Company sharesave or overpay mortgage

Bernard

Hi,

I would like to hear peoples opinions on the following choice I have.

I can start a company sharesave where I can save £250 for either 3 or 5 years. At the end I can buy shares at an option price and then sell or take the money back with a small amount of interest.

OR

I could overpay my mortgage by £250. My mortgage is £204,000 currently fixed at 5.19%. I guess overpaying will save 8 to 9 years off my mortgage.

Which one should I go for? I think the mortgage payment, but I could be wrong.

Thanks

opinions4u

I'd go for the Sharesave.

Best scenario with the mortgage is saving 5.19% on the amount overpaid,.

Worst scenario with the Sharesave is earning around 3% tax free in interest.

Your gamble is that 2.19% interest rate gap. If the shares haven't risen from the offer price, you lose. But not too much.

But as you are likely to be getting a 20% discount on the current market value of the shares, and the markets are lowish (although not as low as they were), the leverage you can get on your investment should, luck willing, allow you to benefit from a return well above 5.19%, possibly significantly above.

e.g. Share price now = £1. Shares offered at 20% discount = 80p.
Share price in 3 years time = £1.20.
Gain for you = 50% on the capital amount saved. Much more than you'd have saved in mortgage interest.

Dial that share price up to £1.60 and you'll more than double your money.

If the share price is 85p or less then you will be slightly worse off than if you'd paid the mortgage.

The potential downside is exceptionally small. The potential upside is significant. A modest risk well worth taking. Do the Sharesave.

uzubairu

Sharesave.

Your return in years to come should be well above 5.19%.

I pay into mine religiously and I have never been let down.