Reply to: Investment options

[Diestl]

Thanks for all the advice,

Any ideas on the best mortgage for this , one account? 90% LTV and 6 months contract?

Cheers

[tim123]

£15K

ta,

[DimPrawn]

Never underestimate the power of stupid people in large numbers.
- Tony (Blair)

Seems more fitting.

[Pondlife]

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

tim

£15K

[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

[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.

[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.

[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?

[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

[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.

[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.

[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]

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.

[ChimpMaster]

The idea of ISA funds is good, as many have stated here already.

The one thing I will add is to try and invest globally, not just in the UK or Europe. I have put some cash to work in China and India via Fidelity ISA funds (only 1.5% charge), and so far they have done very well - almost doubled in under 2 years. These 2 countries are expected to grow quicker than any other over the medium term.

I'll be putting this year's ISA into East Asian funds too.

Apart from ISAs I am aiming for the following :
-to pay off my mortgage
-have a couple of BTL properties around
-a large cash sum in the bank
-I also trade high risk derivatives via LSE

[lukemg]

Max out your ISA allowance, put it in shares via unit trusts. Have a look at Hargreaves Lansdowne for discounts on purchase (usually require lump sum investments though).
Consider a low cost tracker also (out perform many managed funds apparently and with low costs, due to low overheads, can be good).
Have to be looking at 5 years for any shares investments, buy and try not to worry about them.
You never have to put them on a tax return and all gains are tax free. Get one of these a year for 10 years and let them ride.
Been doing this since 97 - through the lean 2000/01 years although had 3 years off due to income meltdown and no spare cash (back in this year).
Avg annual return for these funds has been 12% per year (range is 2%-26%). I am very happy with this with no grief etc that a buy-to-let might cause. I am considering these as part of my retirement planning so they were always going to be long term.
Got a modest mortgage as well that I am paying off over 16years (expecting to increase this shortly).