Clear mortgage or invest?

Zipppy

if you came into an amount (six figures) with which you could either a) clear your mortgage or b) invest in 'something' (property, shares, etc) what would be best move in today's economy?
Obviously investing in certs, bonds whatever is useless these days....

Thoughts?

ulinbac

Zipppy wrote: »

if you can into an amount (six figures) with which you could either a) clear your mortgage or b) invest in 'something' (property, shares, etc) what would be best move in today's economy?
Obviously investing in certs, bonds whatever is useless these days....

Thoughts?

If you had no mortgage would you take out a loan against it to invest?

The answer us no. Pay off your mortgage and save up to invest. Having less financial stress will mean better investing decisiins due to less financial worries

SBarrett

ulinbac wrote: »

If you had no mortgage would you take out a loan against it to invest?

The answer us no. Pay off your mortgage and save up to invest. Having less financial stress will mean better investing decisiins due to less financial worries

I agree. I have never met someone who complained about having too little debt.

Lots of people will tell you, especially if you're on a tracker, that you can make more money by keeping the mortgage and investing. That may be true but you may also lose it.

But there is also that satisfaction knowing that there will no longer be a big amount debited from your account each month.

I wrote about it a couple of months back. Some of the factors I raised may be worth considering http://www.bluewaterfp.ie/mortgages/should-i-pay-off-my-mortgage-early/

Steven

gordongekko

A lot will depend on the interest rate on the mortgage. Personally I would drop a registered letter off to the local bank manager asking if they will do a deal for early repayment. They more than likely will say no chance but the tone of their letter may sway your decision either way.

HobbyMan

gordongekko wrote: »

A lot will depend on the interest rate on the mortgage. Personally I would drop a registered letter off to the local bank manager asking if they will do a deal for early repayment. They more than likely will say no chance but the tone of their letter may sway your decision either way.

I've been fairly involved with banks and property deals and, as far as I know, they have stopped taking early repayment for anything other than trackers.

In answer to the OP; in this climate you should clear your mortgage first. When the stock market falls heavily invest in stocks then. The name of the game is to make money with certainty and that's hard enough to do in today's market.

Cute Hoor

A lot depends on your circumstances, if you're on a variable mortgage then repay the mortgage. If however you are on a tracker mortgage (€46 monthly repayment per €100k on a Danske tracker, 0.55%) then I think you would be crazy to even consider paying off the mortgage, you would surely be able to come up with something that beats a 0.55% return.

A nice situation to be in though!!

AlmightyCushion

Cute Hoor wrote: »

A lot depends on your circumstances, if you're on a variable mortgage then repay the mortgage. If however you are on a tracker mortgage (€46 monthly repayment per €100k on a Danske tracker, 0.55%) then I think you would be crazy to even consider paying off the mortgage, you would surely be able to come up with something that beats a 0.55% return.

A nice situation to be in though!!

You can get 1.95% with RaboDirect on amounts up to a million. Even with DIRT as high as it is you're still talking about 1.1%.

DoYouEvenLift

No mortgage = security
Security = freedom

You'd be free to take more risks for higher rewards.

ulinbac

Cute Hoor wrote: »

A lot depends on your circumstances, if you're on a variable mortgage then repay the mortgage. If however you are on a tracker mortgage (€46 monthly repayment per €100k on a Danske tracker, 0.55%) then I think you would be crazy to even consider paying off the mortgage, you would surely be able to come up with something that beats a 0.55% return.

A nice situation to be in though!!

You are leaving out risk. The risk of them losing their job or something happening to them or a poor investment where they lose their money.

Pay off the house and get rid of the monthly repayment. When you see that payment no longer coming out of your bank account you will be a lot happier

SBarrett

Cute Hoor wrote: »

A lot depends on your circumstances, if you're on a variable mortgage then repay the mortgage. If however you are on a tracker mortgage (€46 monthly repayment per €100k on a Danske tracker, 0.55%) then I think you would be crazy to even consider paying off the mortgage, you would surely be able to come up with something that beats a 0.55% return.

A nice situation to be in though!!

Another way of looking at tracker mortgages is, with rates so low, why not pay off as much capital as you can now, so when rates do go up, it will have less of an impact on you.

Steven

Scobyone

Almighty cushion, just wondering in a similar instance to the op, for example on a Danske tracker for say 200k, shouldn't one include the cost of insurance in the equation which is probably twice as much as the monthly repayment ?

euroboom13

If everyone thinks that its a good idea to deleverage as soon as possible ,it could be a warning to what is coming next in our property market.

Especially ,when all mortgaged property owners realises, our repayments won`t fall anymore ,only rise.(rates changes)

ixus

I would reduce any debt I had (car loan, mortgage etc). Do the math on what you pay out over time. I might not clear entire mortgage but reduce to it being negligible to my income and over shorter term. Again, do the math on what you repay in total.

I would also be looking to hold some on deposit. It doesn't matter that it's "doing nothing". It is a reserve in the event that I was out of work for a period of time (12-24 months).

Then, I would look at what to do with any spare reserves. You don't have to invest straight away. You could hold onto and add to an "investment fund" and wait until something of value turns up. Equities and property look expensive to me at the moment. The cash won't burn a hole in your pocket. Inflation won't eat away at it as there's virtually none at the moment.

Imagine you had held onto that cash in 2005 and the market crashed in 2007/08. You would have picked up some nice value in either equities or property.

Zipppy

Thanks for all the replies...

FYI

Variable mortgage...we're not 'stretched' at all with it...both public servants...still have other 'savings' ...

Was really looking to see if there was a viable investment alternative to paying off mortgage and I dont really see any that wouldn't involve taking a big risk / gamble with capital ??

Zipppy

AlmightyCushion wrote: »

You can get 1.95% with RaboDirect on amounts up to a million. Even with DIRT as high as it is you're still talking about 1.1%.

I only see 1.75% up to 20k and then 1% above to a million ???

AlmightyCushion

Zipppy wrote: »

I only see 1.75% up to 20k and then 1% above to a million ???

I seen the 1.95 rate on the best buys thread on askaboutmoney, maybe it's an old rate or a different account. I'll link to it later when I get home.

Cute Hoor

ulinbac wrote: »

You are leaving out risk. The risk of them losing their job or something happening to them or a poor investment where they lose their money.

Pay off the house and get rid of the monthly repayment. When you see that payment no longer coming out of your bank account you will be a lot happier

Very easy to de-risk if you wish, put your money into a short term fixed rate deposit account, Permanent TSB are paying 1.9% for a 1 year account, even allowing for dirt and USC you will be better off to the tune of €550 approx per €100k per year, it's free money with no worries (based on a Danske tracker mortgage rate of 0.55%).

Cute Hoor

SBarrett wrote: »

Another way of looking at tracker mortgages is, with rates so low, why not pay off as much capital as you can now, so when rates do go up, it will have less of an impact on you.

Steven

See reply above, investing the money short term will/should ensure only a positive impact. The only risk is rapidly increasing interest rates, this is reasonably unlikely over the space of 1 year, there is still downward pressure on interest rates as far as I can see.

Cute Hoor

Scobyone wrote: »

Almighty cushion, just wondering in a similar instance to the op, for example on a Danske tracker for say 200k, shouldn't one include the cost of insurance in the equation which is probably twice as much as the monthly repayment ?

If you have taken out insurance on your tracker then of course you have to take this into account, if memory serves me correctly the insurance costs were absolutely exorbitant (could have been more than the monthly repayments?) but it wasn't mandatory, if you are paying insurance as well as the tracker repayments then pay the lot off if you can is most likely the best option - you just need to work out the figures.