£30K - Invest or pay off mortgage ?

bowf

Got 30K to invest.
I can either pay off some of my mortgage in one lump sum (which would ease the monthly outgoings) or invest it.
One thought I had was to invest the 30K and use the interest (around £1350 a year?) as a yearly overpayment towards the mortgage,but keeping the 30K intact.
What do you reckon ? :-/

Rafter

Tricky one this.

It is often difficult to earn more than the interest you are paying on your mortgage through investments.

The other issue is that you pay tax on interest and dividends received, but you no longer receive mortgage interest tax relief.

It is always worth having some money in short term savings to cover you if you lose your job or can't work for a period.

You could try one of the following:

1) Open an offset mortgage and rather than paying off the 30k, keep it in a linked savings account so it is reducing your interest bill but is still accessible.

2) Repay the mortgage but continue to make the same payments so the term of your mortage reduces (if you are allowed too?)

3) Repay the mortgage and pay the amount you save in interest into an ISA (tax free savings) each month and hope you can beat the rate you are being charged on your mortgage.

4) Invest the money in a share ISA and hope that the return is greater than your mortgage interest.

5) Invest the money in a personal pension or AVC (additional voluntary contribution) in your company scheme. This is the ultimate tax free investment because you get tax credit now, although you may be charged tax when you retire. This does mean tieing up the money until you retire though.



So, plenty of options and it depends on how much risk you want to take, how long you want to tie the money up for etc.

Hope that helps. There isn't one answer unfortunately, but hopefully the above gives you an idea of your options.

R 8)