85k to invest for 4/5 years advice please

deefadog

Can you explain this please (not my field this), I don't understand the £156,992 part

Thanks

EdInvestor

OK look at it another way.

If you put the 85k on deposit @5.4% for 5 years, also paying in 675 quid a month, at the end of the five years you would have 156,992 in your account.You get interest on your interest.

This works in your favour in reverse when you overpay a mortgage. In addition you get more by paying off loans because there is no tax payable as there is on bank interest.

deefadog

Right get you, thank you so much.

So to recap, sorry for the repetition but it's a life changing amount, so i want to get this right

So it would be best to pay the 85k off the mortgage ASAP yes, not sure if there will be a charge for this as it's on a fixed term? will have to ring them (Northern rock) and see.

Then change the number of years to 5 years and carry on paying what i am now off the mortgage a month and maybe over pay when i can?

Many thanks, much appreciated

EdInvestor

Yes, check out redemption charges. If you were to use the entire 85k to recdu ce the mortgage , then you can either reduce your monthly payment (if you need more money for spending or savings/investments) or leave it the same, in which case you will be overpaying and the mortgage will end beforee the 5 years are up.

Alternatively you may not wish to use the entire 85k to pay off the mortgage - how are you for emergency funds ? Have you used your full 7k ISA allowances, this year and next?

But IMHO you should use a large chunk of it - say 60k - as doing it this way will make the best return at no risk.

PS.Take your time over this: make sure you understand what you're doing. It can be a rather confusing (though certainly positive!) experience when large lumps of money come your way unexpectedly. No need to rush.

Ian_W

Ed's right. You don't need to rush and it is likely there will a penalty for larger overpayments on a fixed rate mortgage.
If so, find out how much you can overpay each year w/o penalty, quite often it can be 10% of the outstanding balance which will still reduce the term of your mortgage quite significantly.

deefadog

Yes thank you. Well I/we can afford the monthly payments, so I'd like to continue this and maybe add an extra £30-£40 a month extra on top of this!

We don't have any ISA's at present!

But IMHO you should use a large chunk of it - say 60k - as doing it this way will make the best return at no risk.

This would leave me with a 60k mortgage and i don't think i could cover the monthly payments for this based over 5 years. For the full to be put in then this would be around the same as we are now and effectively reduces the years from 30 to 5 and with a little overpayment maybe paid a little earlier! i think this is the route i may take as it's a knind of no brainer and flexible as well in the fact that (Worse case) if i did get ill, loss of job i could stretch the 35k over 20 year for instance and reduce the payments.

But my brother in law is an IFA, but is out of the country for a while, so i'll talk this over with him when he gets back. At least now i will be able understand it a bit better.

Can't thank you enough really, very help full. I'll report back when i find all the details on the mortgage etc.

Take care

deefadog

Just found all the info, well redemption will by a whacking £5.920 before the fixed rate ends, not sure if this applies to changing to a different company or if i can reduce it with them and stick with them!

And it was actually - £123,790k @ 5.19 fixed for 5 years over a 30 year term!

So it's 113,977k is the magic number

So it's abit more but i'll fin dout about that redemption first, otherwise investments may be the only way?

deefadog

Hi all, been talking to my FA (Family member) and he's suggesting on the basis that i am young and this money is a bonus and not my own savings etc that I should look it to investing this into property in Cyprus, he hi self has done this and so have other close friends of his and it has work out very good the last few years. the comapnies involved are one of the largest and have a very good reputation.

Basically drip feeding an investor over 2 years, then have the option to buy or sell and take the profit. From the last 3 he has delt with 20k has returned the initial deposit + £22k in interest on the sale of the property. So i am going to consider this in a way of investing in 2 properties and if all goes well, i can pay off my current mortgage and have a healthy surplus to purchase another cyprus appartement (with a small mortgage) and rent this out. we have worked out that 15 weeks of the year renting would pay the mortgae per year + it's a holiday place for me and the family as well!

So... Has anyone else done this sort of thing before? I feel it's all way a good thing to get as many opinions on this as possible.

Thank you

mutley74

if i was you, open an ISA for yourself and your partner. Either invest the ISA in a cash ISAs or consider a stocks/share one. You said you have no stock market experience, in that case consider unit trusts/Oeics. Try a broker such as hargreaves lansdown.

use the remaining fund to pay towards your mortgage. i.e. reduce your debt as you have an opportunity!

deefadog

Thansk atpug, yes that is still one of the options, but investing abroad does seem attractive and with the benefit of ending up with a continuing investment out there whilst paying off my own mortgage.