Investment options

Andy_89

Hello All!

I am after some advice on some options in terms of investing.

To set the scene, I get married next year so money is tight up until then. After this, I have a savings potential of around five figures/ annum.

I have looked at different options and are looking at the following;

- Saving the money in an ISA and not touching it.

- Pay it off my mortgage - it's currently at 6% so I'd like to wait to reduce(providing interest rates do not rocket) this before paying off more than I currently do.

- My company does a share scheme whereby I can invest part of my wage in return for shares. (They have risen by 50% in the two years I have been here)

Or the one I am most drawn to at the moment;

-Saving for a deposit on a second, bigger, house - moving into that and renting my current house.

Any additional options would be great!

jimjames

If your mortgage is 6% and you can make additional payments off it then surely that should be the top of your list?

No ISA will come anywhere near that, even current accounts don't and paying off against mortgage gets you 6% return as no tax due.

gadgetmind

Paying off the mortgage is a no-brainer IMO. That's already a stiff interest rate and you need to get LTV way down ASAP so you're in better shape down the line to get a better rate.

What kind of share scheme is it? They are usually SAYEs or SIPs. The former carry no risk to you other than loss of interest/opportunity elsewhere so are *very* worth doing. The latter carry some risk so it's far less clear cut.

Andy_89

jimjames wrote: »

If your mortgage is 6% and you can make additional payments off it then surely that should be the top of your list?

No ISA will come anywhere near that, even current accounts don't and paying off against mortgage gets you 6% return as no tax due.

My theory is...

The projection is to drop to 4% upon the end of my current 'deal'. So if i wait the additional 18months I would be paying less interest and more capital payments. Therefore, if I keep the money in an isa for that time I could accrue interest and technically make a greater capital payment off my mortgage rather than be paying interest.

justme111

Even 4% after tax is a lot imo , I would direct all spare money to getting a better deal /improving ltv.

jimjames

But the money you pay in now reduces the capital so you pay less interest. If you can't beat 6% then paying into mortgage is best return.

Only reason it might not work is if you cannot withdraw it again from mortgage and you might need access.

bigadaj

Andy_89 wrote: »

My theory is...

The projection is to drop to 4% upon the end of my current 'deal'. So if i wait the additional 18months I would be paying less interest and more capital payments. Therefore, if I keep the money in an isa for that time I could accrue interest and technically make a greater capital payment off my mortgage rather than be paying interest.

What do you mean, is it that the fixed rate ends in 18 months and the current go to rate is 4%?

So over the next year and a half you'll be saving at less than 1.5% and paying interest at 6%, not a great strategy.

Also it looks like rates are finally going to increase over the next year, so that go to rate may well also increase.

Personally I'd probably split between the company share scheme, dependent on details, and paying down the mortgage assuming no penalties.

Andy_89

Thanks for that, I have got it completely wrong regarding the mortgage!

With the share scheme it is a SAYE option, whereby you are entitled to two options. A 3 and a 5 year option.

You agree to put up to £100/month into a bank account held by the company. Upon the expiry of the 3 or 5 years you are then entitled to buy shares at a price 20% lower than the share price when you took the deal out.

karlkrueger

Projection is to fall upon the end of my present 'deal'. So if i delay the extra months I would be spending less attention and more investment expenses. Therefore, if I keep the cash in an ISA for that period.

gadgetmind

Andy_89 wrote: »

With the share scheme it is a SAYE option

In the past, I've advised people to dig deep, beg and borrow, and do whatever they can to max out SAYEs. In your case, that mortgage is a bit of a worry, so it's not as clear cut, but SAYEs are great, and the gains can easily dodge all taxes (ask me how in 3/5 years!) so I still think you should put a fair chunk into the SAYE.

I told some of our younger employees to max out SAYEs a few years ago, and a fair few trousered £30k for an outlay of 1/10th of that. No, they don't usually work that well, but there is close to zero downside.

Andy_89

gadgetmind wrote: »

In the past, I've advised people to dig deep, beg and borrow, and do whatever they can to max out SAYEs. In your case, that mortgage is a bit of a worry, so it's not as clear cut, but SAYEs are great, and the gains can easily dodge all taxes (as me how in 3/5 years!) so I still think you should put a fair chunk into the SAYE.

I told some of our younger employees to max out SAYEs a few years ago, and a fair few trousered £30k for an outlay of 1/10th of that. No, they don't usually work that well, but there is close to zero downside.

I was held over a barrell when I took out that mortgage, Halifax were the only ones willing to lend me money!

I am still happy that my decision was the correct one, I am hoping though when my current deal is up I hope to reduce the payment by £150 - However I would still pay the £150 as a capital payment.