Mortgage Overpayment or Investing?

[chilltrader]

Hi,

Had a question on mortage (especially in current economic scene)

Would like to get some viewpoints from the financial experts here

Case:
1. A 5 year fixed mortgage taken@ 6% last year. 4 years remaining.
2. If required able to spare and pay an extra 1/3 as overpayment on top of the
monthly mortage payment.

What would you rather do with the amount you can spare?
a) Overpay every month, as it would help when it comes to remortgaging a reduced amount then required.
b) Invest in stocks - hoping in 4 years time a better lump sum payment can be done?
c) Other ideas?

Thank You!

 

[mauzj]

I did a bit of each.

I'm very glad that I overpaid my mortgage as my stock market investments have fallen, but despite that I can sleep comfortable in the knowledge that I won't lose my home.

A colleauge asked me why I don't take equity out of my home and invest in Middle Eastern property. But to be honest, I prefer a good night's sleep. The upside of a successful investment might be a bit of spare cash that I might blow on a Porsche or overpriced crack whore. The downside of a bad investment could be losing my home, if the investment goes bad and I lose my job.

N.B. I'm not financial expert. Just a lazy half arsed Bobl monkey.

 

[foredog]

Pay off the mortage, you'll sav the interes there where as unless you're invested by an ISA you'll be paying tax on the profits of shares.

If you really want to invest as well 1/3 shares 2/3 mortgage maybe

Just my opinion

 

[Paul71]

Hi,

Had a question on mortage (especially in current economic scene)

Would like to get some viewpoints from the financial experts here

Case:
1. A 5 year fixed mortgage taken@ 6% last year. 4 years remaining.
2. If required able to spare and pay an extra 1/3 as overpayment on top of the
monthly mortage payment.

What would you rather do with the amount you can spare?
a) Overpay every month, as it would help when it comes to remortgaging a reduced amount then required.
b) Invest in stocks - hoping in 4 years time a better lump sum payment can be done?
c) Other ideas?

Thank You!

Interesting question, that. One third, is that say a k on top of 3k a month? I'd say investment was your better choice. Create a seperate investment account with the surplus. Don't forget all the % have to be offset as a ratio to your property value and any gains or losses that the property incurs. I personally believe if you know what you are doing, investment will give you a better return on the surplus/overpayment than the property. It's up to you mate.

Ps. Hope i've understood you?

 

[shadowninja]

b) Invest in stocks - hoping in 4 years time a better lump sum payment can be done?

Would you be happy if the stocks were worth half their current value ie the money you have available is worth 50% in 4 years time of what it is currently worth. Taking into account inflation it would be worth maybe 40% of its current value.

ETA: I speak as a layman who knows **** all about inflation, value investing, etc.

 

[Paul71]

Would you be happy if the stocks were worth half their current value ie the money you have available is worth 50% in 4 years time of what it is currently worth. Taking into account inflation it would be worth maybe 40% of its current value.

ETA: I speak as a layman who knows **** all about inflation, value investing, etc.

Well, the banks always cover themselves where lending is concerned, lending to Chill trader is probably safer than thier other options, and they will make sure the debt is repayed at a better than average in terms of thier other concerns.

The question is.....can Chilltrader beat the banks, £ for £, as a % on the case given? Well, the housing market is probably out of his hands the way he seems to be playing it, he's not really in control. On the other hand, if he's savvy about the markets, he's in full control.

That's why i went for investment, with the get out clause, the get out clause is Chill traders ability.

That's why it's all up to him.

 

[catracho]

Hi,

Had a question on mortage (especially in current economic scene)

Would like to get some viewpoints from the financial experts here

Case:
1. A 5 year fixed mortgage taken@ 6% last year. 4 years remaining.
2. If required able to spare and pay an extra 1/3 as overpayment on top of the
monthly mortage payment.

What would you rather do with the amount you can spare?
a) Overpay every month, as it would help when it comes to remortgaging a reduced amount then required.
b) Invest in stocks - hoping in 4 years time a better lump sum payment can be done?
c) Other ideas?

Thank You!

pay mortgage off - if you believe that we will be in deflationary environment -

if you believe inflationary environment - keep debt as it´s value will be eroded by inflation...



IMHO
personally prefer not to have any debt at mo...also once mortgage is paid then your living expenses are greatly reduced, the house is YOURS and no one can take it away..

my personal belief is deflation - despite the huge efforts by CB´s and governments to stoke up inflation - ie short term inflation followed by larger deflation a la Japan....

 

[mauzj]

That's why i went for investment, with the get out clause, the get out clause is Chill traders ability.

That's why it's all up to him.

But even experts get it wrong. And if he gets unlucky and loses money that could have paid off his mortgage he'd feel like a real idiot.

I was speaking to a local from another arcade yesterday. A lot of the more experienced locals at his place dropped a few hundred grand in the initial volatility spike, decided to call it a day, and have moved on to other pastures. Fortunately, though they'd lost a fat pile of cash, they'd paid off their mortgages and could easily live off more modest incomes.

 

[Paul71]

But even experts get it wrong. And if he gets unlucky and loses money that could have paid off his mortgage he'd feel like a real idiot.

I was speaking to a local from another arcade yesterday. A lot of the more experienced locals at his place dropped a few hundred grand in the initial volatility spike, decided to call it a day, and have moved on to other pastures. Fortunately, though they'd lost a fat pile of cash, they'd paid off their mortgages and could easily live off more modest incomes.

I totally agree with your sentiment. If he's unsure about speculation, just pay the bugger off, it will be the easiest option. And probably a lot less stressful for him/her.

 

[chilltrader]

Hey.. thanks for all your comments. I guess I'll go the 1/3rd 2/3rd route, with 2/3rd going into paying the mortgage off and 1/3rd going into long term buy and hold stocks.
With Benjamin Graham and Warren Buffet to guide me, what can possibly go wrong?

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