what to do with 60k

pdhmobile

I have managed to save up through various avenues 60k. I had plannedto pay of my mortgage and that was it, job done. But now I am thinkning if there is a better way to use the money, i.e invest in property maybe?
I was after some thoughts?

coachman12

Pay off your mortgage and save yourself a lot of hassle, risk and worn-out little grey cells.

BarrySmart

Agree with Coachman. Paid mine off by age 38, best thing ever. 

steampowered

If you do not need this money in the near term, it would be sensible to invest it. 

The best way of investing for most people is to invest in multi-asset investment funds that invest in lots of different companies across different sectors and countries, which reduces the risk. Some funds might also contain investment bonds, government debt or real estate. You will need to find a fund which you understand and suits your risk appetite - Vanguard Lifestrategy funds are a good place to start.

If you are happy to lock the money away until retirement, a pension will be the best vehicle, because you will get tax relief on the investment (aka free money from the government).

Otherwise, the best vehicle is a stocks & shares ISA, making the most of your £20k ISA allowance each year.

Both of those options are better than paying off the mortgage, because they generate higher returns and give you tax benefits. For example why would you pay off a mortgage early (especially if you are paying an interest rate of 2% or less) when you can get an instant 20% top-up (40% if you are a higher rate tax payer) through tax relief, plus returns of perhaps 6-8% per year, on a pension.

Investing in property is less desirable for most people than investing in stocks & shares for a few different reasons, though property can be suitable for nil rate or basic rate tax payers who require income but not capital:
- Most important, investing in property comes with a bunch of additional taxes. Higher rate stamp duty is the most obvious one. Income tax on the rent, and capital gains tax when you sell, also need to be considered. Compare that with a stocks & shares ISA where returns are completely tax free.
- Property involves additional risk, because you are invested in a sole asset - e.g. if your tenants stop paying, you will still need to pay your buy-to-let mortgage.
- Property involves additional hassle, as you need to manage letting agents, repairs, maintenance etc.
- Property is "all or nothing" - you have to sell the whole thing if you need some cash. Compare that with stocks & shares where you can sell any amount you wish (e.g. if you wanted to release £5k but leave the remaining £55k invested, you could do that).
- The major stock markets have returned on average 7-8% per year over the last 50 years. I don't have a crystal ball but given that we are coming to the end of a multi-decade house price boom it seems unlikely to me that house prices will increase at that sort of rate.

kinger101

£60K isn't a sensible amount to invest into property, and as steampowered illustrates above, investing in a single property is a high risk investment.  

What is your pension provision like?  As well as potentially much higher returns over the long term from investing, there are also certain tax advantages to pensions that are not there for mortgages.  Particularly if you are a higher rate tax payer, eligible for salary sacrifice, or are eligible for a LISA.

[Deleted User]

1. Pay all debt.
2. Fill ISA yearly allowance
3. Invest in a 500+ mutual fund and continue to add a portion of your income to the mutual fund every time you are paid.

Albermarle

Deleted_User said:

1. Pay all debt.
2. Fill ISA yearly allowance
3. Invest in a 500+ mutual fund and continue to add a portion of your income to the mutual fund every time you are paid.

As Kinger pointed out , you can not ignore the OP's pension situation. Normally this is the most beneficial route for many people.

RobM99

I'm not giving advice. However, when I could (through good fortune) I paid my mortgage off, seven years early. My thinking was - if I'm cold and hungry, at least I have somewhere to be it!

barnstar2077

For my two pence, I extended my mortgage term last year and pay the difference into my pension.  I also pay monthly into an ISA though.  I guess it really depends how much of a worry having a mortgage is for you.

coachman12

Some differing views on what the O/P should do. From the usual quarter it has to "do something clever" and don't invest in property. From the simple "don't let's get smart and wordy" posters like me it's a simple "pay off your mortgage". The sheer relief and peace of mind, instead of tinkering around with investments that could be losers, makes paying off the mortgage the sort of straightforward advice that should be at the heart of these Forums instead of the advice from folk who just like making up long complicated permutations just because they like the sound of their own voices and care little for the O/P, if indeed they remember his original post at all. It's seen so often on these Forums, and usually by the same people.

eskbanker

coachman12 said:

Some differing views on what the O/P should do. From the usual quarter it has to "do something clever" and don't invest in property. From the simple "don't let's get smart and wordy" posters like me it's a simple "pay off your mortgage". The sheer relief and peace of mind, instead of tinkering around with investments that could be losers, makes paying off the mortgage the sort of straightforward advice that should be at the heart of these Forums instead of the advice from folk who just like making up long complicated permutations just because they like the sound of their own voices and care little for the O/P, if indeed they remember his original post at all. It's seen so often on these Forums, and usually by the same people.

OP made it clear that paying off the mortgage was already their starting position, and said they were 'after some thoughts', which was clearly soliciting a range of opinions, i.e. 'some differing views on what they should do' - just because your opinion coincides with OP's starting position doesn't make the views of others any less valid or valuable, and arguably others actually add more value by giving OP some alternative options to consider, as requested!