Overpay the mortgage VS saving

[ChimpMaster]

Though paying the primary house mortgage off by 40 felt great and made life more relaxed we then bought a much more expensive house

Hi Vetran. Sounds similar to my situation. Looking at selling current home and moving to a 'much more expensive house' as you put it, but this will necessitate a £600k mortgage. Not sure I want the financial challenge but the 'forever home' dream could be achievable here. And frankly, I'm a little bored without having a mortgage to pay off

[vetran]

Hi Vetran. Sounds similar to my situation. Looking at selling current home and moving to a 'much more expensive house' as you put it, but this will necessitate a £600k mortgage. Not sure I want the financial challenge but the 'forever home' dream could be achievable here. And frankly, I'm a little bored without having a mortgage to pay off

oh I couldn't sleep with a £600K mortgage or service it !

[ChimpMaster]

oh I couldn't sleep with a £600K mortgage or service it !

I used to think that - and still do to some extent - but you can fix the loan for 10 years at 2.39% which makes the monthly payments £2,650 on a repayment basis. Not unachievable for a working couple, assuming other living costs are taken into account too.

A 2 year fix brings the rate down to 1.09% (£2290). Or 5 years at 1.84% (£2490).

I'm not saying it's the right or wrong thing to do, just that I hadn't really considered such a large loan being relatively manageable before.

[fool]

Purely from a math point of view - if the interest on your savings (after fees & tax) is higher than the interest of your debt, then you should save as opposed to overpaying. However, mortgages are a bit different than your typical debt in that you only have your rate for a certain period of time and thus need to consider the risk of a rate rise in the future.

Personally I'm doing this:
---
Take 43k out of company, eat the 2k tax. (Same for the other half)
Eat 3-4k per month "living" expenses.
Overpay the mortgage 10%
Vanguard lifestyle ISA


Business
---
Savings account for the tax / warchest
Extra to Vanguard lifestyle (math wise this should be a wrapped in a SIPP, but I don't do that)
Once I have 100k in the vanguard looking at getting a SPV for a company BTL
Maybe Peer2Peer lending.

Diversify for average returns over the long term. Near term doesn't matter that much since I won't be taking the money out because I don't want to pay the tax. Don't bet on individual stocks, don't try to get rich quick.


Just my opinion; YMMV.

[ChimpMaster]

Purely from a math point of view - if the interest on your savings (after fees & tax) is higher than the interest of your debt, then you should save as opposed to overpaying. However, mortgages are a bit different than your typical debt in that you only have your rate for a certain period of time and thus need to consider the risk of a rate rise in the future.

Personally I'm doing this:
---
Take 43k out of company, eat the 2k tax. (Same for the other half)
Eat 3-4k per month "living" expenses.
Overpay the mortgage 10%
Vanguard lifestyle ISA


Business
---
Savings account for the tax / warchest
Extra to Vanguard lifestyle (math wise this should be a wrapped in a SIPP, but I don't do that)
Once I have 100k in the vanguard looking at getting a SPV for a company BTL
Maybe Peer2Peer lending.

Diversify for average returns over the long term. Near term doesn't matter that much since I won't be taking the money out because I don't want to pay the tax. Don't bet on individual stocks, don't try to get rich quick.

Just my opinion; YMMV.

£4k / month living expenses! Really?
I'm interested in the SPV idea. Have retained profits doing nothing in the company account and have considered SPV but not had time to pursue yet.

[fool]

£4k / month living expenses! Really?
I'm interested in the SPV idea. Have retained profits doing nothing in the company account and have considered SPV but not had time to pursue yet.

Yeah, does that seem high? To put it in perspective I'm down £2180 p/m on mortgage payments alone. Bills will easily take that to £2680 before I even buy dinner and a nice dinner will easily cost £40-£80.

Living down south isn't cheap. Not worth doing unless your rates are high.

[WTFH]

£4k including your mortgage isnt high (IMHO).

[ChimpMaster]

£4k including your mortgage isnt high (IMHO).

Depends how much your mortgage payments are and how big your family is I guess.

I reckon my expenditure is ~£2,000 / month excluding mortgage.

[vetran]

Purely from a math point of view - if the interest on your savings (after fees & tax) is higher than the interest of your debt, then you should save as opposed to overpaying. However, mortgages are a bit different than your typical debt in that you only have your rate for a certain period of time and thus need to consider the risk of a rate rise in the future.

Personally I'm doing this:
---
Take 43k out of company, eat the 2k tax. (Same for the other half)
Eat 3-4k per month "living" expenses.
Overpay the mortgage 10%
Vanguard lifestyle ISA


Business
---
Savings account for the tax / warchest
Extra to Vanguard lifestyle (math wise this should be a wrapped in a SIPP, but I don't do that)
Once I have 100k in the vanguard looking at getting a SPV for a company BTL
Maybe Peer2Peer lending.

Diversify for average returns over the long term. Near term doesn't matter that much since I won't be taking the money out because I don't want to pay the tax. Don't bet on individual stocks, don't try to get rich quick.


Just my opinion; YMMV.

There us some benefit to clearing debt, if you need to borrow then you have slack. Also if you do fall on hard times you have less to service. Unless your debt is fixed rate for the term it makes sense to clear it while its cheap.

Though I suspect a lot of debt is going to be inflated away again shortly.

[northernladyuk]

Agreed, your advice hasn't been helping and that premium number is costing me a fortune

But it keeps the old man in baccy.