Help planning future investments - mortgage or invest or property.

hampshirescott

hi

I know this is a privileged position to be in, however, I want to make sure I'm making sensible choices. I know none of this is financial advice, but I want to see if I am missing something. 

I have an income of that puts me in the highest tax bracket. I have completely maxed out any pension contributions. I have filled my cash ISA and will aim to do this annually moving forwards, which from advice, seems sensible. 

I have saved money £150k to pay off the mortgage early and aim to do this in the next 5 years. 

Is this a sensible thing to do to pay off the mortgage early? It would give us freedom. I aim to save at least £50k a year moving forwards, whats the best thing long term to maximise the return, I wold compound the savings but a dividend would be nice or should I be thinking about property investment. I do not want major risk regarding investments. 

any help or guidance would be appreciated. 

Exodi

hampshirescott said:

I have saved money £150k to pay off the mortgage early and aim to do this in the next 5 years. 

Is this a sensible thing to do to pay off the mortgage early? It would give us freedom.

Depends on your appetite to risk.

If we predict that the average mortgage rate of the remaining term of the mortgage will be 3%, whereas we predict that our investments might return 6%, then it makes little sense to ever overpay a mortgage (though people regularly do for emotional reasons and will certainly be more tempted now while they're now currently paying mortgage rates of ~4-6%).

Some like the security of having their house paid off (but in reality, you effectively already have this security, as you it sounds like you have ample ability to service the mortgage, even if you lost your job). You mention 'freedom', and while I'm not clear on what that specifically means, we get a lot of emotional reasoning. So if it makes you happy (or if you're not willing to take investment risk) then overpay it.

You can appreciate you come with the classic request:

"whats the best thing long term to maximise the return"
" I do not want major risk regarding investments."

If only, we'd all be rich. Risk and reward are entwined.

Generally people advise a global index tracker fund - which while it comes with the risks you'd expect from investing in equities and is categorised as high risk, it's lower risk than going all in on individual companies. Personally I consider the risk of not investing worse, whereby you're likely to lose money in real terms against inflation.

Do you have a partner? If so, you should consider maximising their pension contributions and ISA allowances.

Middle_of_the_Road

hampshirescott said:

hi

I know this is a privileged position to be in, however, I want to make sure I'm making sensible choices. I know none of this is financial advice, but I want to see if I am missing something. 

I have an income of that puts me in the highest tax bracket. I have completely maxed out any pension contributions. I have filled my cash ISA and will aim to do this annually moving forwards, which from advice, seems sensible. 

I have saved money £150k to pay off the mortgage early and aim to do this in the next 5 years. 

Is this a sensible thing to do to pay off the mortgage early? It would give us freedom. I aim to save at least £50k a year moving forwards, whats the best thing long term to maximise the return, I wold compound the savings but a dividend would be nice or should I be thinking about property investment. I do not want major risk regarding investments. 

any help or guidance would be appreciated. 

Depends on factors like your age and what kind of mortgage you have and what is the rate.

Investing in property, (presumably to rent out) has become far less attractive, and being a landlord/landlady comes with it's own significant risks.

With your apparent level of disposable income, investing some of that, within your risk tolerance would possibly be a better proposition than property.

dunstonh

I have an income of that puts me in the highest tax bracket. I have completely maxed out any pension contributions. I have filled my cash ISA and will aim to do this annually moving forwards, which from advice, seems sensible. 

When you say you have maxed out pension contributions, do you mean the annual allowance and carry forward (where applicable) or just the maximum your employer will allow?

Is this a sensible thing to do to pay off the mortgage early?

For the long term, you would probably prioritise maxing out your (and spouse if applic - you do refer to "us" in places) pension and ISA allowances with mortgage slipping in after that.   However, its not possible to say on the limited information you have provided.

 I wold compound the savings but a dividend would be nice or should I be thinking about property investment. I do not want major risk regarding investments. 

Property is not going to be tax efficient for you unless you do it in a limited company structure (which is increasingly common with let property owners)

Everything has risk. Even cash savings.  

hampshirescott

I am 45 years old, my wifes pension has been maxed also and she also had ISAs full. I would be happy with investing in stocks and things like the s&p500 etc seem sensible long term. I was looking to best try and accumulate in the long term. 

dunstonh

and things like the s&p500 etc seem sensible long term

100% US equities for a UK investor domiciled under Sterling wouldn't be a great idea.   UK investors do not get S&P500 performance.  They get S&P500 performance adjusted by the exchange rate movements.     This is why the S&P500 was very good to UK investors in the last 12 years but bloody awful in the 12 years before that.    Some believe that this year could be the swing back away from it again (these things do cycle historically).  However, only time will tell.

I am 45 years old, my wifes pension has been maxed also 

So you have both paid 100% of relevant earnings or £60k, whichever is the lower? - well done if that is the case.

Eyeful

1. Anything  to do with money will carry some type of risk, all that changes is the type and size of those risks.
Example: Putting money into a savings account protected by the FSCS up to £85K, carries the risk of inflation.
RPI 1948-2025:  https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23 

2. Paying off the mortgage early or not is a personal decision. 

3. As you have a house, you are already investing in property.
What knowledge do you have, of the risks attached to investing in BTL or the property market?

4. Most active fund managers after charges fail to beat a simple Major Global Index like FTSE All World Index or MSCI World Index.
If you do think of investing I suggest you stick to either:
(a) Low cost fund or ETF that simple tracks a Major World Index
(b) Low cost Multi- Asset Fund with a share/bond split you are comfortable with. This will give you a ready made portfolio.
https://monevator.com/best-global-tracker-funds/
https://monevator.com/passive-fund-of-funds-the-rivals/

5. This may be of help & interest to you:
https://www.kroijer.com/
   

Sovereign_Hunter_999

can anyone recommend any uk based reits?