Pay mortgage or invest??

mr__tom_4

Hi

I am just looking for any advice as I am quite confused

I have recently been left 47,500 and unsure what I should do with it

I have an outstanding mortgage of 25,000 on variable rate

which has about 24,000 left to pay over 23 yrs around 160 a month

the wife works but is a very low earner and doesnt pay tax every month
maybe only 3 months out of the whole year

I think I would be better looking to invest the 47500 but not sure what or maybe pay the mortgage off

I would be happy to put this away for 5 yrs but would like a safe investment

can anyone give me some sound advice?

would be much appreciated, thanks in advance

dunstonh

can anyone give me some sound advice?

No. Partly as the board isnt authorised to give advice and secondly that this is a matter of opinion.

Some will prefer investing. Some will prefer to clear the mortgage. Both has pros and cons although your personal tax position both now and in the future can make investing a more financially sensible option.

However, your risk profile of "safe" suggests that you would find it hard to invest and beat interest paid on the mortgage. Typically you need to low/medium or higher to make investing viable (Although again, personal tax position can impact on that as well).

Agri47

mr__tom wrote: »

Hi

I am just looking for any advice as I am quite confused

I have recently been left 47,500 and unsure what I should do with it

I have an outstanding mortgage of 25,000 on variable rate

which has about 24,000 left to pay over 23 yrs around 160 a month

the wife works but is a very low earner and doesnt pay tax every month
maybe only 3 months out of the whole year

I think I would be better looking to invest the 47500 but not sure what or maybe pay the mortgage off

I would be happy to put this away for 5 yrs but would like a safe investment

can anyone give me some sound advice?

would be much appreciated, thanks in advance

If I was in your situation I would first pay off the mortgage.

uk_steve

Im no Hot shot!


I would deffo pay your mortgage off first! make sure you dont get any penaltys for doing it early as well


the reason i am saying this my friend nr got traped in this postion and it was like an extra 2k for doing it ...

oldfella

assuming there were no penalties I would pay off maybe half the mortgage and save the rest. Then keep on overpaying the monthly mortgage so you pay it off quickly.

Mike

uk_steve

oldfella wrote: »

assuming there were no penalties I would pay off maybe half the mortgage and save the rest. Then keep on overpaying the monthly mortgage so you pay it off quickly.

Mike

Whats the point of that?

is it it the fact you proberly earn good intrest on the savings? where the rate are 6% above

just curoius on your methord

kogsawelly

Mr Tom, there are as many answers as questions but from the info you have provided, i would echo what some of the other guys have said. Providing there are no penalties, and being somewhat risk averse i would clear the mortgage, max out both mine and the wifes cash ISA subscriptions for the year (max allowed £3000) in each - rises to £3600 each from next April.
Put the remainder in a savings account (best currently around 6.3% gross). If you put it in your wifes name, then this financial year, you should only lose up to 10% in tax.
If you are still "interested" in investments, you could drip feed into a shares ISA which is also tax free, from your savings acount every month. Look at Hargreaves Lansdown for info on ISA's. Remember you will have £160 a month extra from not paying a mortgage.
I would stress that the above is what i would do. There are lots of things that you and Mrs Tom should take into account before deciding, eg age / job prospects / salary / current pension provision / dependants / future plans.
Have you considered approaching an IFA for advise?
Karl.

oldfella

Whats the point of that?

is it it the fact you proberly earn good intrest on the savings? where the rate are 6% above

just curoius on your methord

---

it depends what other savings he has - if he has limited savings then keeping a reserve could be v useful in the future

mr__tom_4

thanks for all the comments and suggestions

the point is really that 160 a month on the mortgage doest seem a lot to me

47500 in a high interest bank account for 7 to 10 years would likely give me enough to pay off my mortgage with the interest earned.

so i would still have 47500 in the account and no mortgage.

if i paid the mortgage off i think i would just end up spending the 160 a month on nothing. and to get my balance back to the 47500 would take some serious saving, and would like to use the money in the future to hopefully take early retirement

does this make sense to anyone, or am i talking nonsense?

The_Economist

At the end of the day it is your decision. In this day and age i think the mortgage would be the first thing i would paid off.

mk-donald

You're making sense - after all there is no right answer - simply the answer that best suits YOUR needs, although hopefully based on a rational assessment of all the factors, including your risk assessments and purse-string controls.

Some thoughts for you:

- IF you do pay any 'extra' amounts of your mortgage, ie above the agreed/mandated monthly payments DO study the terms & conditions applied to such 'excess' payments by your mortgagor. Depending on the terms and how much the payments are, sometimes you will get ZERO credit for the excess payment until the last day of their financial year, and hence can afford to wait until that last day, earning extra interest for yourself meanwhile.

- Some people will prefer to keep a pot of X pounds (some use 3 months normal take home pay as a ready reckoner) in readily accessible funds in case of those 'rainy day' needs - eg in case of an accident, or health issues, or redundancy etc. If that £47k suddenly means you can set up that 'rainy day' fund then perhaps some could be allocated to that

- If your mortgage borrowing is at say 5.75%, but you can invest the £47k safely to obtain say 6.75% then you are indeed in the lucky situation you hope, ie able to pay the £160 mortgage and earning a bit extra on your £47k BUT don't forget that inflation is eating away the £47k, and as you found out this week anything above £2k per authorised firm might be eaten away 10% (up to further £33k/firm).