Investing to Pay Off Mortgage - thoughts?

coachman12

ian1246 said:

Afternoon All.
                   Just after some thoughts/feedback/advice.

I'm currently 31. Wife is 28. We own our own house - currently £106,500 left on the mortgage, 20years 3months left on the repayment mortgage. Rough Value is £205,000 for the house (Brought for £165,000 in November 2015). Mortgage is due for renewal October 2020 - we've chosen to reserve a 5 year fixed rate at 1.92% (allowing overpayment up to 50% remaining capital per year). This will be £529.23 per month.

We're very keen to pay off the mortgage as rapidly as possible - partly for peace of mind, but mostly since we'd one day like to upgrade to a larger house (we're currently in a 3 bed semi). We are hoping to start a family within the next 12months - so we'd be ideally be looking to move in probably 7-10years time (once we've had 1 or 2 children and they've started School i.e. no more huge child-care fee's!).

My Initial thoughts were to simply overpay the mortgage - but given the historic returns which have been obtained from the Stock-Market, I think we might be making a mistake to overlook ISA's. 

Therefore we're considering whether it would be better to split the £££'s which would be used for  the overpayment - 50% still going towards the mortgage Overpayment (Our "Safe" Investment), but the other 50% going into a ISA - given our "Safe Investment" Mortgage Overpayment, I'd be tempted to opt for the Vanguard Life Strategy 100% Equity Fund - a higher risk of volatility, but also higher returns when the market is doing well.

In the event of the market being in a "Down" Period when it comes to when we'd be considering moving, we'd either simply not move or just utilise our existing equity in the property & take out a larger mortgage, rather than cashing in our ISA and capitalising the loss.

Needless to say: The £££ which would be going into Mortgage Overpayment (& Investments) would be spare money - rather than anything we couldn't make do without.

##############
Since the question pops up often on these threads: In terms of Pensions - I've got a Police Pension (5+years invested, another 29years to go!) & Wife Currently has a NEST Pension (£200 going in per month) which wouldn't be touched until I'm dead. I've also budgeted, on top of the planned mortgage overpayments/investments, for us to each open a LISA (£50 per month each, initially), plan being to use them to top up my pension from 60 to 68years old, when the state pension would kick in.

In terms of emergency funds: Currently stand at £7,650 (Plus a few thousand set aside to buy wife a "new" 2nd hand car next year).

Is splitting the planned overpayments sensible? Or are we better off, given the shorter-time frame (7-10years), just focusing on repayments only and avoiding investing?

Sorry not to have noticed this thread before now-----and it looks as though Ian has already made up his mind about splitting his spare monthly cash. Personally, I would have advised Ian to go solely for overpaying mortgage-----the pro's and con's have already been discussed on this thread, but I believe in overpaying the mortgage, given all else he said about future plans etc, would be the safest and surest way to achieve his goals. Good luck with any choice you make, Ian.

83705628

Thrugelmir said:

tcallaghan93 said:

Thrugelmir said:

ian1246 said:

I'm just conscious of the Covid19 situation in the USA & the upcoming US Election and its possible impact on US Economic performance. 

A Biden win would certainly herald a totally different regime in many ways. 

/
People said the same things about Reagan and Bush as they say about Trump.

If the Democrats control both houses. Then expect the climate to be let's say less business friendly. 

/
People said that about every Democrat president ever.

83705628

steampowered said:

Over a 7-10 year time period, I personally would do all investments and stop overpaying.

Over 7-10 years, it is extremely likely (though not 100% certain) that you'll get a higher investment return than the interest you pay on the mortgage.

When you are looking to move into a bigger property, you can simply sell your investments and put it towards the new house instead.

There have been plenty of counter examples, I think the OP's chances of this turning out well are somewhere between 70-90% but I cba doing an exact analysis.

coachman12

tcallaghan93 said:

Thrugelmir said:

tcallaghan93 said:

Thrugelmir said:

ian1246 said:

I'm just conscious of the Covid19 situation in the USA & the upcoming US Election and its possible impact on US Economic performance. 

A Biden win would certainly herald a totally different regime in many ways. 

/
People said the same things about Reagan and Bush as they say about Trump.

If the Democrats control both houses. Then expect the climate to be let's say less business friendly. 

/
People said that about every Democrat president ever.

But that is very different to Democrats controlling both Senate and House of Representatives.

Thrugelmir

tcallaghan93 said:

Thrugelmir said:

tcallaghan93 said:

Thrugelmir said:

ian1246 said:

I'm just conscious of the Covid19 situation in the USA & the upcoming US Election and its possible impact on US Economic performance. 

A Biden win would certainly herald a totally different regime in many ways. 

/
People said the same things about Reagan and Bush as they say about Trump.

If the Democrats control both houses. Then expect the climate to be let's say less business friendly. 

/
People said that about every Democrat president ever.

The social divisions and extent of inequality in the US have never been wider.   A broken and fractured society. 

83705628

Thrugelmir said:

tcallaghan93 said:

Thrugelmir said:

tcallaghan93 said:

Thrugelmir said:

ian1246 said:

I'm just conscious of the Covid19 situation in the USA & the upcoming US Election and its possible impact on US Economic performance. 

A Biden win would certainly herald a totally different regime in many ways. 

/
People said the same things about Reagan and Bush as they say about Trump.

If the Democrats control both houses. Then expect the climate to be let's say less business friendly. 

/
People said that about every Democrat president ever.

The social divisions and extent of inequality in the US have never been wider.   A broken and fractured society. 

/
Just watch the South Park episodes about douchebags and turd sandwiches, and ready every Wikipedia article about every US election ever, or learn some American history so you understand the context for their latest hoohaa, or watch some Peter Zeihan he's seductively relaxing.
https://www.pewresearch.org/fact-tank/2019/10/17/facts-about-crime-in-the-u-s/?amp=1
https://en.m.wikipedia.org/wiki/Income_inequality_in_the_United_States#:~:text=The Gini first rose above,in 1975, 1976 and 1980.
https://en.m.wikipedia.org/wiki/Crime_in_the_United_States#:~:text=The homicide rate has been,and its peak in 1991.

83705628

Thrugelmir said:

tcallaghan93 said:

Thrugelmir said:

tcallaghan93 said:

Thrugelmir said:

ian1246 said:

I'm just conscious of the Covid19 situation in the USA & the upcoming US Election and its possible impact on US Economic performance. 

A Biden win would certainly herald a totally different regime in many ways. 

/
People said the same things about Reagan and Bush as they say about Trump.

If the Democrats control both houses. Then expect the climate to be let's say less business friendly. 

/
People said that about every Democrat president ever.

The social divisions and extent of inequality in the US have never been wider.   A broken and fractured society. 

/
1861: hold my beer, slave
1861: hold my beer, servant
Wikipedia: hold my brewery, https://en.m.wikipedia.org/wiki/List_of_incidents_of_civil_unrest_in_the_United_States

Sailtheworld

Thrugelmir said:

kinger101 said:

DiggerUK said:

ian1246, I'm  definitely a "get real and clear the mortgage first" poster. But as the man said, 'stoopid is as stoopid duz'. Harsh, I know.
But as the woman  said, "those who don't learn from history are doomed to repeat it"

I am of course referring to the mis selling of endowment policies. The mis selling came about primarily because they were sold making out they would eventually provide the funds to clear the mortgage, usually, but not exclusively, associated with interest free mortgages.

They failed to deliver in  the tens of thousands. You're about to run the risk of making nearly the same mistake, with no chance of compensation. Just pay the damned mortgage..._ 

OP is going into this knowing that on average returns will be better than mortgage interest, 

Hence the eternal caveat of "past performance" etc etc. Watching the markets no one would know there's been a global pandemic the past few months. Corporate profitability generally is going to take a significant hit. 

Expecting the market to price in only what was in last night's News at Ten will just lead to perpetual bemusement.

83705628

Sailtheworld said:

Thrugelmir said:

kinger101 said:

DiggerUK said:

ian1246, I'm  definitely a "get real and clear the mortgage first" poster. But as the man said, 'stoopid is as stoopid duz'. Harsh, I know.
But as the woman  said, "those who don't learn from history are doomed to repeat it"

I am of course referring to the mis selling of endowment policies. The mis selling came about primarily because they were sold making out they would eventually provide the funds to clear the mortgage, usually, but not exclusively, associated with interest free mortgages.

They failed to deliver in  the tens of thousands. You're about to run the risk of making nearly the same mistake, with no chance of compensation. Just pay the damned mortgage..._ 

OP is going into this knowing that on average returns will be better than mortgage interest, 

Hence the eternal caveat of "past performance" etc etc. Watching the markets no one would know there's been a global pandemic the past few months. Corporate profitability generally is going to take a significant hit. 

Expecting the market to price in only what was in last night's News at Ten will just lead to perpetual bemusement.

/
Exactly it's ridiculous, global equity prices are already back to the start of the year and the start of the year was firm bubble territory so I don't know what to call this.

Thrugelmir

Sailtheworld said:

Thrugelmir said:

kinger101 said:

DiggerUK said:

ian1246, I'm  definitely a "get real and clear the mortgage first" poster. But as the man said, 'stoopid is as stoopid duz'. Harsh, I know.
But as the woman  said, "those who don't learn from history are doomed to repeat it"

I am of course referring to the mis selling of endowment policies. The mis selling came about primarily because they were sold making out they would eventually provide the funds to clear the mortgage, usually, but not exclusively, associated with interest free mortgages.

They failed to deliver in  the tens of thousands. You're about to run the risk of making nearly the same mistake, with no chance of compensation. Just pay the damned mortgage..._ 

OP is going into this knowing that on average returns will be better than mortgage interest, 

Hence the eternal caveat of "past performance" etc etc. Watching the markets no one would know there's been a global pandemic the past few months. Corporate profitability generally is going to take a significant hit. 

Expecting the market to price in only what was in last night's News at Ten will just lead to perpetual bemusement.

Many investors don't price anything in. They just follow like sheep.