paying off or saving/investing

wheelz

Each year I get a sum of money from my parents and some of the money I have used and some I use for paying off the mortgage. I wonder if I should invest (stocks and shares isa?) it or something, try and make some money and then pay it off.

This might be a silly question at the moment but I've had the question for longer.

Any ideas? or comments?

Sepa74

Hi Wheelz, it all depends on your mortgage rate, what other investments you have and what tax rate you're on. Also on how much longer your mortgage has to run.

Why don't you give us a bit more detail, that might help.

wheelz

My mortgage is for another 14 years.
Rate is 2.5%
Other investments are just savings approx. 10,000
basic tax rate

Sepa74

I think you could do better than to pay off your mortgage. An ISA will be tax free, and there are cash ISA with better rates that 2.5%, which is what you would earn if you put it in your mortgage.

If you do invest in stocks and shares you need to be aware that you might lose your money. Financial advisors say the minimum investment should be 5 years.

You should invest as widely as possible so that if one investment goes down another might go up. Investing everything in property isn't a good idea, but neither is investing just in Stocks and Shares - a mix of the two is best! But depending on what form your pension is, you might already be investing in some shares.

You could also consider investing in yourself - is there something you could study that might increase your earning potential later on?

You might find talking to an independent financial advisor helps too. A good one will assess your attitude to risk and then advise you what you can invest in that makes you comfortable - if you are very risk averse, then investing in shares might not be the best idea.

I don't know if that helps at all! It's one of those things that only you can decide!

richj

wheelz wrote: »

My mortgage is for another 14 years.
Rate is 2.5%
Other investments are just savings approx. 10,000
basic tax rate

What is the rule of thumb for this? If your mortgage interest rate is more than your savings rate pay off the mortagage? Or is that too simplistic?

wheelz

Yes some simple advice like that would be good.

getmore4less

Think what the end goal is.

For most that is mortgage free and saving/investments and unearned income that allows you to retire.

The advantage of starting to save/invest now is you build up experience of what works for you, before the pot gets too big.

Some go into property becoming landlords some prefer the more liquid S&S investements, other do something else.

Cuurently there are tax shelters for cash and S&S but these have limits, if once the mortgage is paid off the amount of free cash will excced these limits then starting early is probably a good idea.

You don't indicate how much surplus cash you have each year but if it exceeds the S&S ISA allowance then I would start one.

You could do Cash and a smaller S&S while you learn.

Fill up the ISA and then overpay/save with anything left is one approach.
(save if savings rates exceed mortgage rate)


Whatever you do the biggest difference to your future financial success is spending less.

wheelz

getmore4less wrote: »

Fill up the ISA and then overpay/save with anything left is one approach.
(save if savings rates exceed mortgage rate)

Thanks. Is it really as simple as that. If savings rates are more than the mortgage rate? I have always had cash isas. A friend recommended I look into stocks and shares isas before i use the money to pay off the mortgage. But I'm not sure. It's not that easy to work out if you're getting more as it's not a case of rates and guaranteed sums. I have had stocks and shares when I was in my twenties (no big amounts but just an alternative to plain savings).

The amount I get is about £3500, some I use and spend and some I use to pay the mortgage off normally. I just thought before I pay it off again should I do something else. I had put it in an isa bond that didn't go down well after more than a year I took it out, had not lost anything but not made anything/much either, would have got more if I had just put it in an e-savings account!

wheelz

stocks and shares isa seems a maze for me I must admit.

also I have never changed bank for an isa always stayed with the one I've been with for a while.

Viper_7

Also depends if you have mortgage protection/insurance that you're paying out on.

Paid off my mortgage in full the other week, I had 16 years left to go. Saving around £300 in mortgage protection costs and of course the interest.
Can now plow what I was paying and more into ISA's and the like.
Also an opportunity to receive the Deeds - and find out they were wrong!

wheelz

Viper_7 wrote: »

Paid off my mortgage in full the other week, I had 16 years left to go.

I'm not in such a position!