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Property vs pension

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    #61
    Yes, it's much better because it is cover for a small but potential catastrophe. Paying a few hundred quid off the mortgage will in no way provide the same cover.
    My mortgage is a couple of % interest, I am averaging 11% from investments, I think its the right choice.

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      #62
      Originally posted by lukemg View Post
      Yes, it's much better because it is cover for a small but potential catastrophe. Paying a few hundred quid off the mortgage will in no way provide the same cover.
      My mortgage is a couple of % interest, I am averaging 11% from investments, I think its the right choice.
      So why bother with the life insurance? It's just throwing money away - never mind 11% or 2%, it's a minus 100% investment.
      …Maybe we ain’t that young anymore

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        #63
        Originally posted by WTFH View Post
        OK, so how much do you pay per month into life insurance (which has a zero return while you are alive), compared with how much you pay in interest on the mortgage?
        You said you saw paying off the mortgage as a waste, but you pay into an insurance policy instead.
        For someone focused on the returns, is paying into an insurance policy a better investment than paying down the mortgage?
        Comparing apples and oranges there, surely.

        Life insurance is there to provide for the family if you die. The payout would presumably pay off the mortgage, therefore taking away a significant financial commitment from the bereaved wife and kids. At least that's why I have life insurance.

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          #64
          Originally posted by WTFH View Post
          So why bother with the life insurance? It's just throwing money away - never mind 11% or 2%, it's a minus 100% investment.
          Why are you looking at life isnurance like an investment. They're different things for different purposes.

          OP: "I'm wondering if property or stocks are a better investment"
          WTFH: "Do you have a car? Why bother with a car, It's just throwing money away - never mind 11% or 2%, it's a minus 100% investment"

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            #65
            Originally posted by FrontEnder View Post
            Comparing apples and oranges there, surely.

            Life insurance is there to provide for the family if you die. The payout would presumably pay off the mortgage, therefore taking away a significant financial commitment from the bereaved wife and kids. At least that's why I have life insurance.
            My point being, while mortgage rates are still low, that's when you should be clearing that debt, rather than paying more when the rates rise. Some people seem to think that low rates means borrow more, but really it's the best time to clear your debts. Once you're debt free then you can look at taking riskier investments and you can put your money into savings (with the likely increase in interest rates).

            If your life insurance is £10 a month and covers £500k, then go for it. If it's closer to £50 a month, then I'd say use some of your cash to clear your mortgage, then you don't need as much life cover and with the mortgage gone you can invest more.
            …Maybe we ain’t that young anymore

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              #66
              Originally posted by FrontEnder View Post
              Why are you looking at life isnurance like an investment. They're different things for different purposes.

              OP: "I'm wondering if property or stocks are a better investment"
              WTFH: "Do you have a car? Why bother with a car, It's just throwing money away - never mind 11% or 2%, it's a minus 100% investment"
              Nope, not what I said and you know it, so please stop twisting my words.

              The guy said he was more interested in investments than paying his mortgage. He then said he had life insurance to cover. So the money he is spending on life insurance is part of his investment strategy.
              I'm suggesting that his chosen strategy might not be the best use of his investments at a time when interest rates are low and a mortgage could be paid off quickly.

              If you think/hope/believe that interest rates will stay < 1% for the next 10+ years (or whatever time is left on your mortgage), then it's less of a risk. If you think interest rates are going to rise, then the money which could be used clearing the mortgage down now will end up being spent servicing the interest on the mortgage.
              …Maybe we ain’t that young anymore

              Comment


                #67
                Originally posted by WTFH View Post
                If your life insurance is £10 a month and covers £500k, then go for it. If it's closer to £50 a month, then I'd say use some of your cash to clear your mortgage, then you don't need as much life cover and with the mortgage gone you can invest more.
                If it costs £50 a month for the level of cover you require, then you need to pay it. Mortgage rates shouldn't come into the equation at all. Paying a few quid extra a month on your mortgage isn't going to reduce it by much, but could mean a significant amount less for your family if you die.

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                  #68
                  Originally posted by WTFH View Post
                  Nope, not what I said and you know it, so please stop twisting my words.
                  Sorry, I thought the use of satire was obvious.

                  Originally posted by WTFH View Post
                  The guy said he was more interested in investments than paying his mortgage. He then said he had life insurance to cover. So the money he is spending on life insurance is part of his investment strategy.
                  I'm suggesting that his chosen strategy might not be the best use of his investments at a time when interest rates are low and a mortgage could be paid off quickly.

                  If you think/hope/believe that interest rates will stay < 1% for the next 10+ years (or whatever time is left on your mortgage), then it's less of a risk. If you think interest rates are going to rise, then the money which could be used clearing the mortgage down now will end up being spent servicing the interest on the mortgage.
                  It's not at all. Insurance != Investment.

                  Comment


                    #69
                    Originally posted by FrontEnder View Post
                    It's not at all. Insurance != Investment.
                    His investment strategy is:
                    1. Don't pay off mortgage, but take out insurance to cover the mortgage if he dies.
                    2. Make financial investments

                    Because of his option not to pay off the mortgage (as part of his investment strategy) he is paying for a life insurance policy, so that insurance policy is part of his strategy.
                    If he changes what he does with his money, then he wouldn't need as much life insurance.

                    Back in the old days of endowment mortgages, the lenders were very keen for people to take out life insurance as part of the mortgage package. I suspect they are still keen to do it with people who take out interest-only mortgages.

                    If the OP considers buying a home as part of his investment strategy, then having a life insurance policy to clear the mortgage is part of that investment strategy.
                    …Maybe we ain’t that young anymore

                    Comment


                      #70
                      Ok, I am in no way saying the insurance is part of the investment. You take out insurance to cover the really big potential losses, car, house, life. You don't expect a return, it is there JIC.
                      SO, it is not either insurance OR pay off the mortgage OR invest the money.
                      It is Insurance PLUS a decision to invest or pay off the mortgage and my choice is clear. I also said this would not suit everyone and most would be better clearing the mortgage for peace of mind. Same as I won't touch BTL, I would hate the grief involved but it does work for some.

                      I am also not telling people what to do, only presenting an alternative view to those who think clearing the mortgage is the only way to go.
                      I am 50 and no longer need to work so naturally I think my plan works !

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