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  • Interest only mortgages and stocks and shares isa's
  • maxray
    Free Member

    Hiya, I always seem to make to incorrect decision with our mortgage, getting a 5 year fixed when a tracker would have been loads better most recently.

    Now we are on their standard variable we have been thinking about going interest only and then maybe paying into a stock n shares isa to try and pay the mortgage off quicker.

    Does anyone on here do this and or have any good/bad tales of this method over a standard repayment mortgage?

    mudshark
    Free Member

    Well I sort of did this. If you think you can get a return of greater than the interest rate then you’re a winner. A lot of people in recent years preferred repayment mortgages because they’re ‘safer’ but that was mainly in comparison to endowment mortgages which had huge upfront fees and were so inflexible.

    What I did was take out an offset mortgage then choose to offset the mortgage or invest in unit trusts (in an ISA) as I saw fit. I’m quite sensible though as some might decide expensive cars/holidays/women might be worth splashing out on.

    maxray
    Free Member

    🙂 cheers mudshark… goes off to google unit trusts 🙂

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    Edukator
    Free Member

    Look at a Nikkei chart for the last 25 years before you sign. They had a banking crisis in the late 80s.

    Trimix
    Free Member

    Unless your an expert trader I cant see why you are going to make money by buying stocks and shares. If it was that easy we would all be rich.

    My company has millions invested and we dont make much more than inflation. Your mortgage interest will be higher than that.

    Save yourself the time, risk and money – stick to paying off your mortgage on a variable repayment.

    Spend your time either saving money by not spending it, or by being efficient elsewhere. Oh, and save for the future with a pension.

    stumpyjon
    Full Member

    Personally I wouldn’t go that way on the basis that in the long run interest on your debt is going to be greater than the interest you’re going to earn through a safe investment. Endowments paid off for some as they matured at the right point in the economic cycle, for the majority they won’t. So IMO it’s a risk to assume any investment of this nature will yield a high enough return to offset your debt interest.

    That said I was lucky enough (and it was luck) to move to a tracker mortgage with no upfront fees charging 0.79% above BoE base in 2008 just before everything went down the tubes so i would think repayment mortgages are peachy.

    TiRed
    Full Member

    Repayment and AVC’s into a pension fund was my solution. I’ll know in 20 years whether it was a good one when I take the lump sum. But tax relief at source can’t hurt.

    mudshark
    Free Member

    Unless your an expert trader I cant see why you are going to make money by buying stocks and shares. If it was that easy we would all be rich.

    Hmmm I’m (obviously) not an expert but I did study investment at Uni – interestingly decided not to bother with equities as you suggest. What I did decide though was that by choosing the right funds I would get a relatively cheap way of getting someone to do my work for me; I also choose funds for my pension through a SIPP. I have a spreadsheet that shows me compound returns over time and compares with FTSE which I am beating comfortably so happy with that.

    Edit – a useful strategy (as djaustin is saying I think), if you’re a higher rate tax payer anyway, might be to use up much of your higher rate income by paying into a pension then using the 25% you can withdraw on retirement to pay off your mortgage. Maybe there’s a risk here if pension rules change.

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