At the end of the day....

jamels2

What are we all trying to achieve?

I am considering all sorts of things such as:

-overpaying my current mortgage
-buying a second property as a buy to let
-whether or not to pay into a pension

And it got me thinking, what is the end goal of all of this? What am I aiming for?

My personal situation is that I bought a property early compared to most and have benefited from house price rises. My mortgage is currently about 30% of my income and I can afford to overpay. I could potentially pay it off by the time I'm 40.

This is all assuming I stay single and don't have anybody else to support!

So I could get to age 40 and be mortgage free on a 2 bedroom property. Then what? I still have to work (probably only part time) to pay the bills. What is my next target then?

Would I think, in another 10 years I want to retire early @ 50? I don't know? I don't think I want to do nothing, but I'd certainly like freedom from the system I currently feel trapped in!

Ideally I'd like to travel (on the cheap), volunteer or work part time. Then dedicate the rest of my time to my own interests, hobbies and causes.

So possibly if I achieve the first target I could then save up and buy an investment property with a large deposit @ live off the income in rent? If this worked out, would I need to worry about a pension?

Another option could I just move to a cheaper area and free up equity with which to re-invest or live on? I'm open to the idea of relocating later on to somewhere quiet, less people, more nature.

Anyway just trying to get my head round the options as I find the whole system stressful. I am quite an all or nothing type of person so I think finding an end goal would help me with decisions right now. Thanks for reading.

dunstonh

What are we all trying to achieve?

On the whole of the same thing. You have three phases of life.
1 - when someone pays for you to live (child)
2 - you work to pay for your lifestyle now and provide for your future lifestyle
3 - you live off the money you put aside during your working life.

-overpaying my current mortgage
-buying a second property as a buy to let
-whether or not to pay into a pension

mortgage - not a bad idea at any time but you need to be careful of not putting too much in to that at the expense of other things (such as S&S ISA and pension contributions)
- nice idea but one doesnt help much. Typically you need 6-8 properties for it to replace a pension
- pension - why considering?

Would I think, in another 10 years I want to retire early @ 50? I don't know

Unrealistic on your current provision as you mention no savings and investments and no pension provision. As it stands you will be lucky to retire fully at state pension age.

Another option could I just move to a cheaper area and free up equity with which to re-invest or live on?

As I said, one wont be enough. By the time you have to sell up to repay the mortgage and pay the capital gains tax and remembering its unlikely that you will see similar growth to the credit boom years, you wouldn't have enough to live on.

marathonic

If a younger brother were to ask me for advice today, having gone through the phases up as far as home ownership, I'd probably advise to prioritise the following:

• Pay as much as is required into your pension in order to get your maximum employer contribution;
• Save as much as possible into a Best Buy Cash ISA until you have 3 months salary there as an emergency fund - 6 if you have children;
• When you have the Cash ISA sorted, save as much as possible into a Stocks and Shares ISA for the purpose of a house deposit;
• Buy a house and pay down your mortgage as quickly as possible until you get to 60% LTV and then remortgage to the best available deal over as long a term as possible (60% LTV sounds tough but capital appreciation may make it easier than you think);
• Look at your tax situation - if a higher rate tax payer, increase your pension contributions significantly and, if a lower rate tax payer, put the money into a Stocks and Shares ISA until such times as you become a higher rate taxpayer

Some people will argue that, by increasing your mortgage term when you're at 60% LTV, you'll pay more interest - which is true. However, if you compare the interest paid to the expected return on the stock market, you'll be pleasantly surprised - especially after considering tax relief.

If you are a lower rate tax payer for a significant period of time, your Stocks and Shares ISA value will be pretty high. When you become a higher rate tax payer, you have the option to use these funds for living expenses and diverting most of your salary to the pension.

Personally, I don't get the big obsession with paying down a mortgage ASAP. I'd rather have a £100,000 pension pot and a £50,000 mortgage than a mortgage-free home and no pension pot.

My own situation is that I've just bought a house and my LTV is around 65%. I'm planning to open a Cash ISA next month to build the emergency fund back up (next month because I'm hoping for improved rates).

When the emergency fund is in place and, assuming capital appreciation hasn't taken me to 60% LTV yet, I'll be overpaying the mortgage until I get there. The advantage of doing this is that, in todays mortgage market, a 2.79% 5-year fixed rate mortgage is available with no fees. Because your capital would only be 60% of the value of the house and you're on such a low rate, repayments would be minimal freeing you up to look at other areas such as your pensions or ISA's.