Skandia Capital Bond vs Paying off mortgage

Roypolloi

Hi everyone

I wonder if anyone has a view on this?

My wife and I have a jointly held Capital Bond worth £116,452.79, plus two Stocks and Shares Skandia ISAs worth (Global Dynamic Equity) £9,109.15 and Skandia Diversified £8,366.31.

We have a repayment mortage with C&G on a £350,000 property in Sussex with roughly six years remaining and £90,000 owing on 2.5% interest. There is a £25,000 interest only in addition, the product of an old endowment due to mature in Feb 2013 with a predicted pay-out of £22k from an endowment of £30k (Sun Alliance, now Phoenix).

In other words we have the funds to pay off the mortgage now and have £43K leftover and £22K (maybe plus) more to come from the endowment in Feb 2013.

We are struggling in the current climate to keep the mortgage payments going and I wonder if it is worth getting rid of the mortgage and using the equity at a later stage to invest in other property?

I am heading in 12 years time for a fairly miserable pension.

Many thanks

dunstonh

Would the chargeable gain from surrender of the investment bond be an issue to you? (if you are higher rate taxpayer or close to it)

We are struggling in the current climate to keep the mortgage payments going and I wonder if it is worth getting rid of the mortgage and using the equity at a later stage to invest in other property?

If you cant afford a mortgage now, whilst interest rates are at an all time low, then going with a mortgaged buy to let after you have virtually wiped out your investments is risky and likely to be of little gain. If you are looking at the property providing a "pension" then you typically need around 6-8 properties to make it worthwhile and enough time for the values to rise to cover the capital gains tax bills and repay the mortgages. With only 12 years left, you have possibly left that too late.

Thrugelmir

A few observations.

Why are you considering purchasing another property if you are struggling to make ends meet at the moment?

Do you either of you contibute to a pension scheme?

Maybe take a look at downsizing to release some of your equity and use the funds to invest elsewhere.

Roypolloi

Thanks for these helpful replies. In simple terms, in the current climate is it better to keep a mortgage going whilst interest rates are low rather than pay off the mortgage with a Bond that is also paying very low interest rates - around the same as the mortgage rate - 2.5%?

dunstonh

is it better to keep a mortgage going whilst interest rates are low rather than pay off the mortgage with a Bond that is also paying very low interest rates - around the same as the mortgage rate - 2.5%?

The Skandia investment bond doesnt pay interest. It is a container for investments. Skandia offer around 300 odd investments (on their old version investment bonds - over 1000 on their current product). Investment returns will depend on the investments and the risk levels taken as well as timescale (as they zig zag in the short term).

What are the investments in the Skandia bond?