Paying down mortgage versus investing

Jemma01

It really depends on how high the risk is and return of the investment. You'll need to get a calculator out and calculate what return you can expect on whatever risk profile you invest in with that 50k, and how many years it'll take until you start making money (in comparison with the growth of the debt).

So far, 2.08% of 500k, you'd have paid at least 20k of interest in the last two years. Very hard to see the wealth in the near future with such high debt. Your 50k savings will be munched away in two years due to debt.

I'm in favour of security, but that's why I'm not rich! 🤣 I'd speak to an independent financial advisor if I were you.

Yorkie1

When you refer to investments, are you including pensions? Or is that sorted elsewhere already?

Ramie2021

Not including pension, for pensions I have circa £200k in private pensions curently

BonaDea

There isn't a sensible answer to your question because it is all just piling conjecture on conjecture.  No-one knows what interest rates will do over the next x years, nobody knows what investment returns will be over the next x years (or even if there'll be positive returns), nobody knows how house prices will perform over the next x years either in general nor in the specific case of your house in your area.  Nobody knows how Govt policy change will alter the relative attractiveness or political risk of doing one thing or the other.  So the rational thing to do in these circumstances of uncertainly is to split the difference - if you have surplus income, use half to invest, half to pay down the mortgage.  

BikingBud

Ramie2021 said:

Are they?! I thought in the short term i.e upcoming 1-3 years they would be between 2-3.75%.

Somewhere between 1 - 10%🤷🏼‍♂️

BikingBud

Ramie2021 said:

Hi All,

I appreciate your thoughts on paying down your mortgage versus building wealth for the future? 

For context, I am 37, have a lump sum in excess of £50k in investments and wondering should I continue to invest money or start to overpay on mortgage. Is there a max you would save in ISAs before reverting to overpaying the mortgage?

Putting my personal circumstances aside, I’d like to understand peoples perspectives on this more generally? 

My initial thoughts are that overpaying mortgage is good and provides you with security faster as once paid off the house is yours but also by doing this constrains your wealth for the future.

Appreciate peoples thoughts/views on this topic. 

What is this wealth that you desire to build? 

Is it a figure £1M or £2M, or still a concept that hasn't been tested for sanity or achievability? 

By what age?

And then what?

Some might say getting mortgage freedom means you do not have to work and by having leisure time you become wealthy.

Others might say having good health and life ahead of you makes you very wealthy.

If its just about hoarding funds and assets then I am sure there are many "meaningful" videos on various sites that might coach you to that goal

Ramie2021 said:

Sorry for context, I have 499k outstanding on my mortgage, 3 years remaining on a fixed rate at 2.08% and have circa 50k in investments, property value is prob 850k in current markets. But main purpose is to build money for future.

 Limited context! 

25/35/40 year mortgage?

Follow on SVR 8%, 10%?

Surplus income?

I'm not really interested in these but if you want to add context then make it meaningful.

Other than that, the generic advice is here and has been stable for as long as I can remember.

BarelySentientAI

BikingBud said:

If its just about hoarding funds and assets then I am sure there are many "meaningful" videos on various sites that might coach you to that goal

Other than that, the generic advice is here and has been stable for as long as I can remember.

I think that's the essence of it.

MSE Forum is an unusual place to come and ask "I have a million pound house and a quarter of a million in investments, what do I do next?"

maximise

This is something I always have at the back of my mind, should I overpay or invest, simple answer use the MSE mortgage overpayment calculator, to help decide by determining the interest rate tipping point
https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/