Making chicken feed of my mortgage

Purplesky_2 · 3 July 2015 at 12:14AM

Given that you're aiming for early retirement, I would think that having the investments sitting there would be the best thing. After all, the age that you can get pensions keeps going up, and you'll need something to buffer that a little. You can keep the money in cash, but it's the most frightful bother to keep everything going to get even a halfway decent rate. :mad:

Now that you're in sight of the end (Congratulations on making so much progress btw!:j), there are a number of things to consider. Have you looked at the rates around at the moment? Would it be worth refinancing? It might not be, but given the equity you now have in your house, it's worth a look, certainly. Gee, I wonder where you could have a look for the best deals....:rotfl:

Next, are your pensions where you want them to be? Given the amount you're able to sock away, it would probably be worth it to check (in the 40% tax bracket, each £60 you put into your pension becomes £100, without employer contributions, :eek:so it's worth checking if you're happy with these too)

Then for the S&S ISA, when you say the transfer rates are huge? How big are they? For an investment plan, made by an advisor, that you would implement yourself, it would have cost us £750 when we enquired. It depends if you think that is a lot or a little. But I think (in my totally novice opinion) that you've done ok in your current investments. Including a wobble in 2002 and 2008/9 CRASH, you appear to have an annualised rate of about 3% (quick calculation from here: http://www.pine-grove.com/online-calculators/roi-calculator.htm). Not spectacular, but pretty solid. Are you properly diversified?

Lots of questions? And only you know the answers obviously.

Me, personally, I would keep paying off the mortgage from cash (financed as low as possible) and keep socking money away into some combination of pension/S&S ISA and mortgage. At that rate and with the size of regular payment you're making, and the much reduced loan, you are probably putting most of the normal payment into the principal now, anyway. I suppose the question is how secure are you?

If you feel like you could pay the mortgage/bills if say one of you stopped work, but your pension isn't being fully funded, then I, personally, would feel like I was losing money. A 2.5% guaranteed return on the mortgage overpayments is good, but you could get a HUGE bump from going into your pension.
And your S&S ISA has gained by more than the current mortgage rate. If it continued at that rate, and you started putting all your overpayments into that, then you would hit your target of being mortgage free sooner... (NOT that I'm recommending it as a course of action, I'm merely pointing out the possibility that you could do so). Lots to think about. Good luck with your decision.

Gosh, that was a big reply. Sorry about that!

muddywhitechicken · 3 July 2015 at 5:42PM

Purplesky wrote: »

Given that you're aiming for early retirement, I would think that having the investments sitting there would be the best thing. After all, the age that you can get pensions keeps going up, and you'll need something to buffer that a little. You can keep the money in cash, but it's the most frightful bother to keep everything going to get even a halfway decent rate. :mad:

Agreed. As soon as we started OPing I started seeing this pot of money as a retirement fund rather than as a mortgage payment.

Now that you're in sight of the end (Congratulations on making so much progress btw!:j thank you!), there are a number of things to consider. Have you looked at the rates around at the moment? Would it be worth refinancing? It might not be, but given the equity you now have in your house, it's worth a look, certainly. Gee, I wonder where you could have a look for the best deals....:rotfl: I'll have another look! I did look at remortgaging with the same company and, because we would go onto SVR rather than BMR after the fixed period, the overall interest was higher.

Next, are your pensions where you want them to be? Given the amount you're able to sock away, it would probably be worth it to check (in the 40% tax bracket, each £60 you put into your pension becomes £100, without employer contributions, :eek:so it's worth checking if you're happy with these too) This is the elephant in my diary! My mum died aged 66 after being talked into paying AVCs following her initial cancer diagnosis :mad: I don't want to be pessimistic but I'm unlikely to live to a very old age and, therefore, I don't want to put all my eggs in one basket. I do pay 4% into a pension (and my employer pays 12%) and £300/month into sharesave schemes, we also have a S&S ISA in Mr MWC's name, cash ISAs and shares.

Then for the S&S ISA, when you say the transfer rates are huge? How big are they? I'll have another look - if I remember correctly it was more than 6X the amount we pay in each month. For an investment plan, made by an advisor, that you would implement yourself, it would have cost us £750 when we enquired. It depends if you think that is a lot or a little. But I think (in my totally novice opinion) that you've done ok in your current investments. Including a wobble in 2002 and 2008/9 CRASH, you appear to have an annualised rate of about 3% (quick calculation from here: http://www.pine-grove.com/online-calculators/roi-calculator.htm). Not spectacular, but pretty solid. Are you properly diversified? Just checked and it is 100% UK shares. Thanks for the link

Lots of questions? And only you know the answers obviously.

Me, personally, I would keep paying off the mortgage from cash (financed as low as possible) and keep socking money away into some combination of pension/S&S ISA and mortgage. At that rate and with the size of regular payment you're making, and the much reduced loan, you are probably putting most of the normal payment into the principal now, anyway. I suppose the question is how secure are you?

If you feel like you could pay the mortgage/bills if say one of you stopped work, but your pension isn't being fully funded, then I, personally, would feel like I was losing money. A 2.5% guaranteed return on the mortgage overpayments is good, but you could get a HUGE bump from going into your pension.
And your S&S ISA has gained by more than the current mortgage rate. If it continued at that rate, and you started putting all your overpayments into that, then you would hit your target of being mortgage free sooner... (NOT that I'm recommending it as a course of action, I'm merely pointing out the possibility that you could do so). Lots to think about. Good luck with your decision. It took a while to get Mr MWC on board with MFW... now I'm thinking about FIRE he's insisting that we OP the mortgage!

Gosh, that was a big reply. Sorry about that!

Thank you Purplesky :T

muddywhitechicken · 3 July 2015 at 6:21PM

5 minutes online getting a comparable quote + 5 minutes on the telephone to my current insurer = car insurance renewal reduced from £230 to £180 :T

Eggs IN 4
Eggs OUT 6 (1 box sold for £1.45)

Purplesky_2 · 4 July 2015 at 5:41PM

OK, not to be too morbid about it, but it is possible to get your money out of a pension before the pension age (currently 55-57 ish) if you have a terminal condition. Or you can leave some of it in and leave it for your partner - they pass tax free now, so it might be worth considering to circumvent/reduce inheritance tax?
But I understand why it's not a high priority for you right now!

Have you seen a blog called 'Mr money mustache' ? He's American, but achieved early retirement/financial independence in his early 30s and has some very sensible things to say.

I would also suggest that 100% UK shares is quite risky, particularly since oyu have a house AND a job here. If the UK economy tanks, EVERYTHING goes down. Looking at different geographical regions and investment types would reduce your risk. We've looked at a couple of books, and 'The DIY investor' by Andy Bell is a good one that explains all this stuff, or there's a post from the Monevator (another good blog): http://monevator.com/asset-allocation-in-pyramid-form/

muddywhitechicken · 8 July 2015 at 9:52PM

Another busy week (a 3-day training course - a bit brain dead now), looking forward to some quality time with Mr MWC this weekend and then getting back into a routine...

Whilst out plodding this evening, I passed a rose nursery... the fragrance was very strong