Invest or Overpay Remortgage

mark55man

Thank you all - I need to think about some of the things you mention. Some initial thoughts


1. I am happy (but not delighted) with a big loss on the markets, as I can wait it out until it recovers, and in any case if I think its all getting very toppy then I can pull the trigger and pay off (I know timing is difficult, but I won't be a forced seller on this pot)


2. I am well protected insurance wise against illness - PHI/Critical illness as they are provided though company scheme that makes them relatively affordable


3. I am not really at risk of redundancy and as a long termer would expect about a year's salary to be told to go


4. I have 6x death in service benefit with 1/2 pension to spouse and 1/4 to each underage child so plenty for OH to clear the mortgage and live a similar lifestyle


My only risk really is summary dismissal - and I am good corporate citizen with no scams or anything going on (boring I know). Although I think my in extremis status would be home equity release (I have 60% margin of safety should things get that bad and we can move within the same town within the 50% at a squeeze and reduced circumstances)


In terms of early retirement 55 is not likely, but I am looking at early 60s with a more consciously frugal lifestyle (UK holidays etc) + some continued success with my SIPP where I am returning 14% a year to date


EDIT - To add this link to a thread I started on motley fool on a different topic, that turned into a debate on mortgage repayment vs investment http://boards.fool.co.uk/13-investment-strategy-mistakes-12944432.aspx?sort=whole#12945121

jamesd

mark88man wrote: »

EDIT - To add this link to a thread I started on motley fool on a different topic, that turned into a debate on mortgage repayment vs investment http://boards.fool.co.uk/13-investment-strategy-mistakes-12944432.aspx?sort=whole#12945121

Those tend to go one way, with those who pay off not even trying to work out how much money overpaying or clearing a mortgage cost them but saying they feel great. Personally, I value knowing I have enough money to live on indefinitely more than I value not having a mortgage that I've been able to clear any time I want from the day I got it.

Mortgage overpaying is a good option for those who don't have the risk tolerance to invest. For those who do, it costs money that they could otherwise have. An offset mortgage that you can move money into and out of can be a good option for some if they are using it in conjunction with investments when they don't want to be in the markets.

gadgetmind

jamesd wrote: »

those who pay off not even trying to work out how much money overpaying or clearing a mortgage cost them but saying they feel great

Why should someone try and work this out? That number depends on how the markets and interest rates behaved *after* they made their decision, which aren't things they could have accurately predicted in advance.

All you can work on is data available to the time.

jamesd

It would show what the decision made or cost them. It's a lot easier to say that something makes you feel good when you don't know how much it cost you. That in turn might change the reports form "I like it" to "I like it but I'm x worse off as a result". At the moment it's usually "I like it" or "I like it and look at how much mortgage interest I saved" without the alternative result also declared.

gadgetmind

jamesd wrote: »

It would show what the decision made or cost them.

Maybe, but it also cost me not putting all of my SIPP into Hargreaves Lansdown shares during 2013. I didn't do that, so I've "lost some money", but is it really worth me working out how much?

mark55man

I think jamesd was referring more to arguments like
* over the period in which I saved paying an average mortgage interest rate of <x> which was equivalent to £y in todays money, versus
* a portfolio (insert your portfolio choice here but eg Vanguard World Tracker, or FTSE tracker or 25%, 25%, 25%, 25%) would have returned <z> which was worth so much more or so much less than that


otherwise we just get micawberish sentiment (although I wish I had emulated that gentleman more in my youth!!)

jamesd

gadgetmind wrote: »

Maybe, but it also cost me not putting all of my SIPP into Hargreaves Lansdown shares during 2013. I didn't do that, so I've "lost some money", but is it really worth me working out how much?

To you, no, because you can pretend it cost you nothing by not even reporting your lost gain and saying you're happy that you decided not to do it and instead reporting just what you made or saved by what you did instead.

gadgetmind

jamesd wrote: »

To you, no, because you can pretend it cost you nothing by not even reporting your lost gain.

Not only don't I report it, but I can't even be bothered to work it out. It would take many hours as I'd have to work out the dates, invent a mythical portfolio that I might have invested in back them, simulate payments into the pot and rebalancing, and all kinds of nonsense.

At the end of that I'd have a number with close to zero meaning and even less predictive power for how someone else should act in the future.

Yes, I might have done better by investing between 1994 and 2004 during which I had a small 10 year mortgage. Or maybe I wouldn't? It would depend on exact asset mix, and probably the exact months you picked.

But whether I lost or gained tells you very little about what someone should do in the future, so why bother?

planteria

Rob_192 wrote: »

I have always followed this approach and remember it was 8% with FD until relatively recently and I do £900/month (me, wife and son, as he doesn't use his). This gives me a nice lump sum of over £3.7k three times a year to invest elsewhere. The beauty of this approach is that it sort of gives you the best of both worlds, in the short term you have the cash which can be accessed once a year as each regular saver matures, but if you don't need it then you can invest it etc. You can create greater flexibility by doing two regular savers and staggering them so you can get access to cash every 6 months if required

i like this. i use HSBC for 6% and 4% from West Brom at the moment.

i have a variation in that i will use these two little 'pots' to clear Tesco and NatWest credit cards, or put to other use if i am offered useful repeat BT deals.

planteria

racing_blue wrote: »

Also on the radar, some speculation that lifetime limits might be imposed on ISA contributions (did I hear 100k mentioned?)

i don't expect a limit. and if there is i would be amazed if it is that low.