savings vs. mortgage overpayment

getmore4less

boglehead wrote: »

my bad - the original one was a 25yrs 3%, and I remortgaged 6months ago with the 1.9% over 20yrs (2yrs fixed)

what's the follow on rate, short term low rates are a big risk since if the follow on are high you are dependant on being able to refinance.

planteria

quick thought before i head to work would be that i wouldn't invest significantly outside of a tax wrapper. i would
1. prioritise your ISA allowance (as you are)
2. look at pension arrangements--potentially investing more between the two of you. and then
3. personally i would look at other things, perhaps physical assets such as gold, jewellery, etc. and perhaps policies with friendly societies...perhaps partly linked with Life Insurance or Critical Illness Cover etc.
4. use any spare to pay down the mortgage.:)

boglehead

getmore4less wrote: »

what's the follow on rate, short term low rates are a big risk since if the follow on are high you are dependant on being able to refinance.

I think it is base + 3%... that's why I would prob remortgage for a fixed 5yrs - which comes aroud 2.7% or so

boglehead

planteria wrote: »

3. personally i would look at other things, perhaps physical assets such as gold, jewellery, etc. and perhaps policies with friendly societies...perhaps partly linked with Life Insurance or Critical Illness Cover etc.

Friend of mine mentioned that last week - some decent policies out there for not that much money every month... will look into that. Any advice as to which "friendly" society I should prioritise?

racing_blue

boglehead wrote: »

Regarding your point on % of net worth, I'd be over 85% without the pension (btw if you were speaking net, I am struggling to see how you can get above 100% - in debt/equity terms then yes)

Say I had a house worth £400k, other assets worth £100k, and a £300k mortgage.

My total assets would be £500k, my net assets would be £200k.

The value of the house would represent 80% of my total assets, but 200% of my net assets.

You could consider property equity as a proportion of net wealth- in this case it would be 50%. But I personally think the balance sheet is better framed by considering total assets and the leverage used to fund them. Just my point of view, probably splitting hairs really.

offset mortgages- I imagine the terms vary?

boglehead

racing_blue wrote: »

But I personally think the balance sheet is better framed by considering total assets and the leverage used to fund them. Just my point of view, probably splitting hairs really.

I like that... if I was a business, I would clearly not like the look of my balance sheet. Very much one of a telecom company from the early 2000's :rotfl:

racing_blue

boglehead wrote: »

If I was a business, I would clearly not like the look of my balance sheet. Very much one of a telecom company from the early 2000's :rotfl:

On the other hand, you could be Amazon or Google! You have leveraged your human capital - which seems huge, given your personal finance achievements so far aged 35. Many good businesses use debt to allow them to generate a better return on capital. Nothing wrong with that.

To develop the previous point a little bit (then I'll shut up) the reason I came round to considering gross rather than net assets is this. I bought a big family house and it represented too a large % of my assets. Bit like you. Paying off debt doesn't change this. Investing in other assets does.

I have an interest only mortgage, and currently choose diverse investment opportunities instead of repayment. Looking towards retirement, I'll be aiming for a portfolio of assets split roughly equally three ways between property, equities and fixed-income. And zero debt, because at some point in the twilight years of my career I plan to "retire" the mortgage by selling other assets if things go well, or by downsizing house if all else fails.

boglehead

racing_blue wrote: »

To develop the previous point a little bit (then I'll shut up) the reason I came round to considering gross rather than net assets is this. I bought a big family house and it represented too a large % of my assets. Bit like you. Paying off debt doesn't change this. Investing in other assets does.

That is why my original though process was to diversify and put my extra savings into something else than the house (mortgage overpayment)... I liked the idea of saving tax free pension by making additional payment above what my employer contributes too, but it would only lock money away for 20+years, with exposure to future government legislation. Not really something I wanted to, especially given that a) both my wife and I would reach the PA before we retire and b) we would be taxed at the higher rate from the pension income...

racing_blue wrote: »

Looking towards retirement, I'll be aiming for a portfolio of assets split roughly equally three ways between property, equities and fixed-income. And zero debt, because at some point in the twilight years of my career I plan to "retire" the mortgage by selling other assets if things go well, or by downsizing house if all else fails.

Good approach. I already know that we won't be living in our London house when we retire. So I will always have the option to sell it to redistribute the assets (smaller BTL) - or just rent it out.

Interest only mortgages scare the S*** out of me... unless we're talking BTL

racing_blue

Keeping a light digital footprint...

This post is quite old, and as it contained personal info, I have deleted it for security.

PM me if you would like to know what it said or discuss any aspect.

boglehead

racing_blue wrote: »

The scary thing is buying one huge asset like a house with the money borrowed !

Well... i see the house like any other assets... value is more likely to go up in London. I jsut dont like the allocation % right now.

What i am still struggling to understand though, is the idea that you could be fine with an IO on that house. Is it your principal residence? Do you intend to sell it and move out when you retire / down size. Or as you said earlier, sell other assets to pay it off eventually?