Pay off mortgage or invest...

2

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  • Type_45
    Type_45 Posts: 1,723 Forumite
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    1% until BoE raises rates, that is. It's 0.75% above BoE base rate.


    Sod's Law would be: stock market crashes, and BoE raises rates. That would leave me a out of pocket.
  • jimjames
    jimjames Posts: 17,619 Forumite
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    Eco_Miser wrote: »
    However, borrowing to invest - which this becomes - is generally considered risky.
    I'm not sure I really agree, you're not taking out new borrowing to invest, you're using spare money each month to pay into a S&S ISA rather than paying the mortgage faster than is required
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Eco_Miser
    Eco_Miser Posts: 4,708 Forumite
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    jimjames wrote: »
    I'm not sure I really agree, you're not taking out new borrowing to invest, you're using spare money each month to pay into a S&S ISA rather than paying the mortgage faster than is required
    Post #4 mentions taking out a new mortgage to invest.

    The other case: you have spare money, do you increase your equity in your home, or invest it where it could fall in value?

    I did both. The purpose of my post was to point out that it's not a no-brainer as the investment option increases risk.
    Eco Miser
    Saving money for well over half a century
  • principa
    principa Posts: 67 Forumite
    For my own similar circumstance I've given up trying to answer this question as a straightforward opportunity cost i.e. pay off mortgage vs invest - which one will make me richer?

    As soon as I had the mortgage covered, I had the "mortgage free" feeling i.e. less stress. This was actually more important for me than investment motivations.
  • Fatbritabroad
    Fatbritabroad Posts: 573 Forumite
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    Type_45 wrote: »
    1% until BoE raises rates, that is. It's 0.75% above BoE base rate.


    Sod's Law would be: stock market crashes, and BoE raises rates. That would leave me a out of pocket.
    This is why it only really makes sense if you can fix for a long period. I've just fixed my mortgage for 10 years which should be enough time to iron out any crashes. I'm paying money into an isa 200 a month regular payment plus top ups every time I have spare cash of a few thousand) and th e intention is in the years time I'll pay a big lump off as I remortgage. Plus worst case I'll have paid another 80k off my mortgage and will only owe around twice my salary) if interest rates are still low I'll just reinvest
  • Type_45
    Type_45 Posts: 1,723 Forumite
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    principa wrote: »
    For my own similar circumstance I've given up trying to answer this question as a straightforward opportunity cost i.e. pay off mortgage vs invest - which one will make me richer?

    As soon as I had the mortgage covered, I had the "mortgage free" feeling i.e. less stress. This was actually more important for me than investment motivations.

    This is how I've decided I feel. Having no mortgage is worth more to me than just money. It's about less stress, and you can't put a price on that. It's health-related.


    If I want more money to invest/save, then I can buy a cheaper house and have money left over. I will not be borrowing any money at all unless i have to. Money for investing will be from future earnings.

    Problem solved!


    Thanks to everyone for your input :beer:
  • Ray_Singh-Blue
    Ray_Singh-Blue Posts: 507 Forumite
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    We are repaying (but never overpaying) our mortgage while also building S&S ISAs. Mortgage currently about £320K, ISAs currently about £160K.

    I have a little graph and the day the lines meet, will crack open a bottle of something fizzy. But I won't repay the mortgage. There is so much more flexibility in having both.
  • phillw
    phillw Posts: 5,594 Forumite
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    Ray_Singh-Blue wrote: »
    There is so much more flexibility in having both.

    It depends on your view of risk and it depends on the person. If you think you might ever need to claim some form of benefits then having a huge investment porfolio will cause you problems. They take a dim view on you cashing in your investments and paying off the mortgage to qualify.

    I have missed out on making money, but right now I'd rather just have no mortgage.
  • phillw
    phillw Posts: 5,594 Forumite
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    Ray_Singh-Blue wrote: »
    There is so much more flexibility in having both.

    It depends on your view of risk and it depends on the person. If you think you might ever need to claim some form of benefits then having a huge investment porfolio will cause you problems. They take a dim view on you cashing in your investments and paying off the mortgage to qualify.

    I have missed out on making money, but right now I'd rather just have no mortgage. Although I cashed in my S&S ISA just before the market collapsed and that went towards the mortgage.
  • Ray_Singh-Blue
    Ray_Singh-Blue Posts: 507 Forumite
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    Having three strands to play with (house, loan, investment) rather than one (house) makes you more bendy

    Lets say someone wants to downsize. If they have a house, a mortgage, and investments, then they have the option of buying their next home with their investments. Then, when that's all sorted, they can sell their existing home and pay off their existing mortgage.

    They don't have to do that, but it is a flexibility they would not have if they had just overpaid their mortgage
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