26 Mortgage Free & Planning for the future, property, pensions, saving?

SilverSix

Hi All,

On Tuesday I made a rather large over payment and cleared my mortgage :beer: (4 years frugal living, hard saving and inheritance from my fathers death in 2009 for the property purchase have made this possible at 26, otherwise I would still be living at home).

I'm looking at my options for the future as I know the decisions I make now are crucial.

I ran a lot of numbers for BTL properties yesterday both Interest only and also Capital Repayment, based on what I'm currently capable of saving now by continuing my lifestyle as is (which is quite sustainable) even a small portfolio of 6 properties would see me no better off than just saving for 25 years + 3-4% compound interest on top and wouldn't require selling my existing property.

Capital Repayment mortgages would see me breaking even every year until the properties are sold and then a £220k gain which could easily be eroded by interest rate rises. I haven't checked the sensitivity of this yet as everything is quite preliminary at the moment.

(Both scenarios assumed adequate maintenance costs, honest (consistent - unlikely) interest rates and no capital appreciation, for the sake of being conservative).

In the interim I plan to just continue saving, I have some borrowings for my car which will be repaid this time next year at which point I will be 100% debt free and should have qualified in my profession enabling me to earn/save more. A holiday will of course be in order but after that I would like to work towards my goal of retiring aged 50.

I have a company pension, currently 2/5% EE/ER's which is performing well and will be making use of my ISA Cash & S&S's allowances.

I can run the numbers on BTL options again but I would be lying if I didn't say the risk and associated hassle of a property portfolio and additional mortgages with imminent rate rises, potential defaults and influx of available property makes it less attractive. But on reflection could present a good opportunity too.

Can anyone offer any advice as to options I should seriously consider looking at? (If it helps at all I'm happy to disclose the value of my home, income and amounts I'm able to save, I just didn't want to willy wave from the off...)

Thanks in advance,

Ben

atush

The Govt will be soon reducing the Mtg relief for BTL investors so I would look at Pensions and S&S Isas.

You need an emergency fund in cash too.

Does your employer offer a pension? I'd start there.

SilverSix

atush wrote: »

Does your employer offer a pension? I'd start there.

Thanks,

Yep, currently 2% & 5%, I'll have a look in to whether a salary sacrifice is possible, or alternatively a SIPP.

DesG

If you think starting a business is something you have the time and stress capacity for then go for it.

Personally if you are where you are now, I would look at minimising any time sinks, keeping your outgoings low, and investing all that spare cash in investments in your ISA and Pensions.

50 seems rather pessimistic, why not aim for 45, 40, 35?

martinsurrey

while it is entirely personal, I do think you have stacked the dice a bit.

With no capital appreciation for 20 years you are looking at houses being 35% cheaper in real terms in 20 years time, which I think is HIGHLY unlikely (given 2% inflation a year).

3-4% real return on cash means a nominal yield of 5-6%, which outside of equities, which carry their own risks, you'll not get.

As I say, you seem fairly risk adverse, and that's fine, but make the decision based on risk, not by stacking the numbers.

Personally if I was in your shoes, I would use property (through a corporate wrapper), long term I still feel its going to be good investment.

SilverSix

martinsurrey wrote: »

while it is entirely personal, I do think you have stacked the dice a bit.

With no capital appreciation for 20 years you are looking at houses being 35% cheaper in real terms in 20 years time, which I think is HIGHLY unlikely (given 2% inflation a year).

3-4% real return on cash means a nominal yield of 5-6%, which outside of equities, which carry their own risks, you'll not get.

As I say, you seem fairly risk adverse, and that's fine, but make the decision based on risk, not by stacking the numbers.

Personally if I was in your shoes, I would use property (through a corporate wrapper), long term I still feel its going to be good investment.

Thanks, I value your input, I'll adjust the numbers and be a bit more realistic and add in some inflationary property appreciation + a little bit.

I'm not wholly risk averse as until recently I did have a fairly diverse S&S portfolio but can see I'm coming across that way :rotfl:

SilverSix

DesG wrote: »

If you think starting a business is something you have the time and stress capacity for then go for it.

Personally if you are where you are now, I would look at minimising any time sinks, keeping your outgoings low, and investing all that spare cash in investments in your ISA and Pensions.

50 seems rather pessimistic, why not aim for 45, 40, 35?

Thanks, I have often thought about starting a business but haven't been able to decide or what my favoured field would be, such as a gym or strength & conditioning facility doesn't lend itself largely to profitability without pretty significant outlay.

35 would be fantastic but a little unrealistic for me 45 perhaps, who knows...

atush

Dont get carried away lol.

You'll end up getting married and having a few sprogs so that will set you back to age 50

If you go BTL, you will have too much of your money in property as you main home is mtg free. I think i'd concentrate on the S&S isas and pensions for a bit.