Reply With QuoteMay be worth an appointment with an IFA to get some ideas on how to use the money?
Further to my comments in the 'pay off your mortgage' thread, I thought it appropriate to start a new thread, since there are clearly some very knowledgeable folk on here and I'm starting to consider other options (including buying another property!!).
To recap my circumstances, I owe just under £47k on a property worth £120k. My mortgage is fixed with Nationwide (2.5%) until end of Dec 2016 and the agreed repayment date is 2028. I have £50k sat in a savings account. I'm far from a wealthy man but I do have some other money elsewhere so please assume that this £50k is 'surplus' to requirements. Also, I have absolutely ZERO pension provision. Nothing. Zip.
My main concern is that, as a self employed person who has worked on cruise ships for 2010 to 2013, my UK accounts look (legitimately) rubbish. I'm worried that the new, more stringent re-mortgage criteria, that the FSA are asking providers to enforce from March, will result in my existing provider giving me a rubbish rate come re-mortgage time (since on paper I will not appear to be able to be a safe bet). This is the main reason why I was considering paying my mortgage off early.
So, come December 2016 I can pay the mortgage off in it's entirety with no early fee but this will pretty much take care of the £50k in savings. I could also pay £7k per year off (10% of the original loan) every year and either reduce my monthly payments or the mortgage term.
Alternatively, should I be considering using some or all of that £50k to buy another property (or some other investment?). I hadn't even considered it before but I am open to the suggestion now.
So what would you guys do in my circumstances?
Thanks.
May be worth an appointment with an IFA to get some ideas on how to use the money?
You won't be surprised if I suggest the offset route as my previous post.
However, without knowing your age, health, income, family or lack of it, it is pretty much impossible to say.
I know what I would do with it in my circumstances at this moment in time in my life, no idea what's right for you. IFA is the route or you can do some research yourself. Good luck.
Buy lume paint and some of pippengate"s moody watches.....
Last edited by arthurDALEY; 3rd February 2016 at 16:39.
IMO The problem with a second property is the new level of stamp duty and income tax arrangements.
The problem with no pension is the derisory income gained from a £50K input unless it can be invested and that's where the IFO might help, but with no guarantee of good financial gains into the pension pot.
I faced a similar situation to you, and used the cash to pay off the mortgage, but this was some time ago when interest rates were a lot higher. They could of course rise again but not to levels previously seen in the near future (again my opinion only). The problem is that there are so many factors in this situation...stock market slump, value of the pound, brexit or not, future of the European Union, taxation changes to reduce the deficit etc etc. but most important your health and future plans.
How do you pay yourself and did you have any "good years" that you paid UK tax on & do you have an income now ?
I am not an IFA but you can back date pensions (4 years) so if you have paid UK tax on the earnings it may be worth considering a pension catch up especially if were paying higher rate tax at the time. Going forwards you could consider making additional pension contributions to the maximum tax advantage for you (speak with an IFA or do your research) and making up any income shortfall from the savings.
Alternatively you may decide not worth a pension but it is very tax efficient especially if have a few years on HR tax you can get 40% relief on now as if modest is unlikely you will pay much tax on the way out (& can draw at 55 now).
I used to not be into pensions but with the recent liberation I have been putting profits into pension although being via a ltd the tax savings are different but still useful - it also puts the money outside of the ltd although possibly not in your case if you are self employed.
A bird in the hand is worth two in the bush .
Pay off the mortgage.
2.5% mortgage and what? 1-1.25% net on the savings? Pay off the mortage.
You could consider buying a cheap flat for £50k (therefore no finance or SD) and let it for future post-retirement income, but it'll only realise a few hundred depending on where/market forces etc. Still a better return than on deposit if done wisely.
I think the general advice is pay off debts, highest interest first, then think about making any left over work as hard as possible, commensurate with you risk comfort level.
Once you owe only day to day expenditures then saving is much easier.
I'm not a financial adviser, and don't even play one on twitter...
Dave
Without a pension it's a difficult road, you will want to use that money when working has to stop it could deplete at a fair rate of knots (cruise ship pun)
TBH you need to tell us how you want to end up, and work backwards from there.
Not to lower the tone or anything, I am genuinely suprised TZUK hasnt suggested "pizza, cocaine and hookers" yet in answer to your question ("what would you do with £50k?").
On a serious note - I am hopeless with money and I would love to know what to do with my savings. I am tight, spendthrift and risk averse. Not having a mortgage means my money sloshes around in 1% interest savings accounts (ISA full) and I always feel I should be doing more with it. I do have a pension, whatever that is worth (probably nothing in 25 years time). But the thought of *paying* an IFA, who I just could never trust to truly have my interests at heart (being the paranoid sort that I am), just wont do.
Best at the moment for instant access santander 123 account 3% between 3K and 20K you can have two 123's and so can your wife/partner. so that's 12% on 80K.
£5 fee's per month for each account.
The most important piece of information missing from your opening post is your age.
Forgive me if I am wrong, but if you had Four accounts, each with £20k in them, and all running at 3% interest, would that not be £80k invested with 3% total interest? As you are getting 3% of £20k each multiplied by four?Best at the moment for instant access santander 123 account 3% between 3K and 20K you can have two 123's and so can your wife/partner. so that's 12% on 80K.
£5 fee's per month for each account.
£20,000 with 3% interest/year would be £20,600 after a year. 4x those accounts would be £82,400 after a year.
£80,000 with 12% interest/year would be £89,600 after a year.
#justsaying
How does that arithmetic work? If it's 3% of £20k surely it'll still be 3% of £80k?Best at the moment for instant access santander 123 account 3% between 3K and 20K you can have two 123's and so can your wife/partner. so that's 12% on 80K.
£5 fee's per month for each account.
^^^^^^^
Holding hands up..........got carried away with 3% and 4 123's with 3K 3 many 3333333333333333333333333333333333's and just multiplied
Still £2400 less tax less fee's an't bad............
Last edited by Fords; 3rd February 2016 at 20:23.
Can't edit post.
I remember a time when 6% was the norm.
"Still £2400 less tax less fee's an't bad"
Especially if each is not an HR tax payer as 2000 (2 x 1000) is now tax free.
Multi quote function doesn't seem to be working so I'll try to answer questions raised thus far:
I am 41 years old. Not married, no dependants but that may change. It may not.
I was employed up until 2008 and paid NI class 2 etc. Since then I've been a self employed musician. When I got back from America in late 2013 I built up a reasonable pupil base and this, together with paid gigs, gives me a modest regular income. My accountant is looking into the state of my 'state' pension (prompted by my asking her why I haven't made any class 2 contributions since I became self employed).
Someone asked where do I want to be with all of this. I'm very fortunate to genuinely love what I do for a living but this comes at a price (lowish income, no fancy cars any more!) and that's absolutely fine by me. I want to use this 50k to get the best return whilst not risking loosing the lot. That would not do at all!
So it's earning 1% in a current account. If I pay the mortgage off with it, then that's at least 2.5% assuming rates don't rise in the next decade.
Personally, I would put the money into the Blackrock World Mining Trust and keep it there for five years.
mortgage first every time unless you earn enough to make the repayments pretty insignificant. i had a change of circumstance due to a legacy and paid 45k off mine in december. coupled with clearing some other stuff it's left me £800 a month better off. Now i can save or overpay the remainder of the mortgage when i wish to and our full monthly essential bills are covered in the first weeks earnings between us, leaving three weeks money for saving, holidays , fun, and...watches!Originally Posted by beechcustom
ktmog6uk
marchingontogether!
Ok, definitely a job for an IFA. At 41 you're probably on the cusp for arranging a conventional pension, so I suspect that the advice would be to secure your position by repaying your mortgage. Look on the bright side - there are plenty of people who wish they they were in your position.
Pensions would be the most cautious and tax efficient route forward. As long as GO doesn't make any further penalties in the March budget you should get it all in without any problem, carrying back allowances.
However . . . . . .
I'd buy a property. Property gives you 'leverage' which means you can borrow against your money and then let the lenders money work for you. For example if you borrowed the realistic maximum of 4x your 50k deposit you could buy for 200k. If that property went up say 5% in the first year that's a 5% increase on the WHOLE 200k not your 50k - leverage! On top of that the rental would be around say £800 and the mortgage and insurance £350. Take off say £100 for maintenance or void periods and you're left with £350pm or £4200pa. 4.2k on your initial 50k is 8.4% gross return per annum - where can you get that? And that's without taking into account the annual price rise I mentioned earlier. So a 5% rise would be a 10k gain.
Property works as well as any investment as long as you do your research, realise there's risks and that the market will go down sometimes, so it's a long term game.
P.S. To be transparent I'm an IFA, employ half a dozen mortgage advisers an have a few buy to let's myself. So I'm speaking from experience.
As you get older your disposable income my be a problem if you have to finish working for some reason, a pension provides that bridge, you can look at your own state pension online it gives you a quote depending on what you've paid in, you can buy years @ about £800 ea up to a maximum.
This is a tricky one and (excuse the pun) you may have to play it by ear. what's happened is your earning lifestyle has left a shortfall in the pension department @ 41 I don't know if there is enough room left in one's life to reap a decent retirement pot.
I put 40k in premium bonds and over the last 14 months, my winnings are equal to 2.8% gross interest.
Eddie
Whole chunks of my life come under the heading "it seemed like a good idea at the time".
Definately the IFA route good Sir. Several of them actually.
Knowledgeable people or not, a watch forum is not the place to seek sound investment advice.
Paying off the mortgage does sounds the most sensible to me however EchoSevenNine is right. Get a couple of professional opinions.
Right, not for everyone this but it does me quite well. After saving up quite a bit of money from selling a previous business and basically watching what I spent, the property market went upwards just as I was about to buy a decent house. I ended up buying a flat instead and still had a fair bit to play with. For me, I wanted a good yield, with a potential increase in the future. i bought garages. And more garages. And now I have 5. All let, most freehold, if not long lease and I get £100 pcm. I'd say I get around 9% yield and I think I have a chance of nicking a few grand on each If I sold them one by one AFTER fees. For example I paid £11500 for a freehold garage a few years back, been let ever since I advertised it and if I were to sell it tomorrow I'd want around £17500 (£1000k estate agents, £1000 for solicitors give or take). I made seven grand on one garage which had land with it and only had it 6 months. A real cost effective way to play around with property, and he best thing of all? If they don't rent and you've bought close to home you can build that ultimate man cave you've always wanted! Win win! (I've had no issues renting, always advertise for free on gumtree and all bought in the south east of London/Kent)
Just to add I wouldn't buy a pre fabricated garage only brick built in good areas, just to be clear.
Last edited by Yeti; 4th February 2016 at 16:42.
Them £25 pound cheques mount up.
Personally I'd buy a nice 993 Porsche 911. Find the best one you can, drive it (but not excessively as a daily driver or anything) and keep it in great condition with regular servicing and repair and the yield will be better than pretty much any other investment you'd make. Obviously you'd need a garage and circumstances to suit, but it's what I actually did before I sold it and made net 20% over 18months of ownership.
Pay off the mortgage or if you want to be exciting, straight into the stock market, values are low now.
If you want a pension go SIPP.
BTW be wary of IFA's, they want money and the few I have met don't know a lot more than clued up civilians.
Nobody cares more about your money than you do.
Do your research and get on the case.
Cheers,
Neil.
I'd by a series 4 Land Rover Discovery HSE if I had any change I'd may well buy a new Omega Seamaster 300
Facebook shares. Up 25% in 2015 and some silly multiple since they floated
993 sounds sensible too. No tax to pay upon sale which always helps
For example if you borrowed the realistic maximum of 4x your 50k deposit you could buy for 200k. If that property went up say 5% in the first year that's a 5% increase on the WHOLE 200k not your 50k - leverage! On top of that the rental would be around say £800 and the mortgage and insurance £350
£150k buy to let mortgage that only costs £350pm including insurance :O I need your phone number.
Mortgage hit is top of my list. Bloody noose around my neck.
Although I do quite fancy a new bike
Oh and a couple of watches
Godiva Morgtgages had a lifetime tracker at 2.55% (just gone up to 2.65% yesterday) which would be around £320 per month in interest. Most of my insurance is around £10 per month but I used £30 to be conservative.
Sorry should have read the full thread first, I see other people have already pointed this out
Last edited by ViperStripes; 5th February 2016 at 23:43.
I'd be paying the mortgage off if I couldn't think of anymore creative ways of making my money work for me!
Clear the mortgage first - easiest and least risk involved.
Clear Mortgage or buy a terrace house in a reasonable but cheap northern town and have £4-5k of rent out of it per year
RIAC
Threesomes.
Sounds like a good idea.
however ...you will be totally knackered afterwards.
And when you can walk again you will give the game away with the massive confused drooling grin on your face.
Don't spend 50k on threesomes....
Actually ignore me...come to think. Spend it all on threesomes.
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