Decisions, Decisions (financial)
Discussion
Pistonheads seems to be a fountain of knowledge, and a place where the wise gather, so I thought I might open this up to the community.
We've got an offer on our house of £125,000. With £5000 we've alloted from our savings and another £30,000 on our mortgage, we'll be paying £800 per month and can have a nicer house. It's fixed rate for the next 18 years, so no worries about it going sky high, and we're insured against not being able to pay.
However, the bank have offered an alternative which would see us paying just over £1000 per month (a figure that is on the very edge of what I could afford - also fixed rate for 18 years), but would see us with £50,000 to invest.
Here's the dilemma. Will we be able to invest 50K with sufficient return to offset the extra cost (and thereby have 50K in our pockets at the end of it all)?
We've got an offer on our house of £125,000. With £5000 we've alloted from our savings and another £30,000 on our mortgage, we'll be paying £800 per month and can have a nicer house. It's fixed rate for the next 18 years, so no worries about it going sky high, and we're insured against not being able to pay.
However, the bank have offered an alternative which would see us paying just over £1000 per month (a figure that is on the very edge of what I could afford - also fixed rate for 18 years), but would see us with £50,000 to invest.
Here's the dilemma. Will we be able to invest 50K with sufficient return to offset the extra cost (and thereby have 50K in our pockets at the end of it all)?
Given that £50,000 is 50 months payments on the mortgage, its something to think about investing. Though I would say that whatever product(s) you use, make sure you can get to the money when needed - and not at some hideous expense or time delay.
If you can do this then it sounds a good deal. If its fixed for so long, what might be the limit of your budget will be fine in 5 years (inflation). Unfortunately interest rates are pants at the moment, but got for medium to long term and aim for turning your £50,000 into closer to £100,000 in say 10 years. Then re-do the mortgage, maybe even pay it off, and free yourself of financial burdens....
Oh what a life - mmm, me I will stick to paying ridiculous payments on my mortgage... shame.
If you can do this then it sounds a good deal. If its fixed for so long, what might be the limit of your budget will be fine in 5 years (inflation). Unfortunately interest rates are pants at the moment, but got for medium to long term and aim for turning your £50,000 into closer to £100,000 in say 10 years. Then re-do the mortgage, maybe even pay it off, and free yourself of financial burdens....
Oh what a life - mmm, me I will stick to paying ridiculous payments on my mortgage... shame.
Dunno how feasible this is for you, and to be honest I am not sure whether this is really a good investment but...
I have taken one of those offset mortgages where by (in you case) one could put the 50k into an offset account where it would earn no interest, but be offest against the value of the mortage. This is good over the long term as it gives you flexibility to use the money as you see fit, and also means your fixed monthly payment pays off more of the capital in the mortgage than otherwise, earlier (as long as you have money in the offset accunt).
I probably haven't explained that well...
I have taken one of those offset mortgages where by (in you case) one could put the 50k into an offset account where it would earn no interest, but be offest against the value of the mortage. This is good over the long term as it gives you flexibility to use the money as you see fit, and also means your fixed monthly payment pays off more of the capital in the mortgage than otherwise, earlier (as long as you have money in the offset accunt).
I probably haven't explained that well...
Having spoken to an IFA who reckons investments aren't great at the moment, I've decided against taking the 50K. My mortgage is fixed for 18 years, and I don't mind paying the 5.8% I'm on at the moment. In the long term, I can't see how interest rates can possibly stay as low as they are, so I'm insuring myself against that eventuality.
Of course, I'm still open to ideas and suggestions. A final decision hasn't been made yet, so feel free to pitch more ideas and advice into the pot.
Of course, I'm still open to ideas and suggestions. A final decision hasn't been made yet, so feel free to pitch more ideas and advice into the pot.
Witchfinder said:
Of course, I'm still open to ideas and suggestions. A final decision hasn't been made yet, so feel free to pitch more ideas and advice into the pot.
Probably the best move in reality. Stick the money in the house, pay the mortgage for 5 - 8 years and see if you can liberate a little later for a bit of "fun", but since you have a nice lock-in deal it seems daft to break that in the short term.
Interest rates are low, take advantage. You never know, over pay if possible and finish the term early....
Depends how complex you/your IFA wants to get?
You can (via delayed taxation schemes readily available) borrow cash at an effective rate of approx. 2.9% (this is an approximation based on a recent hurdle rate i was quoted). However im not really the person to explain them. Ask you IFA.
The favourite at the moment seems to be the 4 year tax deferral (via the film industry) whereby you can 'claim back' 4 years worth of tax, with very minimal risk, with repayments taken into consideration giving an effective borrow of aprox. 2.9%)
There are other, more 'aggressive' schemes available, but that all depands on a) how much money you want to invest (some of these schemes are designed for 'high net worth individuals' & therefore investment can start from as low as 50k up to 250k min) and b) how happy you are with risk.
Speak to a good tax specialist/IFA they will advise you better than i can, but i do recommend you look/consider.
>> Edited by cinque on Thursday 31st March 11:49
You can (via delayed taxation schemes readily available) borrow cash at an effective rate of approx. 2.9% (this is an approximation based on a recent hurdle rate i was quoted). However im not really the person to explain them. Ask you IFA.
The favourite at the moment seems to be the 4 year tax deferral (via the film industry) whereby you can 'claim back' 4 years worth of tax, with very minimal risk, with repayments taken into consideration giving an effective borrow of aprox. 2.9%)
There are other, more 'aggressive' schemes available, but that all depands on a) how much money you want to invest (some of these schemes are designed for 'high net worth individuals' & therefore investment can start from as low as 50k up to 250k min) and b) how happy you are with risk.
Speak to a good tax specialist/IFA they will advise you better than i can, but i do recommend you look/consider.
>> Edited by cinque on Thursday 31st March 11:49
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