Should I pay off my half of the mortgage or invest elsewhere?

Pincher

It's a bad time to jump in. Sterling is low, so buying foreign is silly, and FTSE over 7,000 is buy high to sell low, also naff.

If you must, drip feed.

TCA

atush wrote: »

An offset mtg is just like a reg mtg. Any overpayments would be split with your partner - even if only you paid.

There needn't be overpayments but using the spare cash to offset the balance would mean less interest added and therefore the mortgage would be paid off quicker via the same regular 50/50 payments. But the cash used to offset is effectively doing nothing other than offset, so the OP's partner gains equally via less interest added plus the quicker end to the mortgage and that's all the OP would gain as well. The OP's own savings would however remain separate, although part of the offset arrangement, and could be accessed at any time.

havingaball74

My mortgage rate has now reduced to 2,74%. This is on a tracker mortgage. My partner and I are 50/50 in the house and he has an emergency fund. I have 70k in savings (50k in premium bonds and 20k in current account). I am happy for us to share the benefits of using an offset mortgage. I can't find any savings/cash ISA accounts that beat this interest rate so my options are:
1. Pay all my mortgage off (my partner still has the other 50% to pay off). The joint mortgage would then still be in both our names but I would pay nothing. I just have to trust that if we were to split up it would be done fairly.
2. I pay off my mortgage and continue to pay half the mortgage (so I have more of an equity in the house over all).
3. Use an offset mortgage with all my savings. I would share the benefits with my partner to keep it simple. But, this way I wouldn't 'earn' anything on the savings (as opposed to if i put it in a S and S ISA). I would also need to see a broker to get an offset mortgage rather than just change my current mortgage with my existing lender- simple.
4. Fix the current mortgage and invest elsewhere.
5. Just offset our joint £120k mortgage with £30k of joint emergency funds and I can invest the rest. by my calculations that is 18% of the mortgage balance. Is an offset mortgage worth this?
In terms of fairness- I don't either of us to be at a big financial disadvantage.
I want a good return on my 65k.
I want to keep the process simple (ideally not involving solicitors etc).
Thanks again.

havingaball74

Part of me likes the idea of being 'mortgage free' but the other part wants to keep the house situation with my partner equal. I have looked into savings and they don't create a great return. I am still looking into S and S ISAs but with 60k, could I put all my money in in one go? I like the idea of 'drip feeding' into it in order to avoid risk. I am risk averse.

chockydavid1983

With S&S ISA, you can put up to £15,240 this tax year and up to £20k next tax year.

atush

Options 1 and 2 have too much risk. You could lose half your savings.

TCA

Responses below each point:

havingaball74 wrote: »

1. Pay all my mortgage off (my partner still has the other 50% to pay off). The joint mortgage would then still be in both our names but I would pay nothing. I just have to trust that if we were to split up it would be done fairly.

As you said, it's down to trust. You're relying on your partner continuing to pay the remaining mortgage whilst you're still liable for half.

2. I pay off my mortgage and continue to pay half the mortgage (so I have more of an equity in the house over all).

Even more of a trust factor as legally you'd still only own half forever after, unless you legally change the ownership ratio.

3. Use an offset mortgage with all my savings. I would share the benefits with my partner to keep it simple. But, this way I wouldn't 'earn' anything on the savings (as opposed to if i put it in a S and S ISA). I would also need to see a broker to get an offset mortgage rather than just change my current mortgage with my existing lender- simple.

You'd have no choice but to share the benefits. All savings accounts included in the offset arrangement will affect the mortgage interest/balance/payments. So you both gain equally as 50% mortgage holders from whichever savings are offset.

4. Fix the current mortgage and invest elsewhere.

5. Just offset our joint £120k mortgage with £30k of joint emergency funds and I can invest the rest. by my calculations that is 18% of the mortgage balance. Is an offset mortgage worth this?

Try the offset mortgage calculator below for an idea. You can just stick your mortgage details in and savings amount with 0 for current account balance, 0 for savings each month and 0 for extra payments and lump sums:

http://www.rbs.co.uk/personal/mortgages/g2/offset-calc.ashx

lozzy1965

Just one point I havn't seen here:

You can't put 60K straight into a S&S ISA in one hit, you can put in £15,240 this tax year, plus £20K next tax year.

BananaRepublic

You need a certain amount of available cash in case of unexpected problems such as unemployment, or needing a new boiler. Once that is set aside, perhaps in a high interest savings account, if you are willing to leave the money invested for at least 5 years, preferably 10, then collective stock market investments such as unit trusts make sense, albeit with an element of risk.

You could pay off the mortgage, but a house with a mortgage is a good investment because it is highly geared. You might only have put down a £50K deposit, but you get the growth in value of the £200K house. And the mortgage has (currently) a low interest rate. Hence using the spare money to invest elsewhere is perhaps sensible. Assuming of course that you invest wisely i.e. diversify, invest for the long term, do not panic if/when the markets crash etc. Not everyone has the head for investing.

Of course you have to ask yourself how long the low mortgage rates will last. That is perhaps the elephant in the room.

atush wrote: »

Options 1 and 2 have too much risk. You could lose half your savings.

I agree.