Investment options

[rootsnall]

Hi,
Now that I'm contracting I want to invest the extra income. I looking at a 10 year plan, these are what I see as my options.

1) Get a large mortgage and overpay it as much as possible.
2) Get an interest only mortgage, open a couple of maxi-share(linked to ftse) ISA's (me and other half) and pay the limit into them (7K pa).
3) Repayment mortgage and one isa.

Trading up to a bigger house at the moment may be a debatable decision but paying off any existing mortage with any excess income is hard to beat. You could make more going the ISA route but paying off your mortage is a nailed on 5%+ tax free return. As mentioned in other replies potential contracting worries are a lot easier to handle when mortage free.

[Goya]

The one thing to think about if you're diverting funds to mortgage overpayments from other investments (i.e. shares) is that you'll be missing out on compound interest.

[rootsnall]

The one thing to think about if you're diverting funds to mortgage overpayments from other investments (i.e. shares) is that you'll be missing out on compound interest.

Needed a bit of thinking about but it works exactly the same but in reverse ( and is tax free ). The interest on the chunk you chose to not pay off compounds on to the outstanding mortgage.

[wendigo100]

Needed a bit of thinking about but it works exactly the same but in reverse ( and is tax free ). The interest on the chunk you chose to not pay off compounds on to the outstanding mortgage.

Exactly - I finally saw the light on that one a few years ago, particularly the tax-free bit.

[Lucifer Box]

There is some good investment potential here for any wannabe property developers and/or buy-to-letters out there.

http://cgi.ebay.co.uk/ws/eBayISAPI.d...m=120079905388

[Fishface]

sorry for being thick - but could you explain what you mean

>>The interest on the chunk you chose to not pay off compounds on to the outstanding mortgage.

>>Exactly - I finally saw the light on that one a few years ago, particularly the tax-free bit.

what tax free bit?

[DaveB]

sorry for being thick - but could you explain what you mean

>>The interest on the chunk you chose to not pay off compounds on to the outstanding mortgage.

>>Exactly - I finally saw the light on that one a few years ago, particularly the tax-free bit.

what tax free bit?

By not paying of a chunk of your mortgage you end up paying interest on that chunk which effectively compounds over the period it takes to pay off the same amount in the conventional manner.

Over payments on a mortgage are effectivly a tax free investment at the mortgage lending rate. The same money invested in other ways is potentially subject to tax, depending on the type of investment.

Bottom line is, if you have a mortgage then 99% of the time it makes better financial sense to pay that mortgage off rather than invest money in other ways.

[Lockhouse]

Bottom line is, if you have a mortgage then 99% of the time it makes better financial sense to pay that mortgage off rather than invest money in other ways.

Even more so if you are a 40% taxpayer.

[tim123]

There is some good investment potential here for any wannabe property developers and/or buy-to-letters out there.

http://cgi.ebay.co.uk/ws/eBayISAPI.d...m=120079905388

So what was the best offer then (I must be the only person in the world without an ebay account)

tim

[Pondlife]

So what was the best offer then (I must be the only person in the world without an ebay account)

tim

£15K