invest or pay off mortgage

dwtmahdc

jimjames wrote: »

If the Op has a fixed rate of 3.24% for 10 years then they have decent rate guaranteed for a long period which gives more security.

Yeah, I'm comfortable paying above the going rate currently to ensure I know exactly what I'm paying for the long term, and will save when the interest rates skyrocket the day after I lock it down

atush

if you have 3 months of outgoings in cash, and a 10 year fix, 15% going into pension, then I would lean towards a S&S isa. If rates blow up, you can always pay off some/all the mtg with the isa.

Eco_Miser

S&S ISA is a reasonable choice. However I'd also put £2k cash in TSB for 4% net and show a profit over the mortgage, and £5k in Lloyds to almost break even.

cloud_dog

dwtmahdc wrote: »

b) Pay extra into mortgage (allowed 10% over payments p.a.)

Just a couple of points.....

1) Are you sure you're allowed to overpay 10%pa. Nationwide overpayment terms are usually a capital repayment of £500pm (unless your mortgage was gobbled up by NW from another BS?)

2) Check if your mortgage allows 'draw-down' of over payments. I think NW may have stopped this feature but you used to be able to overpay, which built up an overpayment pot of money and you could simply request some/all of the overpayment monies if you wanted it.

I used to use this feature a lot as a 40% tax payer it was extremely efficient.

jimjames

cloud_dog wrote: »

Just a couple of points.....

1) Are you sure you're allowed to overpay 10%pa. Nationwide overpayment terms are usually a capital repayment of £500pm (unless your mortgage was gobbled up by NW from another BS?)

2) Check if your mortgage allows 'draw-down' of over payments. I think NW may have stopped this feature but you used to be able to overpay, which built up an overpayment pot of money and you could simply request some/all of the overpayment monies if you wanted it.

I used to use this feature a lot as a 40% tax payer it was extremely efficient.

Unfortunately this feature is no longer available with new Nationwide mortgages. My existing one from 2006 is incredibly flexible with the ability to overpay and withdraw as required. In effect it is the same as an offset account.

jamesd

You have a nice ten year fix. Today I invested a few thousand Pounds at 14% annualised interest rate for five months via Ablrate. Normally 10-12% is available there. Investing, so not risk free, but always secured on physical property. there are many others. Given the interest rates available from the higher rate P2P places it's quite an easy decision for me to stay invested and not do any repaying of my interest only mortgage, even though I could pay it off twice over and more whenever I wanted to. The P2P ISA hasn't arrived yet but it'll get even more attractive when it does.

Earlier this year I invested in a range of VCTs, mostly the Albion VCT. That's secured on physical property, much of which was banned for new VCTs because the risk is too low. It pays around 10% tax free a year and I got 30% of my purchase price back in tax relief from HMRC (capped at the income tax actually payable in the tax year of purchase). In effect this eliminated almost all of my income tax bill last tax year.

I also have lots of money invested in the usual shares types of things, in both pension and ISA.

You were asked about age in part because that would say whether you will be 55 before the mortgage ends. If you would be the pension tax relief can be handy and you can withdraw 25% of the pension pot as a tax free lump sum. If the mortgage ends after you reach this age it can be a powerful tool to repay the mortgage. At the moment the 25% tax free lump sum in my pension could repay around 95% of my mortgage, all of it out of income tax and NI relief. Almost a pension with a home thrown in free.

Best do do some learning about the options then diversify widely. Diversification is your protection against major failures.

dwtmahdc

Just found out I can make AVCs into my pension through salary sacrifice. That's also tempted me...
Thanks everyone for your advice/opinions so far, I've got some fantastic food for thought!

dwtmahdc

So I've spent some time looking into funds, and with limited assured knowledge I'm going to start drip feeding into funds.
I'm looking at picking one fund to begin with, with the aim of diversifying within 12 months.

With that in mind, seeing as I'm not looking to trade in too many funds, would I be best focusing on a platform with a low annual fee and ignore trading fees?

Eco_Miser

If you are going to invest every month, then trading fees could be a significant expense, particularly if you invest in more than one fund.

Of course low annual fees are also important.

dwtmahdc

Eco_Miser wrote: »

If you are going to invest every month, then trading fees could be a significant expense, particularly if you invest in more than one fund.

Of course low annual fees are also important.

So each time I put, say, £50-£100 a month into it, I'll be charged? I thought it would have just been when adding or removing funds.

Naive They don't make that clear on monevator, morningstar etc