overpay on mortgage instead of saving?

ViolaLass

u0362565 wrote: »

Thanks for that, that's a very nice article. I'm now looking into regular saver accounts, looks like you can get 6% for a year at least! Might n3ed to see what the rate changes to after that 12 months..

1. Just don't expect 6% on the total you have in the RS at the end of the year.

2. They only last a year.

Ray_Singh-Blue

I'm firmly in the invest rather than overpay camp. I have a big mortgage which is fine because it allows me to live in the house I want, where I want. The rate is fixed at just under 2%.

My investments are split between cash, equities and commodities. The cash is earning 2.7% tax free in an ISA. The equities, mainly index trackers, will do what the markets do. The commodities have been up and down like the proverbial nuptial nightwear: -30% one year +30% the next.

Like someone said earlier, nothing in life is certain - and in the long run we're all dead anyway. I think the chances of this investment approach outperforming a repayment approach are quite good. Maybe 60:40 or 70:30 over my investment horizon. Athough if that was the only attraction, I probably wouldn't do it. There are other things:

I'm planning a career break in about 6 years when I'll be late-forties. By this stage, I project that interest and dividends will cover the mortgage repayments.

There's also the intriguing prospect of long term tax free income from this portfolio. In my 60s, I'll be drawing a pension and paying basic rate tax. Assuming the rules around ISAs stay the same, it's quite possible that I'll simultaneously be drawing a tax-free income from the ISAs.

When the kids have flown the nest, I'm not sure we'll need a big house. Actually, I'm sure we won't. So there will be a re-sizing at some point which is likely to release a capital sum & to put an end to any remaining mortgage. If I rush now to build equity in my house, rather than investing in tax shelters, then there is no option on downsizing to quickly transfer that equity to a tax shelter. It's gradual accumulation or nothing.

But the biggest reason - in the end. we all become investors, unless we choose to live paycheck to paycheck and pension cheque to pension cheque. I think the earlier we start, the less painful the lessons. I started mid-thirties and only wish I had started earlier.