Should I pay off my mortgage discussion

stphnstevey

Property has the major benefit of gearing, you only need to invest a small % but can take 100% of the gain.

ie 10% deposit of 10K, 100K house - house increase by 10%=10K = 100% return

Shares 10K, shares increase by 10%=1K =10% return

Obviously you need to take costs, time involved and the gearing (ie 20% deposit halves the return to 50%)

Inflation erodes the return on shares and property. The idea is to get a return that is several fold higher than inflation, which is difficult now with savings rates but still possile with shares and property, over the long term.

What I think your trying to get at is that most people don't see a return on the property they live in as the increase is relative. As house prices increase, the house price of the house they live in increases but also the price of the house they are trying to move to. You only really can take advantage when moving to an area where house prices haven't increased to the same amount (ie sell London and buy in the North) or if you own a house you don't live in (ie BTL).

Jonbvn

jamesd wrote: »

That seems like sensible diversification to me. You did very well so far on that foreign property!

Yes we did! I would add that this was more by luck than judgement, since we bought in a city I was posted to as an expat.

Aless

stphnstevey, the point the article was making was that people won't sell below a certain price so if somebody wont pay it they will wait a few years, then sell it at the price they wanted. They then think they did well holding out but in reality, because of inflation they have either not made a gain or made a loss on what they would have had if they had sold at a lower price a few years earlier. This is not necessarily an opinion I hold and I am not defending it, I just thought that it made an interesting point.

I do agree for your own home that gains or losses may only be on paper. You only realise them if you are out of the game i.e. moving to a different (cheaper area), downsizing, etc. As you say if your house goes up but the house you are buying goes up too, you will have lost out if they went up by the same % and the house you are buying is more expensive as in terms of £ you will have to pay more £ though not %.

Homely_Girl

I am on a BMR mortgage of 2.50%. Should I pay £5,000 off my mortgage? What would I be saving in interest.

Welshlassie

Homely_Girl wrote: »

I am on a BMR mortgage of 2.50%. Should I pay £5,000 off my mortgage? What would I be saving in interest.

You'd need to give more info that you have, like what's left on the term, and how much the outstanding amount is?

setmefree2

Homely_Girl wrote: »

I am on a BMR mortgage of 2.50%. Should I pay £5,000 off my mortgage? What would I be saving in interest.

You should read this.


http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings It;'s Martin Lewis' guide to paying off your mortgage.

Do you have any emergency savings? Have you used your cash ISA alowance for 2009/10?

stphnstevey

Have just started Stoozing again after previously giving it a try for a year and thinking it was not worth the hassle (fees, small amounts, credit rating, juggling money etc).

Have been enticed back by Santander Zero no fees and possibility of Stoozing my large company tax bill.

Anyway, best saving rate I have is Lloyds Vantage at 3.2% net (can't get A+L 6% as recently closed an account with them)

So looking at mortgages (fixed rate, interest only, non-offset):

a) 5.18% - £500 month overpayment allowed. Might change to repayment and shorten term to be able to pay more. But can only claim back overpayments of £500 at will, rest would stay in mortgage.

b) 4.98% - 10% of current debt overpay per year. Can't claim back but can take payment holidays - ~£600 month.

c) 4.69% - 10% of current debt overpay per year. Can't claim any back or take payment holiday.

Struggling to sort out how and whether to use mortgages or not as can only claim back a small amount of the money invested when need to repay?

However would get quite a better rate if I could.

Any help greatfully received!

Homely_Girl

Welshlassie wrote: »

You'd need to give more info that you have, like what's left on the term, and how much the outstanding amount is?

16 years remaining and £75k outstanding.

stphnstevey

If you had three mortgages, is there any benefit to trying to pay off just one of them rather than overpaying each equally?

The reason I ask is I remember Martin saying about the best way to get out of credit card debt is to keep up the minimum payments on all and then overpay on just one untill it is all paid off. Then start doing the same on the next card.

Was wondering if this same principle applied to mortgage debt?

chirpchirp

Yes, in your case there is. You should look at clearing the higher percentage rate first but as you are limited on how much you can overpay you may want to take other things into account.