Use savings or extend mortgage?

martinporter69

Hi there,

I inherited some money from my late father a few years ago. Some was just in savings accounts, some was in a St James Place ISA fund.

The ISA fund has grown from £24 to £38K which to me seems to be a good return (I know nothing about investing)

I am about to remortage my house for £170K as we are out of our fixed term

So with interest rates so low, my simple calculations indicate I could remotargate increasing the loan to £240K, which would give me around £70k in spare cash to pay for a house extension/loft conversion.

Am I missing something obvious in not just using some savings to pay for the £70K for the building work?


Also, any thoughts on SJP as unit trust "providers" (not sure if thats the correct word?!)

The gent from there seems very on the ball with money, but the charges seems quite high:

5% when the money goes in, then about 1.5% annual fess to SJP themselves and I believe 0.5% annually goes to the the guy himself?

I have about £115K in savings in total that I was think of putting all into the SJP ISA. That would leave enough money to have an emergency fund and also help pay the monthly mortgage repayment over the amount I normally pay back.

Hope that all make sense?

Thanks in advance,

M

Jonbvn

Some questions & points to consider:

What sort of mortgage rate will you be on?
You can only put £15.24k per tax year into an ISA.
The fees on the SJP ISA are shockingly high.
The growth in the SJP ISA is over what length of time?
If you remortgage, what happens if rates increase?

kangoora

Search for St James Place using the search function. The comments on their charges are repeated time and again, I understand they are possibly (probably) the most expensive out there.

Putting in £115k would cost you £5,750
Your ongoing charge (on £153k) would be £3,060

I have a self selected S&S ISA with a execution only company
Cost to put in cash payments - £0
Cost to buy funds - nil
Cost to buy shares - £12.50/deal
Ongoing charge 0.25% capped at £75/year

So, in year 1 you would pay £8,810 compared to my £75 (assuming I buy funds and not shares)

Your annual ongoing charge would be £3,060 compared to my £75/year

Is the SJP person worth £5% of every deposit and a 2% balance charge every year?

Of course, I have no advice attached to my S&S ISA - what price is advice worth?

noggin1980

If you put 115k in SJP vs 115k in something with a fee of 0.5% per year, leave it 25 years and the stock market increases at an average of 7% per year.

You will have £190,000 less at the end by going with SJP if he returns the same as the market.

Of course perhaps the guy is a savant and is one of the very few fund managers that can consistently beat the market but it's very unlikely and you have no real way of finding out if he is.

eskbanker

martinporter69 wrote: »

The ISA fund has grown from £24 to £38K which to me seems to be a good return

No kidding, that growth of £37,976 makes it a 158,332% gain!

ViolaLass

You say you know nothing about investing so why did you keep the investment?

racing_blue

I'm thinking that you are presenting two bad choices. Spend £38K of savings, or extend mortgage by £70K. You are asking which is the least bad.

This wouldn't be MSE if someone didn't say, do you have to do either?