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Investing advice please
Splodges
Posts: 23 Forumite
Hi, so I'm just coming up to buying my first property, the property is £110,000, I'm paying a 10% deposit so a £99,000 mortgage over 25 years, fixed at 2.49% for 5 years.
I'm trying to work out the best way to use my excess income. I'd like to live fairly frugally and accumulate as much money as possible. I've been looking into how compound interest works and stuff like the mortgage overpaying calculators on MSE.
I'll have about £7000 cash left over after completion, and the ability to save/overpay/invest about £300 every month after I deduct all expenses from my salary.
I got in my head investing in stocks and shares was the best use of money (probably businesses or indices outside of the UK due to brexit uncertainties.) I signed up to Plus 500, deposited £500 then quickly withdrew it when I read a few things about it not being a good platform to invest on.
I'd like some opinions on my 3 ideas:
1. Pay off £5000 instantly off the capital of the flat, then overpay by £300 per month.
2. Invest £5000 spread over say 5-10 different stocks/shares, then regularly invest £300 per month into them
3. Invest £2-5000 in doing the flat up, semi-regularly renting it out on AirBnB and crashing at my dads place for extra income (used to either invest or overpay mortgage?)
I'd just like your opinions on what you'd do in my position please. Oh and if anybody could recommend a better trading platform that would be good too?
Thank you!
I'm trying to work out the best way to use my excess income. I'd like to live fairly frugally and accumulate as much money as possible. I've been looking into how compound interest works and stuff like the mortgage overpaying calculators on MSE.
I'll have about £7000 cash left over after completion, and the ability to save/overpay/invest about £300 every month after I deduct all expenses from my salary.
I got in my head investing in stocks and shares was the best use of money (probably businesses or indices outside of the UK due to brexit uncertainties.) I signed up to Plus 500, deposited £500 then quickly withdrew it when I read a few things about it not being a good platform to invest on.
I'd like some opinions on my 3 ideas:
1. Pay off £5000 instantly off the capital of the flat, then overpay by £300 per month.
2. Invest £5000 spread over say 5-10 different stocks/shares, then regularly invest £300 per month into them
3. Invest £2-5000 in doing the flat up, semi-regularly renting it out on AirBnB and crashing at my dads place for extra income (used to either invest or overpay mortgage?)
I'd just like your opinions on what you'd do in my position please. Oh and if anybody could recommend a better trading platform that would be good too?
Thank you!
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Comments
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£7k could quite easily get swallowed up when moving into your first place. Repairs, unexpected bills, furniture buying.
Don't do anything too hasty.
Get moved in, settled and then do something with the money.
Also, £7k is a normal sized emergency fund. (bigger than I have, but still normal)Im A Budding Neil Woodford.0 -
Investing is long term, 5 years min.
If you do invest in stocks and shares, do it in an ISA (£20k allowance per tax year) only buy a fund/ IT/ETF, do not buy any individual shares till you understand this field a bit more.
BTW - IT = Investment Trust and ETF = Exchange Traded Fund - these are managed those that provide them, companies like iShares. They are a collection of individual stocks so you don't have to pick any and it's diversified.
Once you decide on a few of potential candidates to invest in - go for it and just leave it alone, do not sell when they start losing, it's long term - in 5 years time it WILL grow, just don't expect to make your fortune in the first few months.0 -
Thank you for some clarification on those terms. Yeah I'd be looking to build a continuous portfolio over much longer than 5 years to benefit from compound interest, probably just ongoing.
The investment isa, should I just ask to do that through my bank or something, do you have any recommendations or should I just google around?0 -
Have a read of the link below to start things off. Don't rush into this, take your time to learn, this is a long term process (investing)Thank you for some clarification on those terms. Yeah I'd be looking to build a continuous portfolio over much longer than 5 years to benefit from compound interest, probably just ongoing.
The investment isa, should I just ask to do that through my bank or something, do you have any recommendations or should I just google around?
https://monevator.com/category/investing/passive-investing-investing/"We act as though comfort and luxury are the chief requirements of life, when all that we need to make us happy is something to be enthusiastic about” – Albert Einstein0 -
Vanguard is popular with many on here, they offer their own S&S ISA, but are limited to their own funds (not necessarily a bad thing). Their fees are pretty low and they allow you to drip feed money into an ISA/Fund
There are of course a host of other ISA providers, funds and other options to consider.
https://www.vanguardinvestor.co.uk/"We act as though comfort and luxury are the chief requirements of life, when all that we need to make us happy is something to be enthusiastic about” – Albert Einstein0 -
The thread below is your friend.
Post #4 has usefull links.
https://forums.moneysavingexpert.com/discussion/6057656/can-you-help-out-an-idiot-please0 -
As your LTV is high, you might be best off focussing on off focussing on getting your LTV down a bit, so that you can remortgage onto a better rate when your fix ends.
At 2.49% on a £99,9000 mortgage you are currently paying £2,465 a year in interest.
If you were only borrowing £80,000 (73% LTV), the MSE best buy comparison shows you could get a mortgage at 1.54% on a 5 year fix. That would be £1,232 a year in interest, saving you £1,233 per year.
Once you have got down to 75% LTV, you will get very competitive rates and there is not much benefit in overpaying the mortgage further. At that point you will be best off investing into a tracker fund through a S&S ISA (while also making decent pension contributions).
Investing in 5-10 individual stocks with £500-£1000 each is a bad idea because the trading charge will eat up a big chunk of your returns. It is also less diversified than a tracker fund.0 -
steampowered wrote: »As your LTV is high, you might be best off focussing on off focussing on getting your LTV down a bit, so that you can remortgage onto a better rate when your fix ends.
At 2.49% on a £99,9000 mortgage you are currently paying £2,465 a year in interest.
If you were only borrowing £80,000 (73% LTV), the MSE best buy comparison shows you could get a mortgage at 1.54% on a 5 year fix. That would be £1,232 a year in interest, saving you £1,233 per year.
Once you have got down to 75% LTV, you will get very competitive rates and there is not much benefit in overpaying the mortgage further. At that point you will be best off investing into a tracker fund through a S&S ISA (while also making decent pension contributions).
Investing in 5-10 individual stocks with £500-£1000 each is a bad idea because the trading charge will eat up a big chunk of your returns. It is also less diversified than a tracker fund.
Thank you for that reply, I think that idea suits me best by far, is there any benefit to paying off say a £5000 chunk off the capital right at the start compared to just regularly overpaying a few hundred every month?0 -
If you want to pick your own shares, I suggest you start from what you know, i.e. your field of expertise. The point is, when a corporation is about to launch a new product, or service, you want to have a grasp on how (un)successful it might be and you can't unless you have some expertise in that domain.Your cholesterol levels are not seen, or used, by your heart and arteries, so ignore it.
:eek:.0 -
Thank you for that reply, I think that idea suits me best by far, is there any benefit to paying off say a £5000 chunk off the capital right at the start compared to just regularly overpaying a few hundred every month?
Unless you can beat the interest rate of 2.49% with a higher return (allowing for tax ) holding cash. Then pay it off the mortgage.
Use your "free cash" every month to build up short, medium and long term savings. Depending on what your personal objectives are.0
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