around with a compound interest calculator, you may be surprised.
If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
Is 8% pension pot growth realistic? I tend to use a way lower figure when making projections. What % do people here typically use when estimating their future pot value?If you add £5k per year for the next 33 years, so retiring at 63, and get an average 8% growth, you will get over £1m.
Perhaps just split it. Some in accessible isa some in pension, some off mortgage. For me it would depend if you are in your forever house, or not
7% may actually be closer to what’s average to be fair I think.
■ 5% a year for equity and property funds
■ 1.4% a year for bond funds
■ 2% a year for cash funds
That's before applying inflation at CPI (somewhere around 2%?)
Real world, I have 2 company pensions with them, as of Friday close;
the one started in early 2011 has an annual rate of return of 8.4%
the one started in early 2017 has an annual rate of return of 10.86%
I guess real world somewhere between 5 and 7, before inflation is about right. I'm very conscious with both my rates or return, neither have really seen a proper market tanking like dotcom or 2008-09. CovidMarch bounced back too quick to count in my book (unless we're talking about the 40% of my pension exposure to the UK market so lets just not
)LeadFarmer said:
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.
well said I am in the same position and very happy with my choicep1doc said:
LeadFarmer said:
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.
well said I am in the same position and very happy with my choiceFor those that are questionning the levels of annual growth available from investments, and saying even 8% is unrealistic, I would say you need to look harder. Below are the funds which I am currently invested in, and their returns for the past 5 years;
AXA framlington global technology, 49% / 15% / 16% / 24% / 39%
Baillie gifford amercian, 109% / 7% / 26% / 20% / 25%
Baillie gifford global discovery, 68% / 5% / 16% / 26% / 21%
Baillie gifford positive change, 78% / 9% / 14% / na / na
Blackrock world technology, 77% / 19% / 14% / 35% / 36%
Fidelity global technology, 37% / 28% / 7% / 23% / 44%
Janus henderson global technology, 41% / 13% / 10% / 28% / 37%
Legal & general global technology, 46% / 18% / 13% / 23% / 38%
Polar capital global technology, 60% / 15% / 16% / 29% / 46%
Morgan stanley us advantage, 62% / 13% / 15% / 12% / na
DMS charteris gold & precious metals, 59% / 30% / -15% / -26% / 140%
LF ruffer gold, 72% / 42% / -11% / -8% / 88%
Smith & williamson artificial intelligence, 51% / 21% / 16% / na / na
As you can see, the above return far in excess of 8% per annum. These are not the best returning funds I could find, as I tried to find funds which performed consitantly well year on year (aside from the gold/previous metals which were more recent purchases based on current financial climate). The technology funds have performed very very well in Covid times, but before that have done year on year far in excess of 8%.
AXA framlington global technology, 49% / 15% / 16% / 24% / 39%
Baillie gifford amercian, 109% / 7% / 26% / 20% / 25%
Baillie gifford global discovery, 68% / 5% / 16% / 26% / 21%
Baillie gifford positive change, 78% / 9% / 14% / na / na
Blackrock world technology, 77% / 19% / 14% / 35% / 36%
Fidelity global technology, 37% / 28% / 7% / 23% / 44%
Janus henderson global technology, 41% / 13% / 10% / 28% / 37%
Legal & general global technology, 46% / 18% / 13% / 23% / 38%
Polar capital global technology, 60% / 15% / 16% / 29% / 46%
Morgan stanley us advantage, 62% / 13% / 15% / 12% / na
DMS charteris gold & precious metals, 59% / 30% / -15% / -26% / 140%
LF ruffer gold, 72% / 42% / -11% / -8% / 88%
Smith & williamson artificial intelligence, 51% / 21% / 16% / na / na
As you can see, the above return far in excess of 8% per annum. These are not the best returning funds I could find, as I tried to find funds which performed consitantly well year on year (aside from the gold/previous metals which were more recent purchases based on current financial climate). The technology funds have performed very very well in Covid times, but before that have done year on year far in excess of 8%.
Hobo said:
For those that are questionning the levels of annual growth available from investments, and saying even 8% is unrealistic, I would say you need to look harder.
Right now, and for the past decade it has been trivial to get excellent returns. That has at least partly been an artefact of the post 2008 low interest rate environment causing asset price inflation. Look at the 1970s for a period when you'd have been doing well to get 8% a year as a comparison.From 1900 to 2016 UK equities have averaged 5% real growth/year (including dividend reinvestment. - pulled from https://monevator.com/uk-historical-asset-class-re...
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