Should I pay off my mortgage discussion

Dithering_Dad

stuffcrash wrote: »

Move you money out of the country bit by bit, pay off your debts and sit back watch the fireworks go off.

The only way to move it out of the country without a paper trail would be to withdraw cash and then physically take it overseas in a bag - not very secure if you have a large amount of money. You may also fall foul of money laundering laws if customs officers find you in possession of a large amount of cash. If you take smaller amounts then it's a lot safer and easier but then you have to take several flights and so will have to take the cost of these into consideration.

Once you get overseas and open a bank account to hold your money, they'll ask for your passport and will pass your details back to the UK tax office (they all co-operate due to double taxation treaties, etc). If you go a tax haven such as Monaco or Liechtenstein, then you'll pay a fortune for a numbered account (if you think our bank charges are bad, think again) and will run the risk of this: http://business.timesonline.co.uk/tol/business/money/tax/article3423610.ece

You'll also have trouble getting at your money if you need it in an emergency - a case of watching the fireworks go off and not being able to do anything about it!

ghill35

Hi folks,

another query on overpaying on my mortgage.

Part is interest-only and the rest is repayment - is there any advantage/disadvantage to converting to all repayment or all interest-only ?

I get the impression that all interest-only would be better ?

Thanks

Luckyjammygit

Hello ghill35

Interest only is cheaper to pay but repayment pays off mortgage quicker.

We cashed in endowment 5 yrs ago converted to repayment from interest only kept paying 7.25% put £500 in every time we saved this amount and this morning I have paid the mortgage off apart from £1 using redundancy money.

I am now skint and out of work and disabled but somehow I feel a weight has been lifted :j

All the Best!

And Good Luck!

Tom

jamesd

ghill35, all interest only is better because you can routinely overpay by the difference between interest only and repayment amounts. Then if you have financial trouble you can drop back to the interest only level without hassle from the mortgage company.

Provided your normal payments are at the repayment amount the use of interest only won't increase the cost of the mortgage or how long it takes to repay - what matters is the monthly payment.

Take care when reading about interest only because most people will assume that you're intending to not pay off the repayment amount and will tell you that it'll take longer or cost more. It can, but only if you're not making the repayment level of monthly payment.

Or you could go interest only and invest the difference between inerest only and repayment, or do a 50:50 split. Whatever you're comfortable with and prefer.

madasarog

The comments from Deefadog about buying abroad and then selling it on ran up the red flag in my mind! I bought a flat in Spain and before I paid the deposit I was told by my UK agent that I could use it as an investment and after paying the first half of the remainder of the cost I could sell it on. Shortly after paying the next installment I had an illness in the family and decided that as I needed the money I would contact the Spanish promoting company but was told I could not sell on because I had 'the wrong type of contract'. I was not told by the UK agent that I should ask for a different type of contract so had to see the purchase through which cleared out all of my other savings! So be warned!

Jonbvn

Dithering_Dad wrote: »

So do I, though I got the impression from your posts that you do the 'investments/savings' part but not the 'overpaying the mtg' bit. Apologies if I am wrong.

DD,

No we do both. We are presently on fixed rate deal ATM, which allows some overpayment, which we make. However, come the end of the fixed rate in July we will pay-off £40k from non-ISA savings.

Dithering_Dad

setmefree2 wrote: »

Hi DD,

Don't agree with this, I'm afarid. Whilst we can argue until the cows come home about what inflation is, or isn't, if I get 6.5% on my cash ISA, which is easily achievable, then it is not being whittled away by inflation.....don't think anyone is saying inflation is greater than 6.5%.......Inflation is used by many as a good reason NOT to POYM - the argument goes (as I'm sure you know beacause some have probably used it against you) that over time inflation whittles your mortgage away, which is true in times of high inflation, which we havn't got - which is why I am a MFW too. If we suddenly hit a period of very high inflation, more than anything, I would probably regret POmyM.

Cash must be seen by many "professional" investors as a vehicle for investing as I have just moved half of my pension into cash and half into the far East. Cash was an alternative offered to me.

I think what you do with your money does depend on what you are trying to achieve. Your plan is right for you as, I believe, you said that you were trying to find income to send your children to private schools...so for you it makes sense to POYM. If you want to save for old age - put it in a Cash ISA, of course, you have to move it constantly or the banks will give you paultry interest. This is true of mortgages too though.

Depends on what you are trying to do....no one way is best surely/

Hi smf2, I guess it also depends on what you do as a household that sets your particular inflation rate - if you drink a lot, smoke and drive a 4x4 gas gussler, then your personal inflation rate will be higher than someone who does none of these things.

I still believe that if we enter a period of high inflation, it will still have been a good idea to reduce your debts. The Bank of England's prime directive is to keep inflation low and the only weapon in their armoury is interest rates. If inflation goes up, then so do mortgage rates - if they go up even by just 2%, how many people will have lost their homes before they will be able to feel the 'good side' of inflation?

Cash is seen as a short term 'bolt hole' by investors who see a chance to capitalise on falling shares by putting their money into cash while they wait for a crash and then buy the shares at a cheaper value. The trouble is that it they're wrong and the opposite happens they will have 'lost' money because their cash will buy fewer shares.

setmefree2

Hi DD,

All good points.:D

Personally, we drive our car so little these days that whenever we want to drive it, it wont start as it has a flat battery:rolleyes: (All suggestions for help on this problem warmly received - we've even tried one of those solar panels that is supposed to give some poke to the battery when it's not being driven - don't think there is enough sun in the UK though, as it hasn't helped much:o).

Drinkin, smoking, eating at record low levels for the SMFs. I started a spending diary 5 years ago and one of my achievements is keeping our "utilities" bills - Electricty, gas, council tax, etc at the same level as 5 years ago.:D

So the SMFs are a lean, lean mortgage fighting machine.:A

You're right when you said in another post that we are just debating small amounts of differences.

The events of the past week have just made me want to POTM more if anything. Just this morning I was thinking how glad I was that we had embarked on this 5 years ago, and not a spending spree. When we got our mortgage in 2003 I was scared by the size of it. To owe £250k was terrifying for me. Everyone around us seemed to have mortgages the same size (or bigger:eek:) but we seemed to be the only ones bothered about it in our social circle. Everyone believed in borrowing the max and alot of the people we know have interest only mortgages. Me & Mr SMF have worked hard trying to get it down for the last 5 years, while everyone around us (truthfully) has been buying flash cars and even bigger TVs. No regrets on that front now. We're still hoping to be MF by 2012. I hate being in debt and I hate paying so much to bank every month. I feel like we work just for them and I know I've been conned somehow.

Anyway, keeping the money coming in has to be a priority for us. I still harbour (unrealistic, I fear) hopes that this "crunch" will all turn out to be like the millenium bug and after it we will all wonder what the fuss is about. The SMfs need to hold cash just in case we lose our jobs. But after the cash ISAs we'll be chucking everything at the mortgage.

Anyway, I seemed to have drifted away from the intent of the thread....or maybe I haven't. Should I POMM - unquestionably

All The Best

SMF2

OMG I've got a third medal - should I be proud or embarrassed?

jamesd

Dithering Dad, if you expect a period of high inflation it's the ideal time to take more fixed interest debt and defer making extra payments to existing fixed interest rate debt. Inflation will reduce the real value of those debts. High inflation is a particularly good deal for property owners, who have relatively large debts with high leverage (borrowing to deposit ratio).

Expecting high inflation is also the time to take out a longer than usual fixed rate deal, but still to make sure that it's at least portable so you can move. The fixed rate taken near the end of the low interest time (which isn't now) is likely to be lower than the future variable rates.

You're probably right to expect higher interest rates once the financial system and following economic problems are clearly dealt with. Probably a few years away so too soon to move to a long fixed rate deal IMO.

Now is a good time to take out unemployment insurance, so minimum cover periods will have expired before a possible claim. Not a good time to deplete savings to pay debt, for this reason, among others.

Personally I'm seriously contemplating large borrowing combined with setting a my pension contributions in a salary sacrifice pension so that my effective salary is about 8,000, which would qualify for working tax credits. That would give very high pension (and later pension mortgage capital repayment) contributions during a year when share prices are depressed but property prices aren't yet. It's a high risk strategy because I'm locked in to the low income for a year and will deplete savings a bit.

Jonbvn

Dithering_Dad wrote: »

You certainly made it sound easy with talk of 12% trackers and no crashes...

DD,

I have never mentioned anything about 12% trackers and no crashes???? I have never even mentioned stock market investment vs. mortgage overpayments. The only thing I have ever mentioned is cash ISA's vs. mortgage overpayments, which is a simple direct comparison.

I think you may have the wrong person.