Better utilization of money?

Just looking for some advice. It may be blaringly obvious but I can't seem to figure out what my best option is,

I'm 27

Take home pay per month after tax and NI between 1600-2000 (varies)

I have a shared 10 year fixed mortgage with wife at 3.5% paying £993 per month - we pay 500 each a month (8 years to go at 3.5%) (At that rate I would still have 12 years of mortage to pay after that 10 years) - 22 years total mortgage

CSD S&S ISA with 6k (VLS80)

Workplace Pension 10k (Paying about £280 a month in including employer contributions)

High interest current account 9.5k

Lower rate tax payer

I've seen people say it could be better to invest rather than overpay mortgage. Would this still apply if I'm paying 3.5% interest but VLS80 from tax year 2017-2018 was only about 1.7%? I'd assume it would have been better this past year to overpay rather than pump little savings into my ISA?

Not really sure where to go from here. I think it's a case of too much information out there at the moment and I'm getting a bit lost as to where is best for me to put my monthly savings for the optimal return over the long term / what makes the most sense?

Thanks all
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Comments

  • Zorillo
    Zorillo Posts: 774
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    Are you maximising the amount your employer will contribute to your pension?
  • cs90
    cs90 Posts: 38 Forumite
    Yes unfortunately they only offer max 6% so I'm matched plus more
  • dawyldthing
    dawyldthing Posts: 3,438 Forumite
    Tell you what there's no better feeling than when the mortgage is paid off. Yeah you might save a bit more if you invested the money but the relief when it's paid off is unreal.
    :T:T :beer: :beer::beer::beer: to the lil one :) :beer::beer::beer:
  • msallen
    msallen Posts: 1,494
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    Tell you what there's no better feeling than when the mortgage is paid off. Yeah you might save a bit more if you invested the money but the relief when it's paid off is unreal.

    Each to their own, but I'd rather have (for example) 120K but owe 100K on the mortgage, than 10K and no mortgage.
  • surreysaver
    surreysaver Posts: 4,022
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    msallen wrote: »
    Each to their own, but I'd rather have (for example) 120K but owe 100K on the mortgage, than 10K and no mortgage.

    Me too. You'd get a better return by owing £100k on a mortgage and investing it, than you would by paying off the mortgage. A mortgage will be the cheapest long-term loan you will ever have
    I consider myself to be a male feminist. Is that allowed?
  • Bravepants
    Bravepants Posts: 1,490
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    There is a general rule of thumb that one should not borrow money to invest.


    Does this rule not apply if one has borrowed money to buy a house?
    If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.
  • surreysaver
    surreysaver Posts: 4,022
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    Bravepants wrote: »
    There is a general rule of thumb that one should not borrow money to invest.


    Does this rule not apply if one has borrowed money to buy a house?

    Buying a house to live in isn't generally regarded primarily as an investment. Although borrowing money at a lower rate than a savings account you are going to put the money into is a sensible thing to do. Particularly sensible with 0% credit cards
    I consider myself to be a male feminist. Is that allowed?
  • steampowered
    steampowered Posts: 6,176
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    Bravepants wrote: »
    There is a general rule of thumb that one should not borrow money to invest.

    That sounds like a pretty bad rule of thumb to me. Most businesses would go bust if they followed that rule.
  • DairyQueen
    DairyQueen Posts: 1,822
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    The logic of favouring investing, especially (say) pension payments, rather than mortgage over-payments, when interest rates are low, is sound. However there are potential risks to this strategy:

    1) Interest rates will rise.
    2) Job instability has a nasty way of increasing in times of recession, and at any time for those over 50.
    3) Property crash = negative equity for those who are too highly geared.

    The OP is young. During his working life he will no doubt experience several recessions, economic shocks and periods of high inflation/interest rates.

    25 years ago my mortgage shot-up from 8% to 11%, and then topped-out at 14%. This coincided with the 1990s recession. My then husband was made redundant five times in as many years. I was earning a good salary but the net amount still equalled the mortgage repayment. By redundancy no.3 we had exhausted our emergency fund and were selling stuff to survive.

    It only takes one such experience to appreciate the benefits of a mortgage-free existence

    I worked like a trojan, and 8 years later paid-off my mortgage. I was 44. One of the happiest days of my life and I have never regretted doing so. My now husband was lucky to be in a position to clear his mortgage when redundancy struck a few years ago (he was in his 50s).

    Examples of how economic conditions range over a working life.

    That experience taught me that long-term, financial security is best achieved by being debt-free asap, and by holding an emergency cash fund of at least one year's expenses.

    Being mortgage-free has also provided lifestyle and retirement options that would otherwise have been off the table.

    OP: had you considered (in order of priority)?:
    1) Fill the cash coffers up to a year of expenses.
    Then split your surplus between:
    2) Increase in pension contributions (why pay tax if you don't have to?) - employer's scheme? SIPP? Your 50-year-old self will thank you
    .... and ...
    3) Mortgage overpayments.

    Make sure your wife also piles as much as comfortably possible into her pension. Inequality of pension income in retirement has disadvantages - especially for the survivor of you two. I know, I know.....difficult for you to imagine ever being THAT old.

    Good luck. You've made a great start.
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
    DairyQueen wrote: »
    The logic of favouring investing, especially (say) pension payments, rather than mortgage over-payments, when interest rates are low, is sound. However there are potential risks to this strategy:

    1) Interest rates will rise.
    2) Job instability has a nasty way of increasing in times of recession, and at any time for those over 50.
    3) Property crash = negative equity for those who are too highly geared.

    The OP is young. During his working life he will no doubt experience several recessions, economic shocks and periods of high inflation/interest rates.

    25 years ago my mortgage shot-up from 8% to 11%, and then topped-out at 14%. This coincided with the 1990s recession. My then husband was made redundant five times in as many years. I was earning a good salary but the net amount still equalled the mortgage repayment. By redundancy no.3 we had exhausted our emergency fund and were selling stuff to survive.

    It only takes one such experience to appreciate the benefits of a mortgage-free existence

    I worked like a trojan, and 8 years later paid-off my mortgage. I was 44. One of the happiest days of my life and I have never regretted doing so. My now husband was lucky to be in a position to clear his mortgage when redundancy struck a few years ago (he was in his 50s).

    Examples of how economic conditions range over a working life.

    That experience taught me that long-term, financial security is best achieved by being debt-free asap, and by holding an emergency cash fund of at least one year's expenses.

    Being mortgage-free has also provided lifestyle and retirement options that would otherwise have been off the table.

    OP: had you considered (in order of priority)?:
    1) Fill the cash coffers up to a year of expenses.
    Then split your surplus between:
    2) Increase in pension contributions (why pay tax if you don't have to?) - employer's scheme? SIPP? Your 50-year-old self will thank you
    .... and ...
    3) Mortgage overpayments.

    Make sure your wife also piles as much as comfortably possible into her pension. Inequality of pension income in retirement has disadvantages - especially for the survivor of you two. I know, I know.....difficult for you to imagine ever being THAT old.

    Good luck. You've made a great start.

    Very wise words!
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