MEW or re-mortgage to invest, Is it worth it?

Stu78

Not sure if this really belongs in investments or mortgages, but...

I have been playing with some figures in spreadsheets, but my understanding of interest rates (AER, APR, monthly etc etc) is a bit lacking, hence the post.

Bottom line is, I was wondering if it would be possible to make money by extracting cash from my home via a re-mortgage (MEW) and investing it.

I have considered the tax situation, and would use my and my partners ISA allowance, as well as taking advantage of the 8% and 12% regular saving deals offered by some banks.

The trouble is, my brain/spreadsheet can't handle all the different rates, and the need to move money from one account to another etc etc.

Is it likely to be possible to make any sort of profit from this, or is it a non-starter?

I am not interested in stocks/shares investment, as I need the capital to be safe.

Thanks

Stuart

ReportInvestor

Hi Stu78 .

NSI is going to pay 5.55% on a tax free ISA and you can get a mortgage for less.

Don't forget to factor mortgage brokers' fees into your calcuation, though.

And don't necessarily expect the regular saver offers to continue ad infinitum. They could just the "flavour of the month" - here today, gone by 2007.

But keep us up to date withou your ongoing calculations . The idea is not a daft one in principle - as long as the sums work in practice.

tom188

I would imagine remortgaging fees would negate any gains but would welcome being proved wrong.

oldfella

I would use any spare cash to reduce the mortgage

Mike

Stu78

oldfella wrote:

I would use any spare cash to reduce the mortgage

Mike

Mike,

Normally I would agree, But assume I have £250 spare cash each month.

I could over pay the mortgage by £250 pm or I could open a LloydsTSB 8% regular saver acc and pop the £250 in there for 2 years.

at the end of the 8% offer term, the money (plus interest earned) could be used to pay off some mortgage capital, or be invested somewhere else.

My point is, it MAY be possible to use these "above base rate offers" to actually make more by SAVING rather than reducing debt.

I havent actually worked out what you would save by overpaying £250 pm for 2 yrs compared to investing it at 12% for 2 yrs, but my logic suggests 8% is sufficiently higher than the average mortgage rate of 5-7% to make saving the better option especially if you are not a tax payer.

My initial post was an extreme example where debt is actually created to free up cash to take advantage of these offers.

Stuart

tom188

Yes
In some cases to do this could be beneficial:
Eg LTSB
8% Certainly if your a non taxpayer
= 6.4% for basic rate - quite possibly
= 4.8% for higher rate - doubtful