Spare capital dilema

[caduceus]

If you had a slush fund that was enough to pay off the remainder of your mortgage, would you pay it off asap, or use the money to make money in buying & selling property,etc?

Not paying any more interest on what I borrowed is appealing...

[clived]

Do you have the time and experience to "make money buying and selling property"? If you lost some of your money, how cross would you be?

The simple, low risk, but potentially lower return option is, just pay it off

[caduceus]

clived said:

Do you have the time and experience to "make money buying and selling property"? If you lost some of your money, how cross would you be?

The simple, low risk, but potentially lower return option is, just pay it off

I have the experience in the physical labour stuff, electrics, plumbing, decorating, flooring, etc. But none in actually buying and selling..

I'd be cross if I spent time, money & effort in 'doing up' a property, and then sold at a loss. Yes. I'd rather lose money in gambling with shares. That I DO have experience in

[beeej]

Um, look at it this way. You're in debt.

So man up and pay it off... or at least, a big big chunk of it

[ringram]

beeej said:

Um, look at it this way. You're in debt.

So man up and pay it off... or at least, a big big chunk of it

Fail.

Look at opportunity costs, alternative investments and assets, expected returns, risks etc, then decide if its better to pay it off or not.

[caduceus]

ringram said:

beeej said:

Um, look at it this way. You're in debt.

So man up and pay it off... or at least, a big big chunk of it

Fail.

Look at opportunity costs, alternative investments and assets, expected returns, risks etc, then decide if its better to pay it off or not.

Could you elaborate please..?

[mrmr96]

caduceus said:

ringram said:

beeej said:

Um, look at it this way. You're in debt.

So man up and pay it off... or at least, a big big chunk of it

Fail.

Look at opportunity costs, alternative investments and assets, expected returns, risks etc, then decide if its better to pay it off or not.

Could you elaborate please..?

Debt at 5% interest but investment returns at 10% mean you're better off staying in debt and putting the money to work.

beeej doesn't understand why start up companies borrow money, it's because they can make more money (returns) at a rate higher than the cost of interest. (Or at least they think they can.) It's why LOADS of businesses either start with debt, or take on debt to expand.

[BoRED S2upid]

Pay it off. How good will it feel not having a mortgage? most people have theirs for life and end up paying the evil banks a fortune in the meantime. Plus you have been paying £xxx off your mortgage every month for how long? pay that money into something else instead and watch that grow.

[fido]

mrmr96 said:

Debt at 5% interest but investment returns at 10% mean you're better off staying in debt and putting the money to work.

That's fine if your investment realizes 10% .. what if you lose the capital? Risk and reward. If you an afford to take the downside risks then go for it.

[jonah35]

What's the interest you're paying on the mortgage?

[caduceus]

jonah35 said:

What's the interest you're paying on the mortgage?

2.5%

[spikeyhead]

caduceus said:

jonah35 said:

What's the interest you're paying on the mortgage?

2.5%

So you want to earn comfortably more on a risk adjusted basis than that from your investment or you're better off just paying it off.

[caduceus]

spikeyhead said:

So you want to earn comfortably more on a risk adjusted basis than that from your investment or you're better off just paying it off.

Sorry, I don't really get that. Risk adjusted basis? On what? Investment? You mean Buying/selling property?

[chris7676]

caduceus said:

spikeyhead said:

So you want to earn comfortably more on a risk adjusted basis than that from your investment or you're better off just paying it off.

Sorry, I don't really get that. Risk adjusted basis? On what? Investment? You mean Buying/selling property?

It's a matter of pricing the risk which may not be easy and objective.
Let's say you can get higher returns than the mortgage interest but there are likely to be some investment risks involved so may not be that clear cut better off.

Something like that:
Outcome % = Investment Return % - Debt Interest % - Risk factor %

[Gaspode]

I'm extremely risk averse, especially when it comes to not being homeless, so I would always advise paying off the mortgage on your home as the most important thing to do.

Another factor to consider is the completely liberating experience that it is to be debt free. I believe that the reason most people have to suck up and take st from their bosses is because they can't afford to lose their jobs. Get rid of the need to make monthly payments and all of a sudden you feel an awful lot better about life.

[caduceus]

Thanks for that Chris
And thank you for all your replies thus far gentlemen.

Gaspode said:

Another factor to consider is the completely liberating experience that it is to be debt free. I believe that the reason most people have to suck up and take st from their bosses is because they can't afford to lose their jobs. Get rid of the need to make monthly payments and all of a sudden you feel an awful lot better about life.

I agree. This is one of the factors that is at the forefront of my mind, but with a different angle. As I'm stuck in a rut in my current employment, and starting to get fatigued by it. Will have to re train to change career, and at 42 the options are less than what they were at 20 something. Hence the idea of using the capital to start a career in property buying/selling, and being self employed.
But as said by others, the risk involved is all to apparent. And after the last 2-3 torrid years I've had, I'm not sure I want too much more stress in my life. But by the same token, I need a new challenge.
I guess I wouldn't know the risk levels until I tried of course.

All in all my gut is telling me to get shot of the mortgage. But I just wanted some 3rd party, neutral opinions on it all. Maybe a bit of, someone telling me its great to start up a business and make loads of money, etc, etc led to the post/question.

Going to think it over the weekend at work.

[Countdown]

caduceus said:

jonah35 said:

What's the interest you're paying on the mortgage?

2.5%

There are some instant access accounts paying 3% (for the first year). If you are completely risk averse I'd stick it in there so that, in theory, you'll make 0.5%.

[Tino]

Countdown said:

caduceus said:

jonah35 said:

What's the interest you're paying on the mortgage?

2.5%

There are some instant access accounts paying 3% (for the first year). If you are completely risk averse I'd stick it in there so that, in theory, you'll make 0.5%.

Not anymore there aren't!(Or if there are, please let me know. The best I can find is 2.3%) Apart from some accounts with low maximum investment(£15000 Lloyds TSB vantage-£20000 santander 123)
Plus you will be taxed on that income if you do find one that pays 3%

[Countdown]

I stand corrected

Forgot rates had dropped during the last couple of months. At work we're getting 0.37% on 3 months fixed and 0.56% on our deposit account

[caduceus]

Well, money is cleared and I'm off to pay off the mortgage. Been thinking about it over the weekend, and weighing up everything, it seems to make the most sense.
So the money that I was paying every month, I'm now going to save and invest.

I think the house buying, doing up and selling might have been too much of a worry.

Thanks for your advice/input chaps.