Saving situation opinions please

money_maker_2

clear_as_mud wrote: »

:eek: erm... why?

Because thats what the OP wants to hear

On a serious note.OP re-read the advice given and really consider switching to repayment. BTL- No way. Its not as easy as you think.

merlingrey

I think you have some dangerous attitudes towards money, red flag on this quote: "I do have some security that all things being equal I will probably inherit enough to pay off my mortgage at some point within the next 25 years."

Well i would never assume anything with inheritance and i would never expect or demand a penny off anyone.
Someone who has you in the will today might change their mind, maybe they go mad and spend/lose what they have and/or decide to give it to someone else/charity, it's not set in stone.

Another issue is that your internal belief/optimism is likely skewed towards hoping for the markets to go UP and interest rates to stay the same.
But there is a chance it could go drastically the other way.

The effect of that (depending on personal circumstances and the economic environment at the time) can be anything from a minor inconvenience to sitting on a park bench and feeding yourself from bins.

kerrjp

OK I can see the advice coming in is to steer clear from the Buy-To-Let and I am listening, I don't expect anything from anyone and have always worked hard to get to give my family a good life and be as secure as possible, it is the arrival of my little one that has made me look at the long term finances to make sure I can always look after her. (on the inheritance part I make no assumption other than that it is likely that I will from at least one parent if not both receive something, but as people have said it is not set in stone). I am / was keen on the buy - to - let as its what others including my family have done even with risk but the whole reason I started this thread was that I was unsure on what would be best given my entire situation.

I do feel slightly stuck because I really wanted to put some savings to actually work for me building and compounding and or accumulating etc.., but it does seem the only sensible thing is to work at the mortgage. I was hoping that there was a half way house idea spread over a 10 - 20 year period that would enable me to get some investment of some sort ticking over without exposing my family to too much risk, but it doesn't seem there is a sensible way of doing this.

I have always been rightly or wrongly against pensions to some degree as with the lack of access to the money paid in and the risk of poor return have always put me off in some sense, however I do have a decent pension going along with the pitiful state pension.

I am still not 100% made up on what to do but the help / advice here is much appreciated, gaining a cross section audience of opinion on a site like this does help put things in perspective some what :-)

andrea_louise

merlingrey wrote: »

I think you have some dangerous attitudes towards money, red flag on this quote: "I do have some security that all things being equal I will probably inherit enough to pay off my mortgage at some point within the next 25 years."

Well i would never assume anything with inheritance and i would never expect or demand a penny off anyone.
Someone who has you in the will today might change their mind, maybe they go mad and spend/lose what they have and/or decide to give it to someone else/charity, it's not set in stone.

Another issue is that your internal belief/optimism is likely skewed towards hoping for the markets to go UP and interest rates to stay the same.
But there is a chance it could go drastically the other way.

The effect of that (depending on personal circumstances and the economic environment at the time) can be anything from a minor inconvenience to sitting on a park bench and feeding yourself from bins.

Well said merlingrey. :T

As a matter of course, not everything is equal. And when you're of the opinion that it is, is usually the point when things bite you on the bum!

oldvicar

I fear older heads on here (I count myself as one) are crushing a successful young man's dreams and aspirations.

But from what has been said he has
(a) a huge amount of debt (£265K)
(b) a salary around £62K
(c) cannot afford to live on a salary of £50k plus say £3K child benefits - which after tax and NI is less than 5K different - EVEN IF managing to do so meant a gross £20K pa being added to his retirement pot

Yet OP fancies the interest only mortgage because he can then 'save' an extra £400 pm (c £5K p.a.) or £750 pm in total.

Personally I would go for the 'interest only' option but ONLY if it was offered as an offset or similar sort of deal, and I made absolutely sure I was offsetting to at least the extent of what a repayment vehicle would have cost. Otherwise repayment is the only way to start dealing with the debt.

Its worth noting MSE's latest article about the cheapest ever mortgage deals now being available:

Firstly, they are only available on a maximum of £250K mortgage, and only at 60% max LTV. We will see more of this, where the the maximum size of a (good value) mortgage is capped. OP needs to get the debt down to be able to take advantage of the best deals in the future.

Secondly. there will come a time when mortgage rates edge up again. OP does not seem to have much resilience to cope with a significant increase in rates (roughly, might be in trouble if rates go much over 5%? ... which has been known!). When rates go up is also quite possible the value of investments (and property) will go down.

If (when) interest rates go up from these record lows, a debt of this size will hurt, and hurt a lot. For OP we're talking about the situation in 4 years after a new fixed period. It could be crushing for someone paying higher rates of tax, and would especially come as a shock to those on an interest-only basis. It won't seem quite so bad on a repayment basis, because these don't go up so much in proportion. If things are really bad (interest rates too high to cope with) in 4 years, then maybe switching to interest-only then, having been used to the repayment costs in the meanwhile, might just be a way to manage.

One final thing: OP's mortgage is 'only' about 4 times salary. But what a salary! And hence, what a debt!

IMHO it is because OP is so successful that he is far more vulnerable to economic changes than someone on average wages with a 4X mortgage, and should prioritise debt repayment.

xylophone

Have you thought about a JISA for your daughter?
https://www.gov.uk/junior-individual-savings-accounts/overview

jimjames

It could also be worth looking at the pension again.

3% of your salary matched by company still isn't very much if it is building in a DC scheme. If it is final salary then that is different.

I'm not sure the 2 things you are looking at with the £450 are actually different.

1) Interest only and save a pot of money to hope to repay mortgage
2) Repayment mortgage and guarantee to get it repaid

Either way at the end of the term you have a mortgage paid. One way is guaranteed to do it, the other isn't but may give more. Try telling those people currently facing endowment shortfalls that the risk of a higher return is worth it and I would guess their advice would be to get the mortgage paid off for sure.

Starting investments with the other £300 per month in a S&S ISA would be a good way to get your foot in the door. You'll still have the mortgage paid with certainty and can grow investments too.

Jegersmart

LardyCake wrote: »

In your situation I would be looking to repay my mortgage as quickly as possible while interest rates are so low.

this.

swap to repayment to reduce your overall risk position.

imho

J

Newbie2saving

Firstly just want to reiterate xylophone's comments, insurance is essential. Having lost my husband in our early 30's, it was a huge tradgedy, I can't begin to explain, but what was a blessing was that the mortgage was covered. We owned a large house and had a similar mortgage to yourself, knowing I don't have to worry about finances doesn't ease my pain, but it eases my worries for my son and I.

Are your wills up to date? Death in service up to date? Critical illness / life cover etc, all valid considerations. Whilst you are young these type of insurances are cheaper (in general).

I personally would go for a repayment mortgage, reduce your debt with such a good interest rate on offer to you.

Consider Junior ISA's, but bear in mind it will become your daughter's at age 18, not something I want for my son (want some control!), hence I have investments earmarked for him elsewhere.

Ensure you utilise yours and your wife's ISA allowance.

Emergency pot, ideal is 6 months salary, large sum to build up, but obviously this is an ideal.

In my opinion BTL is a headache. I considered it briefly and once I had taken into account the landlords insurance, tax implications, maintenance (I'm not very diy orientated / handy), etc, etc, it just wasn't worth it for me, however I know it works for some. Would be looking at reducing debt and not adding to it.

Good luck!

kerrjp

Hi Newbie2Saving,

Thank you for your reply, and can I commend you on your courage with what was and probably still is such an awful event to happen to anyone. Your comments are very helpful and do remind me that my families needs are the main priority. You will be glad to hear that we do have a life cover, which I am in the process of changing as I was previously under insured, this will pay off our mortgage and provide for either of us should the worst ever happen. All three of us are on private medical cover plans and my wife and I have both made Wills which include the guardianship and provision for our daughter and any subsequent children we may have.

I think I have realised that the buy-to-let idea may be too early for me without enough capital to properly set it up. I am now thinking I could have a go at tackling our mortgage over the next 4 years and then review our situation again. I will probably set up either a junior ISA or a junior stocks and shares ISA for our daughter and contribute a monthly sum to start a small savings/investment for her over the next 18 years.

Maybe by hitting the mortgage hard I can secure our financial position and then look to build some moderate future wealth from there. I really do appreciate all the opinions that are given here as it gives a broad prospective and allows me to remain level headed even if I have aspirations :-)

If anybody else has any other thoughts or points to make please keep them coming.