solar panels or mortgage overpayments?

jmjc0112

I've been quoted from 8.5k-10k for a 2.5 is pc system. I was planning to pay for it with 0% purchase credit card paying 100 a month of the card and using the fit payment to reduce the balance by about 900 a year. I've c alcula
ed the card would be cleared in just over 4 years. Or would it be more benefital to just make a 100 over payment each month the rate is currently .78 base rate tracker with about 61k left on it.
Or a 3 rd senario and use the fit payments to make overpayents on my mortgage leading to 8 years to payback the pc system.

Comments welcome

HappyMJ

I doubt the 0% will last for 4 years so you'll probably have to move the debt somewhere else before the deal expires. You might want to count that in the maths.

Do you want a solar panel system?

You could also save the excess money in ISA's and normal savings accounts as well.

jmjc0112

HappyMJ wrote: »

I doubt the 0% will last for 4 years so you'll probably have to move the debt somewhere else before the deal expires. You might want to count that in the maths.

Do you want a solar panel system?

You could also save the excess money in ISA's and normal savings accounts as well.

Yeh would have to shift the debt 3 times, still cheaper than a loan tho.

As to wanting panels? I can see the arguements for and against. I'm not interested in the ethics its a pure financial decision.

As for a isa I think I would be better off making overpayments on my mortgage?

thenudeone

Regardless of the source of any income (FITs, spare income, or 0% credit card deals), if your mortgage is at 0.78% (or even base rate + 0.78%) then you would never overpay it unless base rates rose significantly, because there would always be a much better use for the money. Even a 40% taxpayer can get 1.8% after tax on a short notice savings account (or 3% tax free in an ISA).

Solar PV can be a good investment if you have savings, an unshaded south-facing roof, and you expect to be in the house for a decade or so, but £10k for a 2.5kW system is expensive and will take much longer than that to be repaid. Typical cost for a 4kW system is £12k, which should provide an index-linked return of over 10% for 25 years.

jmjc0112

thenudeone wrote: »

Regardless of the source of any income (FITs, spare income, or 0% credit card deals), if your mortgage is at 0.78% (or even base rate + 0.78%) then you would never overpay it unless base rates rose significantly, because there would always be a much better use for the money. Even a 40% taxpayer can get 1.8% after tax on a short notice savings account (or 3% tax free in an ISA).

Solar PV can be a good investment if you have savings, an unshaded south-facing roof, and you expect to be in the house for a decade or so, but £10k for a 2.5kW system is expensive and will take much longer than that to be repaid. Typical cost for a 4kW system is £12k, which should provide an index-linked return of over 10% for 25 years.

Are you sure about not making over payments on mortgage?
Thought if you made overpayments while the rate is lower you reduce the debt quicker for eg if I paid 1k off it now I would not be paying interest on it for 20 years thus reducing debt quicker.

Cardew

jmjc0112 wrote: »

Are you sure about not making over payments on mortgage?
Thought if you made overpayments while the rate is lower you reduce the debt quicker for eg if I paid 1k off it now I would not be paying interest on it for 20 years thus reducing debt quicker.

It is dependant on the interest rates for

A. your mortgage

B. Savings.

As stated above if you can get a higher rate on savings(after tax) than you are paying on your mortgage, then, provided you reinvest the interest, it doesn't pay to pay something off the the mortgage.

thenudeone

jmjc0112 wrote: »

Are you sure about not making over payments on mortgage?
Thought if you made overpayments while the rate is lower you reduce the debt quicker for eg if I paid 1k off it now I would not be paying interest on it for 20 years thus reducing debt quicker.

But, if you put £1k into a savings account and leave it there until you need to pay off the mortgage, you will be gaining interest on it for 20 years. It's all about the differential in rates and whether the mortgage repayment is permanent or just part of a flexible or offset facility.

Obviously mortgage rates can change and could be higher than savings rates in the future (as they already are for new mortgages).

If you have a flexible /offset mortgage with a very low rate it does not make any sense to overpay now. Put it into savings. If the mortgage rate rises in years to come then withdraw the savings and put it in the offset account.

Without that flexibility it is a more difficult decision because it is likely that over time mortgage rates will be higher than savings rates. As long as there aren't significant restrictions on overpayments I would still say put it in savings then if the mortgage rates rise you can make the overpayment then