Three year project.

sheba223

Myself and my partner decided last October to set ourselves a three year project to either pay off completely or pay a lump sum off our mortgage. Our term ends in October 2010. At the minute we are paying a standing order to run alongside our mortgage payment to help it along. We are also putting £300 each into a medium risk Investment ISA, which is causing us concern. We planned to use this money in 2010 to pay off a chunk of the outstanding balance. However, the horrendous downturn in the economy will probably mean that our return will be poor. Shall we abate putting our money into this type of ISA and just leave the existing money in until things improve? Where else could we save our £300 each for the remainder of the time? Thank you.

abouttimetoo

Hi Sheba223

This is by no means advice as i'm not an expert :rolleyes: but a few others on this thread have similar situations and have temporarily reduced the amount they are investing and used the money to overpay on the mortgage as the former is an unknown currently but they can see the overpayments bringing real benefits.

Have you considered putting the money into a cash ISA instead (assuming you have some of your years allowance left)

You don't mention what your mortgage rate is but usual advice is that if you can find a savings account that pays a higher interest rate than you are paying on your mortgage (don't forget to take into account what rate of taxpayer you are) then you should save the money then pay it off the mortgage. That said some people don't feel they can 'trust' themselves with money in a savings account so pay it straight of the mortgage and others appreciate the pyscological benefits of seeing their mortgage come down rather than savings going up IUSWIM.

For my part, at the minute I'm only investing in an employee share scheme and all other monies are going straight to the mortgage even though I could get a better return saving the money:rolleyes:

StuartGMC

Sheba,
As ABTT alludes, I'm one of those who has reduced, but not stopped, contributions to our Stocks & Shares ISAs (OEIC funds in UK Smaller Co (medium risk); Russia & Greater Russian (High Risk); Latin America (High Risk)).

We see these as long term investments (>5yrs) and they are not part of the plan to pay off the mortgage. By purchasing units now we are getting more for each £1 so it helps the pound-averaging of the investment costs.

I think if you need to have funds for 2010 this is probably (and I'm not an advisor!) too short a time unless you believe you can select some specific equities. I would also think very carefully before selling and thus crytalising your losses. If you can put these on hold then they may(should?) recover in future years.

For the 20 month timeline or s,o until you need the funding then, I would look to do a balanced review of your portfolio of: saving, pension, investing and mortgage. Then structure your distribution of available cash appropriately.

You don't mention your emergency fund of 3-6-9 months income; do you have this in addition to the S&S ISAs? What about planned expenditure on holidays, replacement cars, items which have a finite life (white goods, electronics etc)?