Overpay mortgage or other investment?

jamesd

Nice salary sacrifice deal at basic rate and it appears that you won't have to repay any reduction in student loan deductions because you'll hit the age limit first. So at least 32% income tax and employee NI saving and maybe some employer NI added as well.

Even if mortgage interest rates go up a lot you'll still be well ahead after the investment growth.

For ISA money you might consider the Ablrate innovative finance ISA that's expected in a few weeks. Peer to peer lending with typical interest rates if 12% before perhaps 2% bad debt, their estimate is 1%. An investment with no FSCS protection, not even the very limited FSCS protection you get for other investments.

Outside an ISA you have the £1,000 personal savings allowance available so you might want to put some into MoneyThing P2P, similar to Ablrate but no imminent IF ISA.

adonis10

jamesd wrote: »

Nice salary sacrifice deal at basic rate and it appears that you won't have to repay any reduction in student loan deductions because you'll hit the age limit first. So at least 32% income tax and employee NI saving and maybe some employer NI added as well.

Potentially but at the current rate of interest and repayment level, it'll be done in about 18 years so with 31 years to go I don't think I will reach the age limit, even with reduced contributions. That said, it really is an unknown as rates could be 5% in 5 years and then 10% in 10 in which case I probably would get it written off (assuming this clause isn't removed).

jamesd wrote: »

Even if mortgage interest rates go up a lot you'll still be well ahead after the investment growth.

For ISA money you might consider the Ablrate innovative finance ISA that's expected in a few weeks. Peer to peer lending with typical interest rates if 12% before perhaps 2% bad debt, their estimate is 1%. An investment with no FSCS protection, not even the very limited FSCS protection you get for other investments.

Outside an ISA you have the £1,000 personal savings allowance available so you might want to put some into MoneyThing P2P, similar to Ablrate but no imminent IF ISA.

Anything that offers 10-12% returns with no FSCS protection makes me suspicious so I don't think i'll go down that route.

jamesd

adonis10 wrote: »

Anything that offers 10-12% returns with no FSCS protection makes me suspicious so I don't think i'll go down that route.

The firms I mentioned are fully FCA regulated, it's just that like share or bond value losses it's something the FSCS doesn't cover. The loans are always secured on something, often a building or land, sometimes planes or equipment. Almost always a first charge which works like a first mortgage, with the property able to be taken and sold to repay if required.

P2P has been around since Zopa started it in 2005. My initial lending there in 2008 typically had rates above 15%, some reaching 19.8%. Back then it wasn't regulated. Zopa mostly does unsecured lending to consumers.

badger09

jamesd wrote: »

P2P has been around since Zopa started it in 2005. My initial lending there in 2008 typically had rates above 15%, some reaching 19.8%. Back then it wasn't regulated. Zopa mostly does unsecured lending to consumers.

And those rates are but a distant memory:(

bigadaj

badger09 wrote: »

And those rates are but a distant memory:(

Not on other platforms that have the advantage of also being secured.

You pays your money, or not, and make your choice.

badger09

bigadaj wrote: »

Not on other platforms that have the advantage of also being secured.

You pays your money, or not, and make your choice.

True, but we haven't yet:cool: seen how those platforms perform in a crisis/recession as witnessed in 2008. However, I do accept that the current P2P landscape is very different from the one I entered in 2006.

adonis10

Today is the final day to submit any changes and I have decided to up my contribution by 4%, which only costs me £64 net per month. This still leaves me with £590/month to save/invest on top of the 61k I currently have and, as I mentioned, in a year or so I will have an extra £150/month that I am currently using to pay off interest free debt.


I cannot really see a downside given my low pension provision to date.

justme111

You do not spend much , do you ? If earnings 32 k it makes take home 25 k. Out of those £700/month savings leaving £16500. Mortgage probably about £600/month leaving £9300. Take away student debt payment and some other work related expenses plus your loan payments and it will end up being equal or less to state pension amount. Why do you need any additional pension?:D

adonis10

justme111 wrote: »

You do not spend much , do you ? If earnings 32 k it makes take home 25 k. Out of those £700/month savings leaving £16500. Mortgage probably about £600/month leaving £9300. Take away student debt payment and some other work related expenses plus your loan payments and it will end up being equal or less to state pensionamount.Why do you need any additional pension?:D

Ha, no I spend far too much - I do save 705 a month but that often gets dipped into for unexpected bills or the occasional frivolous spending, which in a way is why I am considering locking it down in a pension to remove the accessibility! Take home is 22.5k because student loan and salary sacrifice pension goes out before I get to my net pay. Also, my portion of the mortgage is £220 so there's another £380 that I spend over and above what you said!

I understand your comment was tongue in cheek but to be honest when I am retired and don't have to spend 45 hours a week inside a building (including travel time) I will want to be going on more holidays and doing more stuff that costs money. I know it won't all be feasible but I think having a bigger target is key otherwise the reality could fall well short.


Part of my nervousness about contributing more is a vanity thing - I crave seeing my overall net worth being higher and higher but until now I've been very short-termist and only considered easily accessible cash as proper net worth which, to be frank, is utterly ridiculous as I have no immediate need to spend 60, 70, 80k etc. so my mindset does need to shift to include my pension pot within this figure.

justme111

Frivolous spending is good !
Re vanity - does your employer increase their contributions when you increase yours? Or is it at max already ? If not then how much do you save on NI ? Why I am asking - I wondered if benefit of increasing your contributions into work place scheme was marginal you could go for SIPP instead/in addition.You would be able to access it earlier as with employers pension the downside would be the age you could access it - is it 68 now ? May well be 70 by the time you get there. You may want to retire far earlier and SIPP would be accessible about 10 years earlier. Plus your vanity would be happier as you would see your pension pot the same as you do with your savings/investments
PS. Factor in children. I bet within 2 years your wife is going to tell you you WILL have children .
PPS. Forgot she was not wife and following your comment about marriage. Marriage does not equal 15 k wedding. While I think it is an aberration to spend on a wedding the amount you have to save for 3 years for and see it as a human circus marriage is not about a wedding .