Pay off Mortgage or invest the money elsewhere

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Originally Posted by ninianclark

My brother in law is in the process of being made redundant - with the money he is due to get - he could pay off his mortgage and have a little bit left over - or he could invest it an ISA or maybe a deposit for a buy to let property.

Which one would you go for and why ?

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How old is your brother in law? Does he have any prospects for new employment? Is he coming up to retirement?

At my age, I am 40 with 24 years on my mortgage, I would keep the money safe because I'd have to pay my bills until I found a new job. Chances are I'd get a lower wage as well, so I would need that money over time.

If he falls on hard times, he may need to borrow money against the property again.

How much is he paying in interest? The interest rates are ridiculously low, and so any return of 4% or more is likely to be worth more to him in money terms. I would consider P2P lending - I'm currently getting about 8% from one site.

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Originally Posted by ninianclark

My brother in law is in the process of being made redundant - with the money he is due to get - he could pay off his mortgage and have a little bit left over - or he could invest it an ISA or maybe a deposit for a buy to let property.

Which one would you go for and why ?

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How old is he?

His age could make a big difference

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Originally Posted by Kris

How old is your brother in law? Does he have any prospects for new employment? Is he coming up to retirement?

At my age, I am 40 with 24 years on my mortgage, I would keep the money safe because I'd have to pay my bills until I found a new job. Chances are I'd get a lower wage as well, so I would need that money over time.

If he falls on hard times, he may need to borrow money against the property again.

How much is he paying in interest? The interest rates are ridiculously low, and so any return of 4% or more is likely to be worth more to him in money terms. I would consider P2P lending - I'm currently getting about 8% from one site.

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SNAP

There is a simple answer, can he get a return higher than the mortgage cost?

rates are low, but so are returns at the moment.

I have had a similar case of whether to invest the money or payoff a chunk of the mortgage. I have invested the money with Zopa (p2p lending) at a rate of 6-10%, my mortgage is 3% so its worth doing for now, but the money is locked in for 5 years (1% charge to release early).

If mortgage rates start going up then repaying the mortgage may be the better option

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Originally Posted by ninianclark

Not heard of Zopa, do they guarantee a minimum return ?, I must admit I thought all P2P loans were not guaranteed

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Funding Circle is getting me about 8%

Put in, say, £100. Lend out to companies (spread it to reduce the risk). Loans can be anywhere between 6 months and 5 years. When you get enough interest, lend it out. Minimum you can loan to a loan request is £20.

You can sell you loan at any time, charging a premium if you can get away with it. Loan requests are graded. A grade you get about 7% interest, down to grade E where you get 17.9%.

I've lent to about 200 companies in 3/4 years, a few have defaulted but are repaying anyway, and my losses are far offset by my gains (hence my 7.9% return).

Worth a try, seems more flexible than Zopa, but I could be wrong.

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Originally Posted by ninianclark

Dont think Brother in law would want to take that sort of risk, but Im going to look into it - I'd take a risk with a grand - I presume obviously the middleman takes a cut

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You pay a 1% fee on interest received. My return is minus fees and bad debts. It's not as risky as you'd think, if you spread the cash over many loans. Yes, you get the losses, but on average people are returning 6% or more. Their site has more detail.

Bought some Bitcoin back in November and since then my investment has nearly doubled.

https://blockchain.info/markets

Bitcoin is seeing a huge amount of investment at the moment as people speculate on whether the Winklevoss twins will have their ETF (exchange traded fund) granted by the SEC.

https://www.bloomberg.com/news/artic...on-bitcoin-etf

Their ETF will basically be a $20m trust fund that trades off the fortunes of Bitcoin. If it gets the go ahead then it legitimises the electronic currency and some real players will begin punting in.

Bitcoin is now at an all time high, reaching £1000 per Bitcoin yesterday for the first time. Might be worth bunging a few quid into it and holding on for the ride, you never know, in a few years that Bitcoin might be worth £30,000 or more.

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Originally Posted by Colonel Cærdiffi

Bought some Bitcoin back in November and since then my investment has nearly doubled.

https://blockchain.info/markets

Bitcoin is seeing a huge amount of investment at the moment as people speculate on whether the Winklevoss twins will have their ETF (exchange traded fund) granted by the SEC.

https://www.bloomberg.com/news/artic...on-bitcoin-etf

Their ETF will basically be a $20m trust fund that trades off the fortunes of Bitcoin. If it gets the go ahead then it legitimises the electronic currency and some real players will begin punting in.

Bitcoin is now at an all time high, reaching £1000 per Bitcoin yesterday for the first time. Might be worth bunging a few quid into it and holding on for the ride, you never know, in a few years that Bitcoin might be worth £30,000 or more.

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It's now above gold, a headline I read this morning. Bitcoin seems risky, could well crash and burn, but people have been saying that for years.

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Originally Posted by Kris

It's now above gold, a headline I read this morning. Bitcoin seems risky, could well crash and burn, but people have been saying that for years.

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Even if the ETF doesn't get approved it would probably crash down to around $800 per Bitcoin then steadily recover again as it has done for the last few years.

If it does crash that low I'll be happy to buy more at the lower price because I'm confident in its future with or without the SEC.

I only wish I got in back in 2009 when you could buy 5,000 Bitcoins for $27 :hehe:

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Originally Posted by Colonel Cærdiffi

Even if the ETF doesn't get approved it would probably crash down to around $800 per Bitcoin then steadily recover again as it has done for the last few years.

If it does crash that low I'll be happy to buy more at the lower price because I'm confident in its future with or without the SEC.

I only wish I got in back in 2009 when you could buy 5,000 Bitcoins for $27 :hehe:

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There's that bloke who has a few million on a hard disk in a landfill site somewhere. He's still looking I think.

no where to invest or decent rates , so pay off and stop paying them interest , that will be your saving

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Originally Posted by ninianclark

My brother in law is in the process of being made redundant - with the money he is due to get - he could pay off his mortgage and have a little bit left over - or he could invest it an ISA or maybe a deposit for a buy to let property.

Which one would you go for and why ?

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Happened to me in 2016, I paid off my mortgage, I've just jacked my current job for another, I wouldn't have taken the chance if i was still with a mortgage.

Pay off mortgage now whilst rates are low. Nothing like being free of it. You can save up quicker with less overheads if you are careful and then choose to invest where you want. Interest rates will rise eventually, they have never stayed low like this in history.....

I'm in the mix for redundos too and have thought about the same thing. Personally, if I get the bullet, I'd all but pay off the mortgage and get a temp job anywhere to pay the other monthly bills.

The problem with your investments these days is that the markets don't make any sense, as why put money you've earned into something that could be worth nothing tomorrow. Your house is the most important thing, followed by Council Tax, home insurance water rates. Every thing else can be rationed according to your circumstances.

I guess it's all down to the individual and their age and family circumstances that will be the determining factor. My view has always been never borrow money, or if you have to, get out of debt as soon as you can.

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Originally Posted by life on mars

no where to invest or decent rates , so pay off and stop paying them interest , that will be your saving

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Not true. You can make more interest than you pay.

http://www.moneysavingexpert.com/mor...ges-vs-savings

Interest of 2.9% means you need to find a return of 3.6%, for example.

There's no better way to invest than investing in property. Pay off the mortgage, sell house for profit and do same again

If Ninianclark's brother-in-law is a steady Eddie type then paying off the mortgage and becoming debt free would help him sleep more soundly. I'd class p2p lending and bitcoin as gambling rather than investing.

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Originally Posted by Silures

There's no better way to invest than investing in property. Pay off the mortgage, sell house for profit and do same again

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Agree.

Other options depend on your attitude to risk. Safety first for me.

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Originally Posted by Organ Morgan.

If Ninianclark's brother-in-law is a steady Eddie type then paying off the mortgage and becoming debt free would help him sleep more soundly. I'd class p2p lending and bitcoin as gambling rather than investing.

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Put it this way, I'm getting a better rate of return at a lower risk that The All Seeing Eye who bet solely on Man U, Rangers and Celtic. Is it riskier than a bank - yes, is it as risky as going to Ladbroke's to bet on Man U beating Rotherham United... no chance.

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Originally Posted by BlueWales

Agree.

Other options depend on your attitude to risk. Safety first for me.

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I don't take risks with money, P2P lending is causing me no anxieties whatsoever.

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Originally Posted by Organ Morgan.

If Ninianclark's brother-in-law is a steady Eddie type then paying off the mortgage and becoming debt free would help him sleep more soundly. I'd class p2p lending and bitcoin as gambling rather than investing.

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Adding some fact to this throwaway statement (not untypical for you).

This year I had £500 in my Funding Circle Account, i added another £500 over the course of the year.

Returns so far this tax year - £80.45.

Fees £7.79

Bad debt £8.61

That's mostly on £500.

Last year I made £56 on £500 - £0 bad debt.

Year before £36 on about £350.

In 3 years, only 4 companies have defaulted (all this year). The one's director has just repaid the loan, two of the others are repaying monthly, and the fourth is likely to default with me seeing nothing. But, they only owe me about a fiver anyway.

So, 4 companies out of circa 200 I have lent to over the years - and I don't lend any company more than £20. Could be risky to some, but for me the gains make the very small risks worthwhile. Plus, you're helping SMEs...

Some people run to the cash machine if there is a hint of problems - there's caution, there's risk, there's sensible risk and then there's paranoia. Technically speaking, you are "gambling" putting money into Barclays or HSBC. Yes, the Government back up the first £75,000, but how long would it take to get that back? No-one really knows do they?

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Originally Posted by Kris

Returns so far this tax year - £80.45.

Fees £7.79

Bad debt £8.61

That's mostly on £500.

Last year I made £56 on £500 - £0 bad debt.

Year before £36 on about £350.

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Christ, champagne on you mate.

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Originally Posted by itkman

Christ, champagne on you mate.

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I appreciate you are "considewably more wicher than yow", This post was directed to someone with a touch more intelligence (and class) who could has the ability to multiply the figures up and compare it to the interest remaining on a mortgage and/or other investments.

I see you've not offered any advice, yet, and the OP would probably welcome some advice from an investment egg head like you. I would too because my ISA paid the same interest as above on an account holding 18 times more than my P2P account.

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Originally Posted by ninianclark

Not heard of Zopa, do they guarantee a minimum return ?, I must admit I thought all P2P loans were not guaranteed

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Anything guaranteed will get you a hefty 1% if you are lucky.

Invest in shares and you are at risk.

The lower zopa rates have a guarantee pot to protect funds, but that will only work as long as that find does not run out.

The zopa plus fund has a built in 3% assumed loss rate. So I lend out at an average of 10% (unprotected) but the advertised return is 7%. Though the loss rate could be higher or lower.


In my opinion your money is at bigger risk investing in shares.

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Originally Posted by Kris

Adding some fact to this throwaway statement (not untypical for you).

This year I had £500 in my Funding Circle Account, i added another £500 over the course of the year.

Returns so far this tax year - £80.45.

Fees £7.79

Bad debt £8.61

That's mostly on £500.

Last year I made £56 on £500 - £0 bad debt.

Year before £36 on about £350.

In 3 years, only 4 companies have defaulted (all this year). The one's director has just repaid the loan, two of the others are repaying monthly, and the fourth is likely to default with me seeing nothing. But, they only owe me about a fiver anyway.

So, 4 companies out of circa 200 I have lent to over the years - and I don't lend any company more than £20. Could be risky to some, but for me the gains make the very small risks worthwhile. Plus, you're helping SMEs...

Some people run to the cash machine if there is a hint of problems - there's caution, there's risk, there's sensible risk and then there's paranoia. Technically speaking, you are "gambling" putting money into Barclays or HSBC. Yes, the Government back up the first £75,000, but how long would it take to get that back? No-one really knows do they?

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Impressive inflation-busting returns you've made. I imagine you must be tempted to deploy more funds to lend higher amounts.

In the monetary world defining the words speculating, gambling and investing is a tricky business along with pinpointing the difference between unearned income and investment income. Some terms are fluffier and more acceptable than others but the motivation is always the same, and that's to make a profit.

The same can be said for placing money in an interest-bearing savings account. That's money lending. Making money off of money remains a big no-no for Muslims. It was once considered immoral by Christians too.

If the state ever has to make good on their up to £75k guarantee on all bank accounts they'd have no problem. But what they repay would have considerably less purchasing power.

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Originally Posted by ninianclark

My brother in law is in the process of being made redundant - with the money he is due to get - he could pay off his mortgage and have a little bit left over - or he could invest it an ISA or maybe a deposit for a buy to let property.

Which one would you go for and why ?

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One consideration is this: if your BiL buys an ISA & then needs money in future, he'll have his investment to spend. If he pays off his mortgage & then needs money, he'll have to go looking for a loan against his house (at whatever rates the banks feel like offering). Keeping his mortgage gives him flexibility. If the mortgage & ISA interest rates are similar, then I'd go for the ISA. Having said that, there are other investment options as described by other posters.

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Originally Posted by ninianclark

My brother in law is in the process of being made redundant - with the money he is due to get - he could pay off his mortgage and have a little bit left over - or he could invest it an ISA or maybe a deposit for a buy to let property.

Which one would you go for and why ?

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Give some to charity?

I would pay the mortgage of, Of course you will still need to get a job to pay bills, but any lower paid job would do that with no mortgage to pay, then look for a job you really like, as pay will not really be that important as you will be mortgage free

pay the mortgage, no question. everythink else will fall into place.

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Originally Posted by Organ Morgan.

Impressive inflation-busting returns you've made. I imagine you must be tempted to deploy more funds to lend higher amounts.

In the monetary world defining the words speculating, gambling and investing is a tricky business along with pinpointing the difference between unearned income and investment income. Some terms are fluffier and more acceptable than others but the motivation is always the same, and that's to make a profit.

The same can be said for placing money in an interest-bearing savings account. That's money lending. Making money off of money remains a big no-no for Muslims. It was once considered immoral by Christians too.

If the state ever has to make good on their up to £75k guarantee on all bank accounts they'd have no problem. But what they repay would have considerably less purchasing power.

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I'm extremely tempted to put more in - the only problem is the funds could be tied up for a while if I ever need them.

Generally, I appreciate P2P lending is riskier than going to a bank, but the returns more than make up for it. If people are able to tie up fund for a number of years (I can't - hence my crappy 0.4% interest ISA) - then P2P lending is something to be investigated.

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Originally Posted by Dublinblue

One consideration is this: if your BiL buys an ISA & then needs money in future, he'll have his investment to spend. If he pays off his mortgage & then needs money, he'll have to go looking for a loan against his house (at whatever rates the banks feel like offering). Keeping his mortgage gives him flexibility. If the mortgage & ISA interest rates are similar, then I'd go for the ISA. Having said that, there are other investment options as described by other posters.

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Agree with this. People that can afford to buy a house outright often get advised to get a mortgage instead.

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Originally Posted by Kris

Agree with this. People that can afford to buy a house outright often get advised to get a mortgage instead.

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Can you explain that a bit more? Buying a house outright for £250,000 will only cost you £250,000 but having a mortgage could see you paying many, many times that figure over the course of decades.

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Originally Posted by ninianclark

Not heard of Zopa, do they guarantee a minimum return ?, I must admit I thought all P2P loans were not guaranteed

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Originally Posted by ninianclark

I gues though - with shares you can hang on to them in the hope they go back up some day, if you loan money and the loaner goes bust - your money is gone forever. There is no easy answer - just and educated guess

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Not always, companies go bust. Lost all your money then.

Though like a share portfolio your money is spread across many companies, p2p lending is lent across many lenders. Only £10 per individual lender with zopa. So of one does completely default then you only lose £10, though most don't default completely as the debt can be sold to debt collection companies so you will get at least a third back.

There is also the fact people know they are borrowing from another person not a bank, so they are less likely to default.

Risk yes, but only as much as shares.

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Originally Posted by Barry Dragon

Not always, companies go bust. Lost all your money then.

Though like a share portfolio your money is spread across many companies, p2p lending is lent across many lenders. Only £10 per individual lender with zopa. So of one does completely default then you only lose £10, though most don't default completely as the debt can be sold to debt collection companies so you will get at least a third back.

There is also the fact people know they are borrowing from another person not a bank, so they are less likely to default.

Risk yes, but only as much as shares.

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just had a quick read of zopa

interesting stuff and not a bad return, i guess most loans are 5 years ? ? ? so you will not see a return till then ? ? ? or do they replay a % monthly / annually ? ? ?

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Originally Posted by Colonel Cærdiffi

Can you explain that a bit more? Buying a house outright for £250,000 will only cost you £250,000 but having a mortgage could see you paying many, many times that figure over the course of decades.

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I could be wrong, but the way I see it is this:-

You've been looking to buy a house and come into an inheritance of £250,000. The house you want costs £200,000. By paying the £200,000 you are left with £50,000 cash. Not an inconsiderable sum, but you have tied up a large amount of money into the house. True, you can sell your house if you fall on hard times, but who wants to do that? And, who knows, your house may lose value in the short term.

If you put down a hefty deposit (say £40,000), your LTV will be 80%. You'll get a very good deal for that. A 20 year (2-year) discounted variable mortgage for a house with LTV of 80% at Furness costs 1.3% interest . After two years, if interest rates are edging up, then maybe you'd consider borrowing less money and putting in more of your own money. Either way, you'd be looking for a new deal because the Furness deal goes to 5.29% after two years.

If interest rates remain the same, you could even consider borrowing more money at the low rate. You'd have £210,000 in the bank earning a small amount of interest, or £210,000 in a Fund earning anything up to about 15%, or £210k in some other investment that returns a lot more money. In the meantime, your 20-year mortgage will cost about 22k over 20 years. So, about £91 a month.

If the house gains value at current market rates, then in 20 years the chances are the house will be worth more than £222,000 (a 10% rise over 20 years? That's very likely to happen). Yes, you have to consider inflation etc, but in 20 years you will be worth (value of house + return on £210,000 investment ). If you buy the house you will be worth (value of house + return on £50,000 investment).

If you fall on hard times, you will have enough money in the bank (providing you haven't squandered it on holidays) to pay your mortgage until you find a new job etc.

You could argue that the person would be putting the money they would be paying for the mortgage into an investment fund. However, many of us don't have that level of self discipline and would probably squander our extra wages on holidays and cars.

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Originally Posted by blue matt

just had a quick read of zopa

interesting stuff and not a bad return, i guess most loans are 5 years ? ? ? so you will not see a return till then ? ? ? or do they replay a % monthly / annually ? ? ?

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I don't know about Zopa, but Funding Circle have the companies pay you monthly.

So, every day, my account goes up as companies pay me what they owe for that month plus their interest payment.

When the account hits £20 - I can lend money to a new company. Alternatively, I can buy someone else's loan that they want to sell.

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Originally Posted by Kris

I could be wrong, but the way I see it is this:-

You've been looking to buy a house and come into an inheritance of £250,000. The house you want costs £200,000. By paying the £200,000 you are left with £50,000 cash. Not an inconsiderable sum, but you have tied up a large amount of money into the house. True, you can sell your house if you fall on hard times, but who wants to do that? And, who knows, your house may lose value in the short term.

If you put down a hefty deposit (say £40,000), your LTV will be 80%. You'll get a very good deal for that. A 20 year (2-year) discounted variable mortgage for a house with LTV of 80% at Furness costs 1.3% interest . After two years, if interest rates are edging up, then maybe you'd consider borrowing less money and putting in more of your own money. Either way, you'd be looking for a new deal because the Furness deal goes to 5.29% after two years.

If interest rates remain the same, you could even consider borrowing more money at the low rate. You'd have £210,000 in the bank earning a small amount of interest, or £210,000 in a Fund earning anything up to about 15%, or £210k in some other investment that returns a lot more money. In the meantime, your 20-year mortgage will cost about 22k over 20 years. So, about £91 a month.

If the house gains value at current market rates, then in 20 years the chances are the house will be worth more than £222,000 (a 10% rise over 20 years? That's very likely to happen). Yes, you have to consider inflation etc, but in 20 years you will be worth (value of house + return on £210,000 investment ). If you buy the house you will be worth (value of house + return on £50,000 investment).

If you fall on hard times, you will have enough money in the bank (providing you haven't squandered it on holidays) to pay your mortgage until you find a new job etc.

You could argue that the person would be putting the money they would be paying for the mortgage into an investment fund. However, many of us don't have that level of self discipline and would probably squander our extra wages on holidays and cars.

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Thanks for that :thumbup:

Equity release, anyone? :-)

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Originally Posted by Kris

Agree with this. People that can afford to buy a house outright often get advised to get a mortgage instead.

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i wonder why :sherlock: