saving acccount, mortgage or stocks and shares?

dalehitchy1

dalehitchy1

dalehitchy1

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I have a spare £50 to £100 per month I can save.

Shall I put this towards my mortgage every month (not long got mortgage ... Borrowed 89k over 25 years)

I was thinking of putting it into a stocks and shares ISA (someone recommended legal and general as its distributed over a stock market) .... Its not as high risk but its still possible. Then again I would be comfortable losing £50 a month.

Or just put it into a saving account.

What ya'll think?
 
depends on risk level and mortgage interest rate/penalties.
also depends if you have any other savings and if you want a buffer. Buffer for emergencies is a good idea.
however regular savings are pretty rubbish atm.
hence why I stick it mainly in funds and a bit of p2p. Funds I can get the money out reasonably fast if needed but to slow to just spend it(lack of self control), p2p lending its essentially stuck in there. But there's risk.
 
Reducing it down to base figures it depends how much your mortgage interest rate is vs the available savings rates. However if you don't have a rainy day fund then I'd suggest building that up before overpaying your mortgage - maybe somewhere easy access but giving you a bit of interest.
 
You can save silly amounts off your mortgage if you overpay, thanks to the wonders of compound interest. I'll bet your mortgage rate is higher than any reasonably assured return on investment you can find.
 
Disclaimer: I am not a financial advisor and as such anything in this post should be taken as an expression of opinion only! It may not even be factually correct!

From and economic point of view you could consider investing that cash into a pension or SIPP as they are often called. the benefit of this is that it is the most tax efficient way of saving. If you are a basic rate tax payer then you will have the government top up your contribution by 25% of the gross amount you put in. eg if you put in £100 a month the government will add £25. Its better if you are paying higher rate tax!

The downside is that you are effectively locking this money away until you are 55 at which point you can take a fairly decent amount of it as a tax free lump sum or invest into an annuity to supplement any company pension or your state pension at age 67.

I suspect that that will even challenge investment returns on UK property of the next 25 years.
Paying it off your mortgage is never a bad idea but when borrowing is relatively cheap then having debt is not a cardinal economic sin and arguably having some debt is a good thing if you can prove that it can be serviced. I'm not sure what age you are but the likelihood is that you may wish to extend this mortgage in the future.

Personally I wished I'd paid less off the mortgage and chunked more into AVCs or a SIPP. Aside from tying up your capital its a much better way of saving.
 
Considering how **** the saving rates are currently, which means after inflation most people are still losing money.. isn't the answer to this ludicrously obvious? :confused: Pay off your mortgage. If you ever need money you'll always have a magic tree of inflating capital (that this country calls houses) to draw from :rolleyes:

Sorry, got a bit ranty there :D
 
indeed - so long as you've got sufficient equity that you're not getting ripped off then low interest rates probably mean it isn't necessarily a good idea to overpay your mortgage
 
At the moment we are prioritising spare cash off the mortgage. Ours is a Lloyds (formerly C&G) standard variable rate so no limit on the amount of extra capital repayment. We have dropped an original £114k mortgage taken over 20 years to around £24k in just over 11 years. Another two years or so should see it gone. What we owe now, some people pay more for an Audi or Beamer.

That said our savings and other debt are in a fairly healthy state and (barring anything unforeseen) the pension is also pretty much in the bag including AVC's, just another 18 months or so to get the maximum in the scheme.

The only caveat about paying money off the mortgage is that once paid you can't get it back, unlike savings or similar.
 
I'm just about to blow all my available savings on paying off my parents and my mortgages, thankfully I don't have to touch any ISA's - which even though are currently performing poorly, I'm banking on them as a long term investment

Feeling a bit twitchy as it will have been a few years since I haven't had a good bit of dosh available in reserve, but being mortgage free will be a good feeling and it hopefully won't take too long to build up a buffer again
 
dowie said:
indeed - so long as you've got sufficient equity that you're not getting ripped off then low interest rates probably mean it isn't necessarily a good idea to overpay your mortgage
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I'm not being funny, but if you're a homeowner -- beyond money for a rainy day, new car, holidays etc. what are you actually saving for? To buy another house? :confused: Genuine question from a renter that diligently puts money away every month only to see house price inflation far outweigh the return..

The best way to make money from money nowadays, is to put it into property. Therefore putting it into an ever-inflating 'thing' such as your house not-only means you benefit from that, but you're reducing your debt and compound interest at the same time?
 
Scam said:
I'm not being funny, but if you're a homeowner -- beyond money for a rainy day, new car, holidays etc. what are you actually saving for? To buy another house? :confused: Genuine question from a renter that diligently puts money away every month only to see house price inflation far outweigh the return..
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Anything, I'm not sure it matters, I was simple pointing out that overpaying is not necessarily a good idea especially given how cheap the debt is at the moment.

The best way to make money from money nowadays, is to put it into property. Therefore putting it into an ever-inflating 'thing' such as your house not-only means you benefit from that, but you're reducing your debt and compound interest at the same time?
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You already own the house - if the house rises in value you get the benefit of that rise in value regardless of how much of the mortgage you've paid off.

re: your last part - compound interest applies to your savings too - bottom line is if you're getting a better rate on your savings or investments then you're probably better off not overpaying. As for reducing your debt - so what? If you've got a 130k mortgage and 30k in savings or a 100k mortage and 0 in savings your net worth is still the same...
 
I guess I think about it differently. Paying off a mortgage to me, *almost* equates to saving money as you end up with that capital at the end of it.. e.g. if you stick £100k deposit down on a £500k house and pay off the mortgage in 25 years -- you're still left with £500k in bricks and mortar. Probably a lot more after house price inflation.

The only way that falls down is that if you're very unlucky and end up in negative equity. Highly unlikely these days.
 
If your mortgage allows it, then paying some of this off is a win-win medium and long term because your rate will be higher than any savings rate and you won't be taxed on your return. I shaved off 7 years from my mortgage by keeping my payments the same as what they were when they were higher.

God help people if and when rates return to some kind of normality.
 
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