Overpaying mortgage Vs investing?

Rollinghome

FatherAbraham wrote: »

Many like index-trackers; me being perverse, I like large generalist investment trusts (Foreign and Colonial, Scottish Investment Trust, Alliance Trust etc etc) which have their own ISA wrappers and low monthly savings minima.

Not perverse at all. Two of those were my first ever investments for which I still hold an affection, which generally isn't a good thing - though I did play the field when L&G first introduced low-cost trackers in the early 90s. Still worth consideration.

VoucherMan

Well thanks for the further input. I'd thought this thread was sinking into oblivion. Amazing what a would be spammer can do.

FatherAbraham wrote: »

Just need to check -- your mortgage product is repayment, right?

Correct - Halifax SVR 3.99%

kidmugsy wrote: »

1) What's your current LTV for the mortgage? Somewhere between 60% and 75%
2) How old are you?

45

atush wrote: »

But i'd also look at your mtg deal as 4% is a bit high these days, there are some better ones out there?

I've considered re-mortgaging but with my comparatively small mortgage the sums just don't add up. Not in my head anyway.

If things stay as they are now I estimate I'll pay about another £4300 in interest. After having a (very) quick look on Money Supermarket at the available mortgages although I could save on interest payments by the time I take all the fees into consideration I'd expect to be paying more than I am now. And that's based on a smaller LTV.
There's a couple of houses close to me which have been on the market for some time & at a considerably lower price. Because of this I've lowered my estimate of the house's value which may put my LTV at nearer 75% removing most if not all the best offers.


My ideal investment would still be something similar to my old Halifax ISA Investor. Choose my risk level & monthly investment and (hopefully) watch the funds build. Unfortunately for me I don't think that sort of investment is available any more. Whatever I choose will require some degree of homework on my part.

I have looked at both Hargreaves Lansdown and Charles Stanley as possible avenues for investing but the fees had looked prohibitive for my likely level of investment. Hopefully once the dust has settled from the RDR I can have another look & work out the costs a little easier.

My current inclination though, unless something happens to make me think otherwise, is to concentrate on paying off the mortgage as soon as I can & start thinking about other investments after that.

Doshwaster

Rollinghome wrote: »

Not perverse at all. Two of those were my first ever investments for which I still hold an affection, which generally isn't a good thing - though I did play the field when L&G first introduced low-cost trackers in the early 90s. Still worth consideration.

Yup. There's nothing wrong with having a tracker at the centre of your portfolio. It's a cheap and easy way to get exposure to the stock market. I started with a £50 a month contribution to a FTSE 100 tracker. As you get more experience you can get move into funds and individual shares.

sabretoothtigger

If you can pay it off early, thats quite sensible. Investing can lose money on irregular company profits, where as you know the bill for rent or a house always arrives so reducing that is good

£3300 in mortgage interest payments over the next 7 years if I paid an extra £3000 a year for the next 3 years

sounds hard to beat

Thrugelmir

Do you view your employment as stable? Clearing ones mortgage is a primary plank of financial security. Once cleared makes life far less stressful.

racing_blue

VoucherMan wrote: »

My current inclination though, unless something happens to make me think otherwise, is to concentrate on paying off the mortgage as soon as I can & start thinking about other investments after that.

But what is the logical basis for this? Why don't you love your mortgage?

Your mortgage is basically a bond which you have sold to your bank. You could buy back that bond bit by bit. Or you could buy equities instead. History suggests that equities outperform bonds over time.

sabretoothtigger

He needs to fix the rate for that kind of thinking. People see it as cheap debt but this is a political favouritism backing continual low rates. Or put simply make hay while sun shines and its shining now.

If bond rates rise it brings equity value down at least at first, so thats a double blow. His bills rise and his savings diminish

racing_blue

sabretoothtigger wrote: »

If bond rates rise it brings equity value down at least at first, so thats a double blow. His bills rise and his savings diminish

That's the downside argument, fair enough

I still think if he has a mortgage for £100k and a tax sheltered investment pot worth £100k, over a month or a year he may underperform or break even- but is more likely to outperform as the time horizon stretches

Thrugelmir

racing_blue wrote: »

but is more likely to outperform as the time horizon stretches

Plenty of potential storm clouds on the horizon. There are exceptional times. With huge sums of financial intervention in play. At some point cold turkey will start. Then as Warren B famously said. We'll see whose swimming without any trunks on when the tide goes out.

racing_blue

With respect, that sounds like the downside argument again.

His swimwear advice sounds very prudent, but did Warren Buffet at any point in his career actually sell all his investments and take a 100% cash position?