overpay mortgage/savings/investments

Andyf33

Hi folks

We have £900 per month spare after all bills etc paid. currenlty we pay £300 into cash isa (earning virtually no interest at moment and we have approx 3 months salary in cash), £300 into unit trusts (under isa - currently good returns and have more than made back what we lost in the previous few years) and £300 overpayment on mortgage (currently 160k left on 5.49% fixed rate with another 2 years to run on fixed rate).

Looking at changing how I divide up the £900 per month. Any views?
Thanks

zzzLazyDaisy

Okay, this isn't financial advice, and I'm biased because I paid off my mortgage early and it is the best thing I ever did. Having got that out of the way (sorry, I'm a lawyer )...

If your mortgage allows you to overpay more than you are currently doing, that's what I'd do.

Reason - the interest rate is way above anything you can get in a cash ISA, and with compounding the difference is even greater. Over the longer term mortgage rates will probably go up, so the less you owe, the less you will be hit when the rates rise, and therefore the more you will still have available to overpay. Once you have got rid of your mortgage, you then have your monthly mortgage repayment money to top up your savings/investments as you wish.

Just my opinion

Daisy

opinions4u

1) Maintain / increase your contingecy fund - get it up to 6 months net pay.

2) Pay down the mortgage debt.

3) Other investments, including pension arrangements.

I'd look to do all three, in that order of priority, perhaps looking at a 75/25 split between mortgage and invesment.

pjread

personally I'd hammer off the mortgage. But then I expect major rate hikes to comeover the next 2-3yrs, and that's largely just a hunch

Andyf33

Thanks for the ideas. Confirmed my thinking that once im comfortable with the cash i have as emergency fund then the mortgage overpayment is the way to go.

getmore4less

With £160k mortgage at 5.49 that probably should take priority till it get lower.

Remember that once you pay it ff the surplus may be more than the ISA allowances so starting to invest earlier at the expence of a mortgage for a few xtra years can pay off.

Also early invensting give you a chance to decide what sort of investor you are, Self select, tracker, or not a shares person and prefer something else perhaps property.

As I say a lot, paying of he mortgage is part of retirement planning so should not be something done in isolation.