Should I pay off my mortgage discussion

jamesd

chelly1972, your private message to me shows that you have a pair of the best long term funds in the UK market, formerly and still partly managed by one of the best UK managers there is. It's unlikely to be worth selling them to pay off any of the mortgage.

Since it will take you about 12 months to repay the credit card, perhaps as long as 15, it does appear to be worthwhile to sell some of the Fidelity investments when the credit card rate increases, to repay it all. I suggest that you sell half of each fund in November, just before the rate goes up, to raise about 1500.

If you're paying 100 a month for the credit card minimum payments now and need to cut that spending, I suggest selling 2000 worth of the Fidelity funds now instead of waiting, split 50:50 between them. That will reduce the minimum payments and let you clear the card before the rate goes up.

I suggest that you continue to contribute 70 a month to the Fidelity funds but it is worth starting a discussion in the ISA section that describes your current investments, whether you are buying them directly from Fidelity and how to buy them a bit more cheaply. You'll be able to get about 5% more for your purchase money.

beecheemink

Thanx for the replies on the paying off mortgage sooner advice. Chelly why dont you just move your credit card around to intrest free I have done that a few times and reduced mine considerably over the past year. At least if you are paying 100 pound a month on it then it is getting reduced by 100 and not x amount of it going to pay the interest every month.

money_spending_expert_4

Hi to all MSE members, this is my first time so please excuse any errors.

I am a mature student (over 40 ) currently studying BSc (Hons) Nursing. When I started my course 2 years ago there was very little in the media about the shortage of jobs for newly qualified nurses so it didnt worry me. Now , however, not only do the media frequently report on the job shortage but nursing publications and students comming to the end of their training also report that there are few if any jobs. As I am a single parent, the thought of qualifying but not having a job to go to scares me. As the situation seemed to be geting worse I cut back hard on my spending and lived a simple and basic existance to try and save some money. My two sons also got part time jobs that they could combine with their college studies and contributed to the household bills. As I result I have managed to save 10K. My question is should I use all of this to pay off a lump sum from my morgage of approx 35K. My fixed rate has ended and I now pay the SVR. I think I need to remorgage to get a better interest rate but Im not sure how much of my savings I should use to reduce the amount I borrow. I want to reduce my morgage as much as possible so that if I dont get a job when I qualify I can still afford to pay my morgage but I dont want to leave myself without any emergency money. Can any MSE readers offer any usefull advice. Thank you.

Dithering_Dad

I would wait until you got a job before you made your decision as this will have a major bearing.

You will need your current savings of 10k to help you get by until a job is forthcoming, and with only a 35k mortgage I would imagine you could probably keep your head above water for a very long period.

Once you have secured a position (and have gotten through any probation period), I would then work out how much 3 month's worth of your outgoings are and put this into a cash ISA and then put the rest onto the mortgage.

Good luck with the job hunting

teecee90

What is the average annual rate of return on a fully diversified portfolio of shares over a 25 year period?

jamesd

teecee90, there is no such figure because it depends on the risk level desired and used by the shareholder. Have a look at this Fidelity leaflet to get some idea for basic index trackers, though you should really try to do better.

It looked over 25 years to see average returns and how often someone starting at any point might have lost money ten years after they started, for the UK FTSE All-share and the global MSCI World Index. In every case over ten years investors at least broke even. Average gain was 13% in the UK, 11.7 international each year.

Over 5 years, UK only would have lost money at 6.6% of the start times, international 17.8%. UK gains 14.1%, international 13%.

Over 1 year, UK only would have lost money 16.8% of the time, international 23.9%. UK gains 14.5%, international 13.4.

Do note that it's currently expected that the world markets will do better in the future compared to the UK than in the past.

money_spending_expert_4

Thanks Ditherering Dad for advice. As I am a single parent I am very worried about coping with a morgage of approx 35K if I couldnt get a job in just over a year when I hopfully qualify. I dont know what welfare benefits I would recieve but I imagine it wouldnt amount to much and Im not sure if it would be enough to pay morgage and all other household bills etc. I think putting 3 months worth of expenditure in bank ISA for emergency is very good idea as a safety net. Do you or any other reader know if its possible to get a 1 year fixed rate morgage that has a low interest rate as I think this would enable me to keep my options open at the time of qualifying to decide how much to pay of my morgage. (I am hoping that if I keep to my current level of not spending but trying to save the amount will have increased, although living a simple and basic lifestyle is getting more difficult as various bills go up but not my student income). If anyone else has any usefull ideas I would appreciate them. Thank you.

turbo25

I don't think I was very clear in my 1st post, so here goes again:

Say you become unemployed but have 50K savings and a 70k mortgage. And say the partner is on a salary of 16k. Now there are a number of means tetsted benefits such as family credit, grants, employment benefit, EMA which you would not be able to claim because of the savings.

If however you were to put the 50k into an offset mortgage, you no longer have any savings, thus becoming eligble for these benefits. With the advantage that you have access to the 50k should you wish.

Am I correct in my analyses?

jamesd

turbo25, the money normally goes into an "offset savings account". I suspect that that will be treated as a savings account, since that's what it says it is. If you did not show this savings account when applying for benefits it appears that it would be fraud.

A flexible mortgage with overpayment and drawdown features would perhaps be treated differently but it may be optional for the mortgage company to let you draw down against the overpayments and they may be reluctant if you're unemployed. How they would handle this is something you could discuss with them in advance.

getmore4less

turbo25 wrote: »

I don't think I was very clear in my 1st post, so here goes again:

Say you become unemployed but have 50K savings and a 70k mortgage. And say the partner is on a salary of 16k. Now there are a number of means tetsted benefits such as family credit, grants, employment benefit, EMA which you would not be able to claim because of the savings.

If however you were to put the 50k into an offset mortgage, you no longer have any savings, thus becoming eligble for these benefits. With the advantage that you have access to the 50k should you wish.

Am I correct in my analyses?

This subject has come up before on other sites,

If it was a single account like the one account effectivly a large debt that probably would be OK but the true offsets where you have seperate debt/saving probably not.

The other thing you cannot do is suddenly pay down you debt, it deliberate deprivation of assets.

There is another kind of offset where you have multiple mortgage accounts like the Woolwich/Barclays mortgage reserve, with the reserve account you can put them into credit with these it is uncertain what would happen.