Small investment or pay towards mortgage?
Discussion
Hi folks,
After finally getting myself settled and paying off credit cards, loans etc. I'm now free of debt apart from my mortgage. I live a nice lifestyle that I'm happy with, I do have some spare cash that I save.
I can free up another £100 per month without noticing so thought it would be a good idea to do something with it. What would people suggest?
Stocks & shares, ISA, pay an extra £100 on my mortgage per month?
I don't have a dedicated saving account at the moment and my mortgage is fixed for another 2 years at 2.5% or thereabouts with 18 years remaining.
Cheers
After finally getting myself settled and paying off credit cards, loans etc. I'm now free of debt apart from my mortgage. I live a nice lifestyle that I'm happy with, I do have some spare cash that I save.
I can free up another £100 per month without noticing so thought it would be a good idea to do something with it. What would people suggest?
Stocks & shares, ISA, pay an extra £100 on my mortgage per month?
I don't have a dedicated saving account at the moment and my mortgage is fixed for another 2 years at 2.5% or thereabouts with 18 years remaining.
Cheers
I would pay into your pension. Sometimes your employer will match any extra you pay in up to a limit of course.
If you don't want to tie your money up for too long, then stocks and shares ISA. Or premium bonds although returns are fairly low, but you can get your money out fairly quickly.
If you don't want to tie your money up for too long, then stocks and shares ISA. Or premium bonds although returns are fairly low, but you can get your money out fairly quickly.
NickM450 said:
Cheers folks, never heard of a stocks and shares ISA. Looks very interesting, although I'm not familiar with it, would anyone be able to recommend a 'do it for me' platform (that's what moneysavingexpert calls it)?
Personally would recommend Hargreaves Lansdown. Despite the slightly higher charges, theres plenty of equity funds to choose from. I've started investing in Feb 2019 and one of my funds is up 20% and the other 9%.NickM450 said:
Cheers folks, never heard of a stocks and shares ISA. Looks very interesting, although I'm not familiar with it, would anyone be able to recommend a 'do it for me' platform (that's what moneysavingexpert calls it)?
Vanguard is worth a look. Simple to use website. Low charges. https://www.vanguardinvestor.co.uk/
JulianPH said:
Caddyshack said:
Pay it straight off the mortgage, immediate impact, no costs, charges, commission or risk.
I would have to agree with this. An investment could certainly give you a higher return, but the security of owning you home is pretty priceless.There are 2 problems with this approach however. 1st the risk regarding past performance is no guarantee of future performance malarkey, however his timeframe can mitigate that. The 2nd & probably bigger risk may be the financial discipline of the OP. Once you pay a bit of the mortgage it's done & irreversible. The S&S ISA can always be dipped into.
Thanks, interesting reading. I'm going to go with a S&S ISA, once I've set up the DD I'll forget about it and very much unlikely to dip in to it 
Has anyone heard or dealt with OpenMoney, part of Evestor. Apparently the lowest (long term) fees. I'm thinking an 80% fund would suit my idea of high-ish risk but not too risky.
Annual platform charge: 0.35% (0.25% OpenMoney fee + 0.10% product fee)
Annual transaction costs: 0.05% max
Annual fund manager charges: 0.13% max
Total annual fees, including fund and transaction charges, are just 0.52%
Has anyone heard or dealt with OpenMoney, part of Evestor. Apparently the lowest (long term) fees. I'm thinking an 80% fund would suit my idea of high-ish risk but not too risky.
Annual platform charge: 0.35% (0.25% OpenMoney fee + 0.10% product fee)
Annual transaction costs: 0.05% max
Annual fund manager charges: 0.13% max
Total annual fees, including fund and transaction charges, are just 0.52%
If you stick it in S&S in a pension wrapper you will get tax relief on the contributions, so depending upon your marginal rate you can effectively be investing between £128 and £167 whilst it is only costing you £100.
You should speak to your IFA to understand this properly.
The only disadvantage of this approach is that the funds only become accessible after age 55. However if you are on 40% tax rate (or higher) you can easily see how this will amount to a much more compelling return on your £100.
As someone else said if your employer will match your contributions it gets even more interesting.
You should speak to your IFA to understand this properly.
The only disadvantage of this approach is that the funds only become accessible after age 55. However if you are on 40% tax rate (or higher) you can easily see how this will amount to a much more compelling return on your £100.
As someone else said if your employer will match your contributions it gets even more interesting.
If you have no savings at all then it might be wise to save up a couple of grand to have as an emergency pot should your car/boiler need some work rather than having to borrow cash as you will not be able to access pension savings. Once you have this pot of cash then look at pensions or an ISA.
GT03ROB said:
JulianPH said:
Caddyshack said:
Pay it straight off the mortgage, immediate impact, no costs, charges, commission or risk.
I would have to agree with this. An investment could certainly give you a higher return, but the security of owning you home is pretty priceless.There are 2 problems with this approach however. 1st the risk regarding past performance is no guarantee of future performance malarkey, however his timeframe can mitigate that. The 2nd & probably bigger risk may be the financial discipline of the OP. Once you pay a bit of the mortgage it's done & irreversible. The S&S ISA can always be dipped into.
If you overpay the mortgage then the next month the payment drops by a fraction, as the drop continues each month you can adjust the payment to soak up the savings so the overpay payment accelerates as you go. If this reduction in debt also improves the loan to value on the mortgage you can drop the rate at rate review point and plough those savings back in again and so on.
There are many mortgages that allow an overpayment to become an under payment later or swap to flexi offset with borrow back or just a reserve account but I believe things work better when you cannot get them back - like a pension....too many people stop or cash in early and scupper the long term plans.
Each to their own though, I overpay my mortgage to the max 10% each year and put a decent amount in to a simple Tracker ISA - have been doing the ISA for 19 years and not long to mortgage end day now- cant wait as an R8 is the reward for me at the end.
Caddyshack said:
I am financial advisor / mortgage broker and Julian is a wealth manager.
I know.Caddyshack said:
Each to their own though, I overpay my mortgage to the max 10% each year and put a decent amount in to a simple Tracker ISA - have been doing the ISA for 19 years and not long to mortgage end day now- cant wait as an R8 is the reward for me at the end.
Exactly & we each have different perceptions of risk & reward. None of us are right or wrong.greygoose said:
If you have no savings at all then it might be wise to save up a couple of grand to have as an emergency pot should your car/boiler need some work rather than having to borrow cash as you will not be able to access pension savings. Once you have this pot of cash then look at pensions or an ISA.
This. Bung it in something like a Nationwide Flex account and get 5% on it for the first year. Then look at further Investments. It's worth pointing out a few things;
1.) Interest rates are likely gonna drop at some point soon, which perhaps means a S&S ISA is the way to go, but what about interest rates in 5 years? What if they return back to ~5%? Have a plan to deal with changes like that.
2.) Your fix is for 2yrs, keep in mind things like LTV ratios for when you remortgage, overpaying could save you more than you think in terms of % charged and setup fee.
3.) If you over pay your mortgage it'll not take 18yrs to pay off. I can't wait until my mortgage is gone!
AHH the last couple of posts didn't load when I wrote this. Others have covered it.
Edited by dasbimmerowner on Monday 3rd February 23:15
I change my mortgage to an offset mortgage. Ok you are tied in for another 2 years so not answering your question but it as saved me a fortune.
The offset is calculated daily so you all accounts offset on you mortgage so you pay less interest and if you pay off all your credit cards at the end of the month all you ££ of the month is offset. You can set it up to pay off more of your mortgage or pay it off quicker. I managed to convince barclays to offset my cash ISA while keeping it in the ISA account so getting good rates compared with cash isa.
The offset is calculated daily so you all accounts offset on you mortgage so you pay less interest and if you pay off all your credit cards at the end of the month all you ££ of the month is offset. You can set it up to pay off more of your mortgage or pay it off quicker. I managed to convince barclays to offset my cash ISA while keeping it in the ISA account so getting good rates compared with cash isa.
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