Excess money.

[Denpot29]

Hi,

Not really sure where to post this so feel free to redirect if necessary, I have a current dilemma (good one).

I disposed of a property and have some funds sitting in my account, current situation, I'm 45, wife and one 6 year old boy, no debt apart from mortgage, have a property in Florida as a holiday home mortgage free, some shares (non generating so no dividends), pension is at an ok level and still contributing ok amounts, basically I’m not sure what to do with it, my thoughts are below but I wanted to know your views, you are the more savvy investors, do I :-

1. Pay off the mortgage completely, house is worth £450k feels like the right thing to do, safe option and being mortgage free at 45 would be nice.

2. Buy another property abroad and rent it to generate some income and look for long term value of the years.

3. Buy a bigger house in the U.K., would be nice but not sure I really need to, over the long term again the house would hopefully increase in value.

Any suggestions would be appreciated, I’m leaning towards the mortgage free option but my wife thinks we should do something else with the money!!!

Thanks.

[GeoffF100]

The safe and sensible thing to do is to pay off your mortgage.

[Denpot29]

Hi Geoff,

I’m heading that way, it’s amazing how many people say “why would you do that! Mortgages are so cheap”, my view is it’s still a loan and requires servicing for many years though. Clearing this would leave me in a good position for the future and would mean my family and I would live a nice stress free (relatively) life.

Thanks.

[Dod101]

Sounds as if you have enough exposure to property without buying another. What interest rate are you paying on the mortgage? If it is very modest then logically you might be better investing the money in equities. I would not I think buy a bigger house because that just brings with it additional costs and if you have no pressing need why bother? Lady wives should not be ignored.

OTOH you cannot go wrong by paying off the mortgage and it will give you a nice feeling, and if you are tending towards that anyway..........

Dod

[b0f77]

Hard to suggest without more information. What are your goals in life, do you want to retire early? How much mortgage do you have remaining on the house? Do you want to fund your 6 yo through college later? I would consider paying off a big chunk of the mortgage ready to retirement at your age as you don't really want to go into that with debt. I'm in my mid 50s and we have ours fully paid off...I remember high interest rates is the problem. Have you maxed out your ISAs this year? You could put £20k in an ISA - a 10 to 15 year target date fund with Vanguard for when your child goes to college or finishes school might be good.

[tjh290633]

With your 6-year-old, my thoughts lean towards funding a pension for him, putting in the maximum each year to get the tax rebate. Having done that, set up a bare trust with an IT, like Witan via Jump Savings, which will be his when he gets to 18 and can fund his further education, or set him up in housing. It could also go on fast cars, slow horses and women, but you take that risk.

TJH

[johnhemming]

It is difficult to say without more information, but you could always do a combination of paying off half of the mortgage and investing half of the funds or some other proportion. From a tax point of view you are taxed on the income (apart from through tax wrappers such as ISAs) and you pay the mortgage interest out of taxed income. Hence it doesn't take much of an interest rate increase to make it not cash flow effective to invest the funds. Say you get 6% interest on investments (which is highish) and pay a marginal tax rate of 40% then you have a cash receipt after tax of 3.6%. Even if your mortgage is only 3%, the marginal benefit of 0.6% is not that much and reducing the risk by paying off the mortgage is worthwhile. It is quite possible to have a marginal tax rate and you need to look at National Insurance as well. Its difficult because there can also be capital gains, but things do go up and down and we have material uncertainties in the UK at the moment.

Hence probably beyond keeping a bit for ISAs for a rainy day, the mortgage is a good target.

[Denpot29]

Thanks everyone, if the mortgage is paid off I’ll still have money left over, I could then look at other savings like ISA’s, won’t be doing equities, I got badly burnt many years ago!!!

Thanks everyone, appreciate your views.

Cheers.

[Denpot29]

Hi all,

Mortgage now cleared I’ve just transferred and paid off in full, I think your replies confirmed my thoughts.

Now today is officially “Mortgage free day”!!!!!

Time to look at investing now.

Thank you everyone.

[Stonge]

Mortgage paid off aged 48. Great feeling.

[swill453]

Hi all,

Mortgage now cleared I’ve just transferred and paid off in full, I think your replies confirmed my thoughts.

Now today is officially “Mortgage free day”!!!!!

Time to look at investing now.

Thank you everyone.

1 hour 22 minutes for such a momentous decision (and implementation). I admire your bravery!

Scott.

[Denpot29]

Hi Scott,

Been thinking about it for a while, it’s paid now and Nationwide are closing the account. No real biggie really.

Thanks everyone.

[Longtermyieldman]

Pay off your mortgage, then divert the money that would normally service it to your ISA or pension.

Last thing I'd do given the weak Pound is buy overseas property.

[Muddywaters]

Pay off your mortgage, then divert the money that would normally service it to your ISA or pension.

Last thing I'd do given the weak Pound is buy overseas property.

That’s what I did. Parents and grandparents all died when I was in my late 20s so had all the inheritance I was ever going to have. Took the decision to repay my mortgage in full as soon as my fixed period ended. Whatever happens now I know that my wife and children will always have a nice home fully paid for

The mortgage payments are now diverted into my Sipp and Jisas. Monies cheap but you can’t beat peace of mind. I know that if I ever lose my job (which is correlated with the markets) we’ve still got somewhere to live!

[Itsallaguess]

The mortgage payments are now diverted into my Sipp and Jisas.

Money is cheap but you can’t beat peace of mind.

I fully agree with this sentiment.

Quite often, especially on a forum such as this, we see a tendency to follow the logic of any given options purely from a financial perspective, but I've found that there are lots of very personal and emotional benefits that might come from taking a particular option that make a really important difference.

For me personally, peace of mind is a hugely important aspect regarding these types of decisions, and being in a position where you own the roof over your head come what may is a very fortunate place to be...

Cheers,

Itsallaguess

[nmdhqbc]

https://www.autotrader.co.uk/classified/advert/201801082547702?year-from=2016&onesearchad=Used&onesearchad=Nearly%20New&onesearchad=New&advertising-location=at_cars&maximum-mileage=25000&make=FERRARI&postcode=cb246zq&sort=price-asc&radius=80&page=4

Plenty of room in the back there for the 6 year old.