Investing or pay off the mortgage?
Discussion
First thread here so here goes. Bought my first house last year. £300 a month mortgage 2.5% interest 82k mortgage over 35 year can pay 10% lump sum every year.
Had a bit of savings left over from the house purchase and recent a small inheritance. Total amount I got is 7k. I was thinking keeping around 2-3k as a back up fund and use the rest to start investing. Doing research of EFTs/index founds and individual stocks.
Now my question is would it be better to priorities paying higher amounts off the mortgage then investing or putting more into investing?
Now I'm not looking to making big with the next game stock but would like to start now growing my money over letting it sit in savings account earning naff all interest.
Also got around £600 a month left over after monthly bills fuel and food cost etc.
Had a bit of savings left over from the house purchase and recent a small inheritance. Total amount I got is 7k. I was thinking keeping around 2-3k as a back up fund and use the rest to start investing. Doing research of EFTs/index founds and individual stocks.
Now my question is would it be better to priorities paying higher amounts off the mortgage then investing or putting more into investing?
Now I'm not looking to making big with the next game stock but would like to start now growing my money over letting it sit in savings account earning naff all interest.
Also got around £600 a month left over after monthly bills fuel and food cost etc.
Over time, investments are hugely likely to provide a better return than paying down the mortgage. However with investments there is always the chance of investments going down in value; over a 35 year timespan, that is vanishingly unlikely if you just put your money into a managed fund. That said, that chances of you losing all your money go up hugely if you try to pick stocks yourself rather than leaving it to the professionals.
In your shoes I would stick whatever lump sum you can afford into an ISA and then choose a couple of funds you like the look of - one that's US based and one that's international/Asia biased isn't a bad overall strategy - and then also drip feed in a few hundred a month. Ignore it for ten years and you'll more than likely end up with enough to pay off the mortgage if you wanted - but again, in pure investment terms, the mortgage is cheap money and you will be better off just leaving that to run its course.
In your shoes I would stick whatever lump sum you can afford into an ISA and then choose a couple of funds you like the look of - one that's US based and one that's international/Asia biased isn't a bad overall strategy - and then also drip feed in a few hundred a month. Ignore it for ten years and you'll more than likely end up with enough to pay off the mortgage if you wanted - but again, in pure investment terms, the mortgage is cheap money and you will be better off just leaving that to run its course.
deckster said:
Over time, investments are hugely likely to provide a better return than paying down the mortgage. However with investments there is always the chance of investments going down in value; over a 35 year timespan, that is vanishingly unlikely if you just put your money into a managed fund. That said, that chances of you losing all your money go up hugely if you try to pick stocks yourself rather than leaving it to the professionals.
In your shoes I would stick whatever lump sum you can afford into an ISA and then choose a couple of funds you like the look of - one that's US based and one that's international/Asia biased isn't a bad overall strategy - and then also drip feed in a few hundred a month. Ignore it for ten years and you'll more than likely end up with enough to pay off the mortgage if you wanted - but again, in pure investment terms, the mortgage is cheap money and you will be better off just leaving that to run its course.
Thanks for the reply that is sort of what I was thinking of doing just weighing up the pros and cons of each side.In your shoes I would stick whatever lump sum you can afford into an ISA and then choose a couple of funds you like the look of - one that's US based and one that's international/Asia biased isn't a bad overall strategy - and then also drip feed in a few hundred a month. Ignore it for ten years and you'll more than likely end up with enough to pay off the mortgage if you wanted - but again, in pure investment terms, the mortgage is cheap money and you will be better off just leaving that to run its course.
When you over pay your mortgage, does your mortgage company allow you to underpay in the future? With mine if I over pay say £1000, I can under pay by £1000 in the future if needs be.
I like this because you get the advantage of over paying, and should you need it in the future, you can under pay.
I like this because you get the advantage of over paying, and should you need it in the future, you can under pay.
MG CHRIS said:
First thread here so here goes. Bought my first house last year. £300 a month mortgage 2.5% interest 82k mortgage over 35 year can pay 10% lump sum every year.
Had a bit of savings left over from the house purchase and recent a small inheritance. Total amount I got is 7k. I was thinking keeping around 2-3k as a back up fund and use the rest to start investing. Doing research of EFTs/index founds and individual stocks.
Now my question is would it be better to priorities paying higher amounts off the mortgage then investing or putting more into investing?
Now I'm not looking to making big with the next game stock but would like to start now growing my money over letting it sit in savings account earning naff all interest.
Also got around £600 a month left over after monthly bills fuel and food cost etc.
I would head towards a Vanguard ISA type fund, picking stocks is hard work if you want consistent returns and dont have the time energy to put into it.Had a bit of savings left over from the house purchase and recent a small inheritance. Total amount I got is 7k. I was thinking keeping around 2-3k as a back up fund and use the rest to start investing. Doing research of EFTs/index founds and individual stocks.
Now my question is would it be better to priorities paying higher amounts off the mortgage then investing or putting more into investing?
Now I'm not looking to making big with the next game stock but would like to start now growing my money over letting it sit in savings account earning naff all interest.
Also got around £600 a month left over after monthly bills fuel and food cost etc.
Its also about maths I suppose. £1000 investment doing 6% return is %3.5 more than paying the mortgage down in effect.
My plan is to invest then when mortgages come up for renewal use that as a lump sum.
The S&P 500 has historically returned 10%, mortgage interest most likely around 2%, so put my additional cash into a Stocks and Shares ISA invested in the S&P500. I do it via the VUSA fund in vanguard.
Not a believer in premium bonds which on average return nothing.
Sooner you do it, the sooner compound interest becomes your friend.
Not a believer in premium bonds which on average return nothing.
Sooner you do it, the sooner compound interest becomes your friend.
btdk5 said:
Make someone who’s looking to buy their first house in London jealous and tell us what sort of house can you get for that mortgage…..
2 bed terrace it's an old mining area 100 year old house sort of thing. Great for a first house and in a area where prices are rising. Am South Wales based. I don't envy people buying houses in London.The one thing where overpaying the mortgage could help is come renewal time, you could knock that 2.5% rate down in half (or more). So for overpaying a smaller sum and getting below a significant LTV threshold, you save 1% interest on a much bigger sum.
However I also do a bit of each as a poster above says - some mortgage overpayments, some cash type savings, some long term VLS type fund in an ISA.
However I also do a bit of each as a poster above says - some mortgage overpayments, some cash type savings, some long term VLS type fund in an ISA.
Dave350 said:
The S&P 500 has historically returned 10%, mortgage interest most likely around 2%, so put my additional cash into a Stocks and Shares ISA invested in the S&P500. I do it via the VUSA fund in vanguard.
Not a believer in premium bonds which on average return nothing.
Sooner you do it, the sooner compound interest becomes your friend.
Exactly what I am hoping, mortgage rate is 1.6% and I am paying in each month into a Vanguard Life Strategy 100 fund. As long as it increases by more than 1.6% a year I will be happy.Not a believer in premium bonds which on average return nothing.
Sooner you do it, the sooner compound interest becomes your friend.
deckster said:
Over time, investments are hugely likely to provide a better return than paying down the mortgage. However with investments there is always the chance of investments going down in value; over a 35 year timespan, that is vanishingly unlikely if you just put your money into a managed fund. That said, that chances of you losing all your money go up hugely if you try to pick stocks yourself rather than leaving it to the professionals.
In your shoes I would stick whatever lump sum you can afford into an ISA and then choose a couple of funds you like the look of - one that's US based and one that's international/Asia biased isn't a bad overall strategy - and then also drip feed in a few hundred a month. Ignore it for ten years and you'll more than likely end up with enough to pay off the mortgage if you wanted - but again, in pure investment terms, the mortgage is cheap money and you will be better off just leaving that to run its course.
Pretty much this. Theres more upside on individual stocks, a couple of mine at present are on 95% and 177% unrealised at present and one (albeit small) is on 600% (was 1700% but we won't dwell on that). However, I've also 100% lost on a couple of stocks - got greedy and went into a couple of AIM mining stocks - live and learn.In your shoes I would stick whatever lump sum you can afford into an ISA and then choose a couple of funds you like the look of - one that's US based and one that's international/Asia biased isn't a bad overall strategy - and then also drip feed in a few hundred a month. Ignore it for ten years and you'll more than likely end up with enough to pay off the mortgage if you wanted - but again, in pure investment terms, the mortgage is cheap money and you will be better off just leaving that to run its course.
I also have a couple of grand in an Emg mkts Fund and a Gbl Equity Fund, both with Vanguard - they are showing a return of about 20% at present since purchase 18 mths ago. Also 5k in a US SMID fund (small and mid cap) that is up 22% over 1 year.
If I'd paid down my mortgage by the initial investment capital of about 'some' k I'd have paid about 50%. My initial is up to more than double that and no way would the reduction in mortgage balance have made up for the investment gain.
If you're not sure what you're buying then as said, spread it across a couple of decent and diversified investment funds. Should see you around a 10%pa return on average but watch the charges.
You also mention spare cash end of each month, maybe pay a couple of hundred of that off the mortgage - kind of best of both worlds
OP 35 year mortgage is a very long term that must mean, assuming no early payments, clearing it at 65 to 70 years old.
£7k on c£85k mortgage would make a notable dent and possibly you could reduce the term to 20-25 years a much more sensible.
You could do 50:50 pay into mortgage invest into ISA
You say it might not be your final forever home - but imagine being mortgage free by say early 30’s? At that point YOU can then choose what to do. A terrace 2 bed is lovely property, you could always step up and up and up there is always the next step to move to but if you like where you live area good and no physical need for more space then why more. Being mortgage free if the worst came to the worse you’d only have to cover council tax and water bills and food. The rest cold shower and no heating and candles
£7k on c£85k mortgage would make a notable dent and possibly you could reduce the term to 20-25 years a much more sensible.
You could do 50:50 pay into mortgage invest into ISA
You say it might not be your final forever home - but imagine being mortgage free by say early 30’s? At that point YOU can then choose what to do. A terrace 2 bed is lovely property, you could always step up and up and up there is always the next step to move to but if you like where you live area good and no physical need for more space then why more. Being mortgage free if the worst came to the worse you’d only have to cover council tax and water bills and food. The rest cold shower and no heating and candles
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