Make my equity work - or not?

Carey_Baxter

I have been advised that I could make the equity in my house work for me:

(1) remortgage to the full value of my property
(2) pay off my current mortgage
(3) invest (securely) the equity at a rate above that of my mortgage
(4) Use the return to pay off the additional mortgage payments & pocket the difference or put back into my mortgage payments to reduce my overall monthly outgoings.

Any comments, advice or pitfalls?

Thanks

thebyp

1) 100% mortgages are expensive
2) pay off your current mortgage by remortgaging or something else, please clarify
3) remortgaging, if you can do it will always be cheaper
4) not sure where you are going with that, seems short term / long term

Carey_Baxter

These are 4 steps, not 4 options

Step (1) remortgage to the full value of my property
Step (2) pay off my current mortgage with the remortgage
Step (3) invest (securely) the equity at a rate above that of my mortgage (ie the left over money from the remortgage once the original has been paid off)
(4) Use the return from the invested money to pay the additional mortgage payments (the difference between the mortgage and the remortgage) & pocket the difference or put back into my mortgage payments to reduce my overall monthly outgoings.

Maybe I am not explaining this so well?

Thanks

ManAtHome

Doesn't matter whether you're using equity or taking out loans (although a mortgage is likely to be cheaper than a loan), the sticky bit is step 3 - security and high returns rarely figure in any specific investment.

Best savings rates are just over 6% for a 5 year fix - 4.8% after tax. Equities could return more - up to £8k capital appreciation tax free each year, but less secure over the short term.

Not pulling out equity will presumably be worth more than 5% pa (or whatever your mortgage rate is) "after tax" with absolutely no risk...

silvercar

step (3) is so risky, particularly with all your equity.

a lot of people do the exact opposite with an offset mortgage - pay savings into their mortgage account to reduce payments.

thebyp

silvercar wrote: »

step (3) is so risky, particularly with all your equity.

a lot of people do the exact opposite with an offset mortgage - pay savings into their mortgage account to reduce payments.

i was just going to sugest that