Where to save when mortgage is paid off?

Ballard

Pincher wrote: »

Double up, buy a bigger house.

Get a Japanese YEN ten year fixed rate mortgage for 1.5%.
Japanese YEN is very high right now.

Borrow JPY50million at GBP1:JPY140, ~=£357k.
At 60% LTV, that means you can buy a £600k house.

At 1.5% fixed for ten years, you can afford to borrow more than the silly 3.5 multiple. Whether the lender will lend, I don't know. They always say no to me, because I don't look like a virgin they can abuse.

At the end of ten years, re-mortgage to a sterling mortgage.

If things go according to my scheme, the exchange rate goes to 1:180, so you only need to repay £278k.

You have made £79k = 357k - 278k . I don't know if the HMRC would even ask for capital gains tax in this scenario, as you did not in fact buy or sell anything.

In the mean time, you have been living in a nicer house, paying 1.5% interest on £357k, which is about £100 a week. If the Japanese YEN depreciates against sterling as I wish, it will be less than £100 a week.

Yes, I know, that assumes you can get an interest only loan, and you would have been repaying the principal otherwise. So, you try to get a 40 year term mortgage, to try to reduce the principal repaid in ten years.

I think you'll find, the monthly repayment is less than £2,000 , so you still have £1,000+ from your £3k to save per month.

Assuming the house goes up in value, and the Japanese YEN depreciates, you are onto a winner financially. You have also enjoyed a bigger house at a lower interest rate.

What happens if GBP/JPY drops to 100?

I know that Yen mortgages were promoted in the 1980s but I haven't seen anything about them recently (although I must admit that I haven't been looking)

Pincher

Ballard wrote: »

What happens if GBP/JPY drops to 100?

I know that Yen mortgages were promoted in the 1980s but I haven't seen anything about them recently (although I must admit that I haven't been looking)

It's a gamble.

Multi-currency mortgages were a disaster for people who were told to do it without understanding the underlying mechanisms. If you can get 1.5% FIXED, which did not exist in the 1980s, the exchange rate fluctuations only affect the monthly repayment, not the whole balance outstanding. How high do you see Japanese YEN going? 1:120, 1:110, 1:100? Yes, you will lose if the exchange rate is 1:100 at the end, but has the property gone up in value?

It's not a sure thing, but it's loaded in your favour.

Jonbvn

Pincher wrote: »

It's not a sure thing, but it's loaded in your favour.

I'm not convinced. Just ask the Eastern Europeans who took out mortgages in Swiss Francs how things can move against you

http://www.euronews.com/2015/02/10/property-dream-turns-to-nightmare-for-eastern-europeans-with-swiss-franc-loans

Ballard

Pincher wrote: »

It's a gamble.

Multi-currency mortgages were a disaster for people who were told to do it without understanding the underlying mechanisms. If you can get 1.5% FIXED, which did not exist in the 1980s, the exchange rate fluctuations only affect the monthly repayment, not the whole balance outstanding. How high do you see Japanese YEN going? 1:120, 1:110, 1:100? Yes, you will lose if the exchange rate is 1:100 at the end, but has the property gone up in value?

It's not a sure thing, but it's loaded in your favour.

It's a massive gamble because you'd be taking on a huge fx risk. It could go in your favour but then again it could go against you. Back in the 80s, Sterling mortgage interest rates were way above 1.5% so I can see that the gamble would have been more tempting. With the very low rates on offer at the moment I can see no reason whatsoever to take the gamble.

darkidoe

nirish wrote: »

I'd be very interested to hear if anyone has any ideas outside of what I'm aware of already to save approx 3k a month.

I'll shortly finish my mortgage on a modest first home with my partner. The monthly amount mentioned above will still be saved towards our future home which we don't want to buy until children will be a part of our lives.

In the meantime where should I save 3k a month towards a future home when interest rates are so paltry, the investment term is unknown so can't afford to lock money away for an extensive period either!

Congrats on paying off your mortgage! The freedom that brings will definitely be relieving!

I would start with all the available regular savers, TSB (250), HSBC (250), First Direct (300), Santander (200), Lloyds (400), Nationwide (500), M&S (250). 4% and above interest cover total of 2150 risk free!

The rest can go into a high interest current account if you want to play it safe or investing in global index trackers in you have an appetite for risk and future proofing.

I would look into LISAs from next year for the tax-free boost if you qualify.

£3000 a month is an amazing sum to be able to put away each month. Well done!

nirish

darkidoe wrote: »

I would start with all the available regular savers, TSB (250), HSBC (250), First Direct (300), Santander (200), Lloyds (400), Nationwide (500), M&S (250). 4% and above interest cover total of 2150 risk free!

I would look into LISAs from next year for the tax-free boost if you qualify.

The regular savers look great but I need an accompanying current account for each one with a qualifying monthly deposit into each I presume?

As for the LISA I like the idea but as I already have a final salary pension (if it survives) and don't know how much cash I'll want to lay my hands on for a house upgrade in due course, so I'm not sure about tying up extra funds until 60!

nirish

Dird wrote: »

Current accounts: 14

Is this why you have 14 Current accounts DIRD?
To access all the regular savings interest rates?
Do you have direct debits set up to move the cash around between them to meet the monthly deposit criteria?

YorkshireBoy

darkidoe wrote: »

I would start with all the available regular savers, TSB (250), HSBC (250), First Direct (300), Santander (200), Lloyds (400), Nationwide (500), M&S (250). 4% and above interest cover total of 2150 risk free!

2% and above.

xylophone

You have a joint Nationwide Flex Account?

Each open Flexdirect current acounts as well and a joint Flexdirect?

You could each have the Flex Reg Saver.

A couple of Tesco current accounts each could be worth considering.

Tesco Savings Accounts allow you to set up DDs to pull from other current accounts.

YorkshireBoy

nirish wrote: »

Is this why you have 14 Current accounts DIRD?
To access all the regular savings interest rates?
Do you have direct debits set up to move the cash around between them to meet the monthly deposit criteria?

No they don't. They may have standing orders, but you can't pull money into a current account by direct debit.