Pay off mortgage or invest??

Tremar777

I have £39,000 in a low interest cash ISA. Should I use this to pay off mortgage and reduce monthly payment or should I invest in a higher interest savings account? My mortgage still has 18 years to run. I could save approximately £200 a month by paying money off mortgage so I could maybe reinvest this. I’m reluctant to go to a financial adviser because I feel they will advise me on what they can make most money out of and not what’s best for me.

MaxiRobriguez

There's a similar thread with a lot of comments on which is active here: https://forums.moneysavingexpert.com/discussion/6242426/invest-or-pay-off-house/p1

Whilst it appears that poster *probably* has more income than you, the actual decisions on whether to pay down the mortgage or investment will be based on similar pro's/con's. Worth checking that thread out.

grumiofoundation

If you search the forum you will see a number of similar threads e.g. https://forums.moneysavingexpert.com/discussion/6242426/invest-or-pay-off-house#latest

Tremar777 said:

I have £39,000 in a low interest cash ISA. Should I use this to pay off mortgage and reduce monthly payment or should I invest in a higher interest savings account? 

Since you mention investing (capital at risk) would assume you are talking about stocks and shares ISAs? (would investing via a pension and/or stocks and shares LISA be suitable - would be more tax efficient). Not a savings account!

My mortgage still has 18 years to run. I could save approximately £200 a month by paying money off mortgage so I could maybe reinvest this. 

How much is the mortgage?
Interest rate?
Any Early repayment charges?

People will also be able to give you more detailed and helpful answers if they have more info
pension situation, salary, age, risk tolerance, aims etc etc 

 I’m reluctant to go to a financial adviser because I feel they will advise me on what they can make most money out of and not what’s best for me.

On the amount you are talking about chances are the fees with a independent financial advisor would be quite high in % terms to make it worth their while.

 

Albermarle

 or should I invest in a higher interest savings account? 

Best to be clear on wording . To most people 'invest ' means investing in financial markets . So taking a calculated risk for the prospect of higher growth than in a safe savings account .

 I’m reluctant to go to a financial adviser because I feel they will advise me on what they can make most money out of and not what’s best for me.
That opinion would be shared by some but not everybody . In any case they are not interested normally in savings accounts . They mainly concentrate on investments , tax planning etc
You should spend sometime reading the forum as similar questions get asked every day .
https://forums.moneysavingexpert.com/discussion/6243885/savings-v-investments#latest
https://forums.moneysavingexpert.com/discussion/6242426/invest-or-pay-off-house/p1

Thrugelmir

How much you need to clear the mortgage balance? 
What early redemption penalties would you incur? 

jimjames

If you are purely looking at keeping money in savings vs paying off mortgage then in almost all circumstances it will be financially beneficial to pay down the mortgage rather than keeping the money as savings as it seems very unlikely that many savings accounts are paying substantially more than your mortgage.

However if you are looking at investing rather than savings then that would be a very different answer and mean it is better financially to keep the mortgage and invest the money.

In terms of savings accounts vs mortgage it would be completely pointless to pay an IFA to tell you an answer.

Tremar777

Thank you for your advice.
I’m 51
Salary £40k
ISA £39,000
Savings Account £ 11,000
Mortgage of £99,000 House value £240,000
monthly payment £511
term 18 yrs
I think I used the term ‘investing’ too loosely. I’m just looking for the most beneficial way of using my money rather than having it sitting in a practically 0% interest account.

Alexland

All looks reasonable - are you contributing enough to your pension to achieve your retirement goals? Pensions are often the best way to invest due to the tax benefits.

MEM62

Tremar777 said:

I have £39,000 in a low interest cash ISA. Should I use this to pay off mortgage and reduce monthly payment or should I invest in a higher interest savings account? 

If you have a competitive rate, your mortgage will probably be costing you around 1.5%.  Investing in a medium-risk fund should return you 5% in the long term so figuring that out is not too difficult.     

Tremar777 said:

I could save approximately £200 a month by paying money off mortgage so I could maybe reinvest this. 

That is one way to approach it but it will not give you the same returns.  Another option, depending on your tax position, could be to make extra pension payments - where the returns would be significant. 

Tremar777 said:

I’m reluctant to go to a financial adviser because I feel they will advise me on what they can make most money out of and not what’s best for me.

Unfortunately, there are many that cling onto outdated views of the way IFA's work.  That has not been the case for many years and you would benefit greatly from letting go of your prejudices and understanding how the real world works.    

Doshwaster

Tremar777 said:

Thank you for your advice.
I’m 51
Salary £40k
ISA £39,000
Savings Account £ 11,000
Mortgage of £99,000 House value £240,000
monthly payment £511
term 18 yrs
I think I used the term ‘investing’ too loosely. I’m just looking for the most beneficial way of using my money rather than having it sitting in a practically 0% interest account.

What's your pension situation? If you have spare cash it could be worth making more contributions especially if you employer will match them.
Otherwise with over a year's salary in cash (probably 2 years living expenses if you lost your job) then you do have the scope to do something more active with your money.

jimjames

Tremar777 said:

Thank you for your advice.
I’m 51
Salary £40k
ISA £39,000
Savings Account £ 11,000
Mortgage of £99,000 House value £240,000
monthly payment £511
term 18 yrs
I think I used the term ‘investing’ too loosely. I’m just looking for the most beneficial way of using my money rather than having it sitting in a practically 0% interest account.

Having seen this new information, does the mortgage term take you beyond your planned retirement age? Age 69 will be just above the state pension age. If so then there may be benefits in paying down some of the mortgage to make sure it is cleared by the time you retire.

It's also worth looking at pension provision as mentioned above. I assume the ISA is a cash ISA not Stocks & Shares so you may want to look whether some of that could be invested or moved to a better rate elsewhere - unfortunately any savings account is going to be a poor rate at the moment.