*sigh* this may take a while

ohdearhowdidthathappen

Was chatting to a friend and she asked how we were getting on with clearing the debt from the extension (I'm always very open about finances with friends, never seen the point in secrecy).  I said we'd cleared it and were now saving and looking at overpaying mortgage.  She then said her and her husband decided not to go down that route as interest rates are so low and are investing instead, with the theory that the investments will grow and they'll end up with more money overall. 
Has got me thinking and I'm going to do some research around it.  OH was saying we could do a mix ie OP the mortgage to a certain point to get it clear in x number of years and then invest excess over that.  Don't know, food for thought....

Sarahwithlove

I think stocks and shares isa and shares themselves are probably a good way as they will grow again. Depends what your interest rate is on your mortgage as to whether it will make enough overall to be worth not just overpaying or like you said do both at least then you have money available if you want to do something in future 

enthusiasticsaver

Just bear in mind investing does not guarantee a return or even that you will get your capital back.  Our investments have returned between -10% and +7% over the  last year.  I agree with your neighbour the potential for rewards are higher but there is also a potential for loss if you cash out at the wrong time.  I think a balance of saving, investing, overpaying the mortgage and pension is a good way to go rather than doing either or.  Most people would say at the moment though investing rather than overpaying the mortgage is better due to low interest rates.  I always think the psychological benefit of being mortgage free is worth it and of course it is reducing outgoings if you no longer have a mortgage so that helps with retirement as you need less income to live off. As housing is usually the most expensive cost in anyone's budget being mortgage free is a big advantage. 

The savings and investments board are quite helpful although some are quite evangelical about it but if you intend to look after your investments yourself you will need to do lots of research.  Monevator does good articles for beginner investors.  The three magic rules are
1     Keep enough cash so you do not have to sell in a market dip should you need money.  A decent emergency fund is a must. 
2     Don't invest above your risk profile.  If you are going to panic everytime the market moves and sell out then you are invested above your appetite for risk. If you are younger you can afford to take more risk as the timespan to correct it is longer.  The closer you get to retirement the more cautious you should be. The riskier investments tend to give higher returns but the potential for higher losses is also there. 
3     Diversify the assets so not all your eggs are in one basket and political or economic circumstances do not adversely affect your portfolio.  When self investing I went for the Vanguard lifestrategy funds (globally and multi sector (property, bonds, shares) diversified and low costs).  It is just a passive fund of tracker funds and is very popular on here.  After retiring we went for an IFA who has moved us into managed  multi sector funds which are more expensive to run but we are invested cautiously as we are retired and not as much time as many to make up losses.  The portfolio dipped in March as obviously the coronavirus is a global pandemic when it dropped to  about -10% but now it is back up to about 3%.  Things  like Brexit did not affect it too much as only a small percentage was UK.  The benefit to us from our IFA although he costs us in fees is that he is the one dealing with the portfolio rather than me so he assesses it periodically and sometimes moves out of one fund into another.  He has better resources for research than me and the expertise and  time and I am less inclined to do that now.  He also cashflows our investments so we know how much we can take out each year over and in addition to our pensions. 

There is no guarantee that mortgage rates will remain low forever so getting the balance down is still worth it.  We set ours to finish as our eldest started uni so that the spare money we had from getting rid of the mortgage went to her instead to help with fees/living expenses. Overpaying your pension is worth looking into as well.  Doing that with my DHs pension was the single reason why we were able to retire 8 years early.  I just wish we had focused on mine too but I concentrated on saving and stocks and shares isas. 

Sorry that is a long diatribe but hope you get something from it. 

ohdearhowdidthathappen

That is so helpful, thank you ES.  You're very good at putting complex info into simpler terms
Our mortgage rate is low (1.8%), but I still err on the side of overpaying it.  Our current mortgage is £340K over 21 years (I'm 42, OH 46) ... the monthly payments are £1650, we'd have to OP by £500pm to get it to 15 years.  We also want to save a pot of £15K as that's almost 3 months salary for us both.  Also need to finish house rens.
Maybe we should focus on those aims and then start investing once house is finished, using the money we've been putting into that fund.

Sarahwithlove

ohshithowdidthathappen said:

That is so helpful, thank you ES.  You're very good at putting complex info into simpler terms
Our mortgage rate is low (1.8%), but I still err on the side of overpaying it.  Our current mortgage is £340K over 21 years (I'm 42, OH 46) ... the monthly payments are £1650, we'd have to OP by £500pm to get it to 15 years.  We also want to save a pot of £15K as that's almost 3 months salary for us both.  Also need to finish house rens.
Maybe we should focus on those aims and then start investing once house is finished, using the money we've been putting into that fund.

I think that sounds like a plan if you have things you want to do in the property. Plus as nice as it is to invest for me personally I would want to pay the mortgage off because then if you're able to do it earlier then you can retire without having to worry about mortgage costs or go part time potentially which is what one of my colleagues has done and he gets best of both worlds. 

enthusiasticsaver

I would agree with that plan.  Also don't forget you are investing if you have a pension although I think yours is an NHS one which is excellent and linked to salary rather than invested.  The pension administrators take all the risks. 
It is a large mortgage with substantial monthly payments even without OPs so I would be keen to get that lower to give you more options on taking lower paid work as you get older as I think you are not particularly happy at work. You also have a lot of children so university may be pricey.  However you may also decide to downsize or move to a cheaper area as you move out of work and get closer to retirement so that is something to consider.  
I think focusing on the £15k savings and £15k for the home improvements will give you enough to be going on with for the time being with maybe some mortgage overpayments until it gets down to a more comfortable level. 

ohdearhowdidthathappen

Thanks ES.... Yes, our mortgage is 3x our joint salaries at the moment, so quite high considering we're not particularly young anymore.  Going by the OP calculator on here, if we overpay by £350pm for next 5 years our mortgage will be £250K instead of £271K.  I'd hope to OP more than that, but that's a good start

ohdearhowdidthathappen

Hair appointment this morning, never been so pleased to go to the hairdresser.  Bit weird with all the masks etc, but was fine and well worth it to not look quite so unkempt 

ohdearhowdidthathappen

Just playing around with OP calculator... if we overpaid by £500pm it would bring balance down to £240K after 5 years.  Very tempting, but will start with £350pm first and see how we get on.  Small steps!

ohdearhowdidthathappen

Ugh, apparently someone with far too much time on their hands has reported my username because it contains a profanity.  In the process of changing it to something very similar, but minus profanity to protect the easily offended