Pay off mortgage or BTL

[MarillionFan]

Surely that logic is flawed - "no way am I repaying it early" - in other words you could repay it now, but you'd prefer to wait until the interest rate goes up so you have to repay more money in interest to clear the debt.


"Would you prefer to pay £100 today, or £120 next week? Oh, I'll wait until next week cause then I still have my £100 for an extra week"



£100k mortgage over 25 years at 1.9% = £125,701 total
£100k mortgage over 25 years at 2.9% = £140,708 total.
A 1% increase in your mortgage in this example = a 15% increase in the loan.


So, pay off the mortgage now, then when you have the cash and the interest rates have gone up, you know what, the savings rates will go up too.

Youse a bit thick aintcha.

[WTFH]

Youse a bit thick aintcha.

Sorry, I don't understand what you're saying. I've provided figures and your response is not to point out the flaws in my calculations but to question my intelligence without reason.

[Intel]

I'm with the BTL crowd. A mortgage isn't a debt in the same sense as loans, credit cards etc. It's one of those facts of life for most people. If you plan to still be working when it's due to be paid then just carry on as you always have. You'll save the mortgage money if you've paid it off but it's pretty bloody useless as you won't have enough to invest with for years. Paying the mortgage off is a lifestyle change, not a chance to invest in most cases.

Use the lump sum on BTL's I'd say.

There is a halfway here.. Get an offset mortgage and the money can be sitting there paying the mortgage off early until you need it so best of both worlds.

The biggest problem I have with BTL is the illiquid nature of the asset. In the (admittedly unlikely at the moment) event of an interest rate or housing market structural change it can be very difficult to realise the value of the asset and pay off the loan. If that happens then it's bankruptcy time in worst case scenarios.

It's different where you borrow to invest in bonds or savings where the rate makes sense. Those are liquid assets that you can realise to cover the debt if necessary very quickly.

Again, all comes down to attitude to risk. I prefer to have my a*se covered so if anything goes pear shaped I just lock my door and wait for it all to blow over....

[MarillionFan]

Sorry, I don't understand what you're saying. I've provided figures and your response is not to point out the flaws in my calculations but to question my intelligence without reason.

It's because your entire response and argument was wrong. You don't understand what was being told to you.

[Lightwave]

I'm with the BTL crowd. A mortgage isn't a debt in the same sense as loans, credit cards etc. It's one of those facts of life for most people. If you plan to still be working when it's due to be paid then just carry on as you always have. You'll save the mortgage money if you've paid it off but it's pretty bloody useless as you won't have enough to invest with for years. Paying the mortgage off is a lifestyle change, not a chance to invest in most cases.

Use the lump sum on BTL's I'd say.

There is a halfway here.. Get an offset mortgage and the money can be sitting there paying the mortgage off early until you need it so best of both worlds.

I'm a great believer in offset mortgages.
I'm also a great believer in liquidity, it took us over a year to sell a nice house (completed almost exactly a year ago), I can sell my shares tomorrow at 9AM and pay off my mortgage by coffee time.

I'm an old git who can remember people saying a lot of the above in 1987.
I bought a house in Jan 88, sold it in 1995 or 96 for less than £2k notional profit, ignoring the interest of up to 16% I'd paid.
That kind of thing stays with you.

Everybody needs to do what they think is the right balance.

Personally I'm up for being an evil landlord, just not a highly leveraged evil landlord.
Define your own 'highly leveraged' I guess it's a function of personal circumstances.

[WTFH]

It's because your entire response and argument was wrong. You don't understand what was being told to you.

OK, explain what is incorrect about a 1% increase in interest rate costing an extra 15% on a £100k loan.

[SlipTheJab]

Really ?!!!!

Let the spongers get their own. Eventually they will throw you in a care home.

Pay off your debts.

Aah but the thing is they're young enough for me to still like them wait until they hit 13!

[SlipTheJab]

I'm with the BTL crowd. A mortgage isn't a debt in the same sense as loans, credit cards etc. It's one of those facts of life for most people. If you plan to still be working when it's due to be paid then just carry on as you always have. You'll save the mortgage money if you've paid it off but it's pretty bloody useless as you won't have enough to invest with for years. Paying the mortgage off is a lifestyle change, not a chance to invest in most cases.

Use the lump sum on BTL's I'd say.

There is a halfway here.. Get an offset mortgage and the money can be sitting there paying the mortgage off early until you need it so best of both worlds.

Offsets charge ridiculously high rates 4% plus, for the mugs that are prepared to pay that!

[diseasex]

OK, explain what is incorrect about a 1% increase in interest rate costing an extra 15% on a £100k loan.

You don't understand a simple concept. Let me explain that to you:

you have 100k borrowed at 5% (for simplicity)

you have 100k in bank

Now if you are able to make more than 5% a year then you are in plus. Simple as that.
Now lets assume a scenario where you were able to make 10% a year for 5 years until interest go up:
100k + 10% + 10% + 10%+ 10% +10% = 161.051

Whereas your mortgage debt will look like this:
100k + 5% +5%+5%+5%+5%= 127.628
youre better of 33k.
Now house being not so liquid is another problem , so is house price change (and its raising now)...

bottom line - borrowing money to make higher yield than the interest is a GOOD thing. Its a good loan. Borrowing money for an asset that is increasing value - even better. Now car on finance is a bad loan (obviously) - not only you pay interest but also lose on value.

[jmo21]

Sorry, I don't understand what you're saying. I've provided figures and your response is not to point out the flaws in my calculations but to question my intelligence without reason.

This is what they are talking about.