Pay of the Mortgage or Re-invest?

What is the interest rate you are paying on your mortgage?
It is a simple calculation - if you are paying, let's say, 5% interest on your mortgage, then if the most you could get (with the ICIC bank) is 5.1%, then after tax (at 22%) you would get a return of 4%, but be paying out your mortgage at 5%. Therefore not worth it I guess.

So to gain you would have to get net of tax a gain of over 5%, a return of over 6.25%. The only way you get that is on a regular save account, which is generally a max of £250 a month - again a low net gain on your 35K.

You could put it in an ISA, but the max allowance is only about a 6th of your 35K, and cash ISA's are only getting a return of around 5% so neutral but for a low amount...

The other alternative is to put it in the stock market, but that could go DOWN, so highly risky.

So why not pay off the 35K, and use the monthly saving you make of apx £250 to put in a monthly saver account of 10%. You save the interest payed on your mortgage, and you save your money at the best rate on the market.

(I'm not a Financial advisor, so don't listen to me about money - I just like everyone else here, look for my best options)
Well done on your 35K!

There are loads of alternatives between high risk stock market investments and low risk savings accounts, and an IFA will be able to tell you about some of these. There seems to be a commonly held notion that you only have a choice between savings or stock market investments, but this is really not true.

Mortgage rates are so low now they can be easily be beaten by pretty low risk investments (or more sensibly a spread of investments), and although it won't go down well on this board to say this, the main reason for paying a mortgage off is emotional.

Indeed there are positive disadvantages in sinking money into property where it can't be easily accessed in need, since the only way of getting the money out is to sell or remortgage - the latter being difficult at times of need by definition when mortgage applications are likely to be difficult.

Hi there

I know I'm picking up on this thread fairly late, but I think the tax relief piece has not really been discussed fully... you get full tax relief on the mortgage interest on your rented property. At the highest rate you pay.

You get fully taxed on interest you earn. At up to 40%.

As someone who's just remortgaged two investment properties to take 150,000 (nearly hit me 'K' then!) off the 246,500 mortgage on our home, I'm more than happy to keep playing the tax game to my advantage. Equally, a 100,000 mortgage suddenly brings it into the realm of "payable off", whereas nearly 250,000 is not really doable from income.

Bummer is Loan to Value... there's actually enough equity in the investment properties to pay off the whole of our home's mortgage. But I can't borrow 100% on buy to let. Silly really - they'll happily lend 100% to a first time buyer with no record, but a spotless record paying mortgages for 15 years AND the additional income with which to pay it, but nah! Still - the mortgage game has always been 20 years behind the innovation curve...here's waiting!

All the best

H

mdeebee wrote:

Forgive me for this everyone.

I think you are a bit smug and should that you should use the "K" things to make you happy,

Do you mean "thousands"?

'K' is a widely accepted abbreviation for 'thousands', and in fact is scientific notation (eg 56Kb for internet connection speed). I'm not entirely sure how use of it can be seen as 'smug' - it's not exactly difficult to work out the meaning in this context, and a quick Google search would have explained it to you. As you now know it, presumably you're happy for us to use it? I personally wouldn't be happy typing 100,000, 200,000, 300,000 etc over and over again (or even worse, 100 thousand, 200 thousand); I've got better things to do with my time.