Thoughts on my Mortgage Repayment Vehicle using S&S ISA and or LISAs

ciscobloke01

Hi

I have 3 BTL properties all on Interest only mortgages maturing roughly the same time (16 years from now).

So far we have been saving £500pm into a S&S ISA invested into the S&P500 and have accumulated a pot of £65k.  My initial plan was for the next 16years to up this to £750pm and see where that leaves us.

It then occurred to me that my wife & I both have a LISA with £1k currently sitting there not being used.  We are both 45yrs old so could add to our pots for the next 5 years and take advantage of the 25% government top up.

My question is, am I right in thinking that if for the next 5 years we split the £750 putting in the maximum per month into the 2 LISAs £333.33 pm each) and the rest into the above mentioned ISA, and once we reach 50 we put the full £750 into the ISA that this would lend to better returns after 16 years? (Obviously still invested into the S&P500 so like for like potential for growth)

I've tried to run some numbers on the assuming of a conservative average return of 3% and to me using the LISAs would return the most but someone with financial knowledge might be able to sanity check my theory and give me peace of mind.

Cheers in advance

eskbanker

Yes, LISA will beat a non-Lifetime ISA by virtue of the 25% topup, provided you're happy to defer access until you're 60 (based on current rules!).

The wisdom of choosing to invest specifically in one specific market (however dominant currently) is a wider issue....

dunstonh

So far we have been saving £500pm into a S&S ISA invested into the S&P500 and have accumulated a pot of £65k.

Which is great during a period when US equity has been king.   Its far more risky over the long term though.   These things tend to cycle and part of the reason for the very strong US growth in this cycle was that it was awful in the previous cycle.        You should consider a more global approach.  

ciscobloke01

Thanks for the feedback.  I used the S&P500 as an example (As this is where a large chunk of my portfolio is invested) but I do and will have some Global Equity Funds in there also.

El_Torro

You say you are assuming a return of 3%. Is this before or after inflation? If it’s before you’re right, it’s conservative. If it’s after inflation then that might be too optimistic. 

Since you’re investing to specifically pay off your BTL mortgages it’s a good idea to derisk as you get closer to the end of your mortgages. I also agree that it’s a good idea to invest globally, not just in the US. 

Paying off your mortgages at 60 doesn’t have to be an abrupt end date. You can extend your mortgages beyond that, if stock markets aren’t doing well and it’s not a good time to sell. If you’re willing to consider this then derisking isn’t as important.