Invest Lump Sum or Not Help....

Trundley27

Hi everyone. 
May be a stupid question....
Looking for a bit of advice, myself and my partner both regularly invest monthly into Lifestrategy 80% & 100% over the last couple of years. I have pension which I have paid into for the last 10 years and hoping to be mortgage free in 10 years time, both aged 31 (Currently have what we would call a 'Life House') so no need to move. Have a emergency fund also. 

I have a additional lump sum of money £3500, but we need a new roof on the house (Thinking March 2021) and would like to add dormer etc (Old house), my question is should I use the money and put this towards the roof replacement will cost circa £5500, (Add some additional money in to top up £3500), OR take a small low interest loan to pay for the roof replacement and invest the £3500? 

We are planning to permanently hold our investments in Lifestratgey forever!

Thanks in advance 

Ashley 

maximoose94

Completely up to you and your loan rates, however, personally I wouldn't take a loan out if you have the funds. Look at it in flip reverse, you use the loan to pay for the investments and the cash you have to pay for the roof. Personally, I don't think it would be a good idea. 

SonOf

Maybe you shouldn't be overpaying the mortgage as much as you are if you are leaving yourself short of money?
And your emergency fund/cash savings should be sufficient to cover short term needs.   So, £5500 spend should be factored into your cash savings and not your investments or overpaying the mortgage.

Trundley27

No not overpaying the mortgage, hugely reduced the term on remortgage. And not leaving self short of money I can save most months. Have good incomes. My initial thoughts were the long term benefits of investing vs a short term loan which would be better. 

Thrugelmir

If your investments underperform during the term of the loan. Then you've gained nothing. In fact you are exposing yourself to loss. Guess it depends if you believe that you've identified an opportunity in the markets that no one else has . What will the interest rate be on the loan? Is the potential gain worth the risk? 

Albermarle

We are planning to permanently hold our investments in Lifestratgey forever!

As you have a long term view , then it could be better to invest more into your pension, and less outside a pension due to the tax advantage. Within most pensions you will be able to invest in similar funds to LS , or in many SIPPs you can invest directly in LS funds . A Vanguard SIPP will be available shortly as well.

eskbanker

Trundley27 said:

We are planning to permanently hold our investments in Lifestratgey forever!

An interesting approach if taken literally - perhaps there's a market for a product called DeathStrategy....

barnstar2077

eskbanker said:

Trundley27 said:

We are planning to permanently hold our investments in Lifestratgey forever!

An interesting approach if taken literally - perhaps there's a market for a product called DeathStrategy....

Haha, this made me chuckle! :  )

NedS

So basically, you are asking should I leverage now (at low interest rates) to invest for the long term? Yes, interest rates are low, and investing for the long term should provie a higher long term return than current rates, but I would not want to be leveraged at current market valuations. If it were me, I would pay for the new roof (and Dormer extension if desired) in cash whilst continuing to drip feed your pensions at a rate you can afford. I'm guessing a loan is going to cost ~3% and inflation is around 2%, so you'd need a 5% return to break even. Personally I will be happy not to lose money this year and would be delighted with a 3-5% real gain.

Audaxer

Trundley27 said:

I have a additional lump sum of money £3500, but we need a new roof on the house (Thinking March 2021) and would like to add dormer etc (Old house), my question is should I use the money and put this towards the roof replacement will cost circa £5500, (Add some additional money in to top up £3500), OR take a small low interest loan to pay for the roof replacement and invest the £3500? 

If it was me I would hold the £3,500 to put towards the new roof in March next year. If the value of your investment has a significant fall within the next year, you might end up wishing you had kept the lump sum in cash to pay for the new roof rather than having to take out a loan.

AnotherJoe

Trundley27 said:

No not overpaying the mortgage, hugely reduced the term on remortgage. And not leaving self short of money I can save most months. Have good incomes. My initial thoughts were the long term benefits of investing vs a short term loan which would be better. 

That amounts to the same thing except you've contractually  tied yourself into those overpayments 
long term, by focussing on mortgage instead of pension, especially if you are a high rate taxpayer, you will be losing a lot of money. The upside is less worry about mortgage and flexibility of retirement date. 

Re your question loaning to yourself will get you a better interest rate than from a third party, so do that, use the cash rather than invest.