mortgage / isa / savings / future.

roswell

Happy 2007 to everyone,

It comes to the time of year where i think everyone or maybe just me looks into there finance`s and comes up with some new plans.

My situatuion.
Age 25
Company pension contributions £86 a month (6% of salary + matched by employer)

House (not lived in by myself) mortgage outstanding 15440. (Value 80 000 ish) (income from property £0) (Not willing to BTL as mother lives in it and pays for repairs up keep etc)

Savings.
£13200 Cash ISA (offest against mortgage)
£ 2000 (offset against mortgage for car insurance / tax etc)

Deposit for house (no 2) (3000 ish)

plan for 2007 onwards.

Cash out cash isa ( yes loose tax free status ) Reason :
This will free up cash, Use 4 000 of thsi to open a self select isa,
ISA to hold some managed funds like invesco income and growth, an emerging markets fund and possible 2 tracker funds (not decided yet).

Pay 9000 off mortgage (has withdraw facility)
Reduce mortgage payments from the current original amount of £135 to extend term back to original length (15 years remaining)

Use £100 (mostly from reduced mortgage payment) a month to either pay into shares isa / to take higher risks in a halifax share builder account.


Long term,

use isa as a pension (loose wording but as long term investment eg 35 + years allowing me access to the full fund), Sell house 1 (probably in 20 / 30 years).


Reasons for above, If I loose my job I currently have to much chase for benifits (not planning on this happing but call it self insurance), Buy putting the cash into the isa its in effect hidden from my bank account, it is accessable if needed.

Emergancy fund ? Using 0% 12 month purchases credit card (my view of emergancy is anything over £2000 (savings) that is needed when i cant get access to a bank (hence credit card) Iv never had an emergancy yet ...

Your opinions welcomed if this looks like its suicide please tell me.

roswell

Forgot to mention current debt £0

sloth

roswell wrote:

Reasons for above, If I loose my job I currently have to much chase for benifits (not planning on this happing but call it self insurance), Buy putting the cash into the isa its in effect hidden from my bank account, it is accessable if needed.

hi,

i may have misunderstood you but by putting your money into an ISA, it will still be used to calculate what benefits you may be entitled to if you lose your job

roswell

mmm time for plan 445 then althoguh short term it wouldnt be a issue after a year or so it wouldnt help having the 9 K in the mortgage .... time to get thinking again.

jamesd

It's likely that this year's budget will announce that you can switch the money from cash ISA to stocks and shares ISA. So, waiting beats withdrawing and reinvesting.

You could switch the mortgage to interest only to free up more money for investing.

The ISA, however it's held, will count for benefits. A pension doesn't, so that's sometimes a significant advantage for a pension if you are pessimistic. But insurance can cover this risk fairly well. Permanent health insurance can be handy because it'll potentially pay out for your anticipated working life. Not cheap, but nice downside protection.

roswell

Ok I think I will hold out and put all plans on hold till the budget, Risk loosing some investment growth but may be helpfull also gives me time to research where im going to invest.

jamesd

Have fun learning all there is to know about asset allocation and the available fund choices.

nrsql

You are in effect borrowing money on the motgage to invest.
Not a bad idea as long as you realise that is what you are doing.

In the past couple of years it would probably have made a profit - and may do in the future but that's the risk you are taking.

Relying on a credit card for emergency cash is a bit dangerous - the bank could decide to withdraw it or reduce the limit just when you need it.

roswell

True in a way im borrowing from the mortgage, in another way the isa was there before the mortgage, the mortgage then arrived and the isa was used to save the interest on the mortgage, the mortgage is now 2 000 higher then the isa i feel its now time the isa gave up its day job and went forth and grow.

Im not relying on the credit card as cash just as an emergancy fund to pay for service `s as most emergancies will require payment and as above i class an emergancy as bill that excedes savings. I will have higher cash savings by the end of 2007 (unless i have a said emergancy) and my only asset will be 1 house and cash which i consider a big risk if there is a down turn in the UK economy I could have a house that looses value and cash that is erroded by inflation.

Im looking at china / asia pacific funds as one option as my view is they have the power to hold the western world by the proverbials, also looking at european funds. not going to look at USA as dont hold much faith in the way there currancy is / debt levels / housing crisis / outsourcing

roswell

sloth wrote:

hi,

i may have misunderstood you but by putting your money into an ISA, it will still be used to calculate what benefits you may be entitled to if you lose your job

Sorry got my ISA mixed up with my mortgage .. all plans on hold at present

Please continue giving me options.