What would you do?

zekepes

I have just posted this in the savings and investments board as well, so apologies to those of you who frequent both.

We (well DH really as he invested before he met me) have three investments. I have just gathered together all the data I can find on them and entered it into a spreadsheet and compared them to paying the amount off the mortgage at an interest rate of 6%.


NEW STAR (very poor performance)

Initial investment in 2001 of £2500 now worth £1585 (high point dec 07 £1821). We would be approx £3115 better off if that amount had been paid off the mortgage in 2001 instead.

SOCIETE GENERALE (breaking even performance)

Initial investment in 2001 of £7000 now worth £9720 (high point may 07 £10330). We would be approx £210 better off if that amount had been paid off the mortgage in 2001 instead.

JUPITER (Good performance)

Initial investment in 2001 of £5000 now worth £19890 (high point apr 07 £22745). We would be approx £9830 worse off it that amount had been paid off the mortgage in 2001 instead.

They are all Stocks and Shares ISA's

Jupiter UK growth Fund (Income)
New Star Technology Unit Trust (Acc)(Unit trust)
SocGen European Growth Unit Trust

We are currently making overpayments on our mortgage debt and making annual lump overpayments rather than investing further (started early this year as for the last few haven't been in a position to do either).

I know my above calculations are crude when comparing their performance against paying the initial amounts off the mortgage rather than investing them but...

My question is would you cash them in and pay them off the mortgage now?

iieee

What would *I* do - well I'm risk averse so I'd rather pay the mortgage off, and save money in mortgage interest than hope the investments go up. That's probably why I've never had my money quadruple in value over 7 years though.


I guess the answer to what you should do depends on how you think the stock market is likely to perform over the rest of your mortgage term.... and you're asking the wrong person here.:eek:

zekepes

iieee wrote: »

What would *I* do - well I'm risk averse so I'd rather pay the mortgage off, and save money in mortgage interest than hope the investments go up. That's probably why I've never had my money quadruple in value over 7 years though.


I guess the answer to what you should do depends on how you think the stock market is likely to perform over the rest of your mortgage term.... and you're asking the wrong person here.:eek:

I'm the same as you iieee - I don't think I would have ever taken them out when I had mortgage debt still. On average though, I have to admit they have outperformed paying the mortgage off early.

Pity DH didn't invest it all with Jupiter though! It is amazing how differently these funds have performed. Just shows what relatively high risk investments they are really.

DH was all for seriously thinking about getting rid of them this am, and paying it off the mortgage - making it a reality to pay the rest of the mortgage off in as little as 2.5 years or less. Probably because he got the lastest New Star statement, lol!

He seems less keen now. I really don't know! I left wondering if there will ever be a reason good enough to sell them or a time that is right....

dimbo61

stocks and shares ISA,s
So one has been rubbish
one is breaking even
and one has done very well really
But if you overpay on the mortgage you are guarenteed to save 6% tax free!
The share market MIGHT drop like a stone next
The value of your house MIGHT drop by 20/25% this year but you can live
in your home and shares are little bits of paper !!
I want to own my own home long before retirement and then save up for the good things in life GOOD LUCK

zekepes

dimbo61 wrote: »

stocks and shares ISA,s
So one has been rubbish
one is breaking even
and one has done very well really
But if you overpay on the mortgage you are guarenteed to save 6% tax free!
The share market MIGHT drop like a stone next
The value of your house MIGHT drop by 20/25% this year but you can live
in your home and shares are little bits of paper !!
I want to own my own home long before retirement and then save up for the good things in life GOOD LUCK

Thanks Dimbo.

I think it is so massive to be MF! I know that the psychological boost of being just 2 years from being MF (if we paid these into the pot) would almost certainly make us mortgage free even sooner.

I think I will try an pin DH to make a decision sooner rather than later on this one. He doesn't like to feel pushed though.....

dimbo61

tough one
you do need an emergency fund of say 3/6 months of income in tax free savings ie cash isa,s with a good rate of interest to beat inflation.
But and this is the big BUT what will your stocks and shares ISA,s be worth
in 2/3/5 years time ?
He has at least put them in a TAX free wapper but what are the fees each year and if he wants to sell.
Thats why the city pays out million pound bonuses to traders each year
its not about making profit for them its about buying/selling shares and
comission earned. GOOD LUCK

zekepes

dimbo61 wrote: »

tough one
you do need an emergency fund of say 3/6 months of income in tax free savings ie cash isa,s with a good rate of interest to beat inflation.
But and this is the big BUT what will your stocks and shares ISA,s be worth
in 2/3/5 years time ?
He has at least put them in a TAX free wapper but what are the fees each year and if he wants to sell.
Thats why the city pays out million pound bonuses to traders each year
its not about making profit for them its about buying/selling shares and
comission earned. GOOD LUCK

Yes, that is the big but! In two years I would gamble that they would be worth less/about the same as they are now. Five years probably more (except for one of them!). Without cashing them we could, if all goes well, be MF in 3.5 years. If we cashed them then it would be more like 2 -2.5.

We can easily get back all of our mortgage overpayments (we overpayed by 14K about 3 years back but got that back, no questions asked, a few months later as we decided to do an extension) so that has us covered emergency money I think.

My feeling is the time to gamble on higher risk investments is when we are MF. I guess my biggest motivation is just to be mortgage free - I want to just get that job done!

I don't know about the fees.

I am quite interested in all of this now. I think I will spend some time reading up on all of this over the next few years so I at least have some idea what to do with our money when it is not going towards paying the mortgage off.

Thanks for taking the time to reply.

dimbo61

please remember that once you have cashed in the S&S ISA,s to pay off the mortgage early you might come to the point that you cant save as much as you want to in TAX free savings each year.
My friend at work has no mortgage and wants to save £18/20k a year for his retirement but can only put 2X£3600 into cash ISA,s each year ( he does not like the stock market )
So look at your own needs and age , time to retire, savings etc
Lots to consider !

Jonbvn

dimbo61 wrote: »

please remember that once you have cashed in the S&S ISA,s to pay off the mortgage early you might come to the point that you cant save as much as you want to in TAX free savings each year.
My friend at work has no mortgage and wants to save £18/20k a year for his retirement but can only put 2X£3600 into cash ISA,s each year ( he does not like the stock market )
So look at your own needs and age , time to retire, savings etc
Lots to consider !

Tell him to have a look at index linked savings certs from NS&I.

zekepes

dimbo61 wrote: »

please remember that once you have cashed in the S&S ISA,s to pay off the mortgage early you might come to the point that you cant save as much as you want to in TAX free savings each year.
My friend at work has no mortgage and wants to save £18/20k a year for his retirement but can only put 2X£3600 into cash ISA,s each year ( he does not like the stock market )
So look at your own needs and age , time to retire, savings etc
Lots to consider !

There certainly is a lot to consider! That is a very good point, thank you.

angelavdavis

Jonbvn wrote: »

Tell him to have a look at index linked savings certs from NS&I.

I agree, this tax free vehicle is another lower risk option that I have also used when my ISA amount has been utilised.

I paid off my mortgage last month and this will be the first month I will be able to invest some money. I intend initially to boost my pension funds as well because I had stopped paying into them while paying off the mortgage. However, I will definitely be using NS&I bonds, mainly so I have the bonds maturing at regular intervals whilst I am hopefully raising a family.