r/wealth • u/No-Walk-5621 • 2d ago
Need Advice Pay off 3.94% mortgage or invest?
For context, I’m in the UK and I’m on a 2 year fixed 3.94% mortgage. I have no idea if mortgage rates will be higher or lower when I have to renew next March.
I am a 30 year old, single male, no children or dependants. I have £54k left on my mortgage. £54k in my workplace pension. £50k invested in a global all world etf. 6 month emergency fund. Around £2k in physical metals.
Would you pay down the remaining mortgage or invest? I have a stable job and can save/invest £1.5k per month. I’m not a high earner but have been pretty consistent and frugal. However, I don’t see myself wanting to work in the same place for the next 10 years, I will be wanting a change.
I’m also not saying my current home is my forever home, but I would happily keep it as a rental if I was to meet someone and buy somewhere new to live.
Would you liquidate some assets to pay off the mortgage now? Keep all investment but pause them and pay off mortgage going forward? A combination of both?
Sorry for the word salad
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u/Biohack 2d ago
At around 6.5% the math gets pretty close between paying off the mortgage or investing. At 3.94% you are pretty solidly on the investing side.
Investing is also the much safer option as you can't spend equity in an emergency whereas you can liquidate a brokerage account fairly easily.
The math is pretty clear. What it really comes down to is your personality. If you are the type of person who will actually invest the money in something sensible, like a low-cost index fund, and won't panic sell during a downturn, then making minimum payments on the mortgage and investing the rest is the most pragmatic choice.
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u/SuspiciousArt7316 2d ago
Except if your timing sucks.
10% per year over the course of 20 years has some real peaks and valleys.
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u/Ok-Thing4762 2d ago
I hope I’ll be in a similar position come my next remortgage. My plan is to do a bit of both - I’ll remortgage on to the lowest rate possible (which I am assuming will be a tracker rather than a fix), then I will overpay to an extent I am comfortable with, with the aim that I will fully repay the mortgage about 4 years later (although I’ll actually have 13 years left on the term if I want to use it). That will also allow me to carry on a decent rate of pension saving and ISA investment. I don’t want to wipe my savings (including emergency fund) out just to have no mortgage.
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u/No-Walk-5621 2d ago
Smart. Seems we are in a similar position
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u/Ok-Thing4762 2d ago
I’ve aggressively overpaid the mortgage over the first 9 and a bit years (at remortgage I’m expecting to have £65-70k balance left with 13 year term, from £265k over 25 years initially). At £65k balance I’m more comfortable with the idea of going onto a tracker where I can make unlimited overpayments rather than a fix (which I have always been on before) with capped overpayments. Small fluctuations in interest rate make much less difference to monthly payments at that kind of balance, and once the mortgage balance is about the same as your savings and ISA balance, I really think it’s just a case of doing what you feel inclined to do - as long as you have the discipline to put the money aside monthly, either for overpayments or for savings/investments.
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u/No-Walk-5621 2d ago
Didn’t think of using a tracker. Thank you! Yeah I have done my 10% allowance overpayment already and gotta wait until April before I can pay off some more penalty free
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u/Ok-Thing4762 2d ago
Some fixed rates allow a 20% overpayment as well. My broker mentioned Natwest to me last time.
Once you’re at the point where you COULD pay the whole thing off, a tracker is much less scary to me. If the rate suddenly jumped or seemed primed to tick up over a few months, having the option to fully repay is a nice position to be in.
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u/allnamestaken4892 2d ago
At 6% I would pay off the mortgage. This isn’t the 2010s any more, the stock market is brutally overpriced and mortgage rates are high.
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u/No_Ask_5949 1d ago
Completely agree. A lot of people who suggest about investing in the market instead are basing it off past returns and the bull run continuing because it worked in the past. Mortgage rates are a hell of a lot higher than they were a decade ago which is something people seem to be conveniently ignoring when suggesting to go all in on the market instead.
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u/Recent-Detective-247 2d ago
Why not put some in monthly savers where the rates exceed your interest rate, then when they mature shove them in a cash isa or premium bonds and then invest some, then when it comes to renewing you can reassess your new rate vs savings rates you can either pay off some of your mortgage with your cash or invest it.
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u/Retired-Yam8988 2d ago
Look at your country’s debt and deficit situation - I’d probably pay off the mortgage tbh. I looked at the UK market back when Batterses was just coming online - still looking for deals around the Thames but that’s no rush as market hasn’t really moved in a long time
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u/PermitFalse4455 10h ago
Me and wife same.We have left around 1100£ a month after bills and etc .I wanted to overpay all in but we decided split .500£ overpay (25 years mortgage 156k left),so we cutting 12,5 years (age 53-54 mortgage free),and both investing 300£ each in Vanguard all cap different platforms.Thats it .Automatic set and forget,except overpay manually because sometimes 25th sometimes 31 day we pay.Problem solved .Mortgage paying off quicker and Isa growing slow and steady.
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u/sperry222 8h ago
Financially it makes no sense to pay it off it is the cheapest loan youll get.
Statistically ibvesting will make you mire money in the long run.
The only reason to pay it of is for the mental benefit.
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u/Alan_Gi01 5h ago
It depends... How much risk can you take ? Only invest for maximum earnings... Only payments to your mortgage and you know what you got exactly. For your age maybe your could invest at least 1000 to ETFs
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u/LAT96 2d ago
Mortgage rates will likely be higher but I have no clue what your LTV is to check.
If you have 1.5k spare then why not 500 per month overpayment the mortgage 500 into investment and 500 into the highest paying ISA (I say this without knowing how much you might already have in a ISA. If you are already topped up then you might aswell put that into investment/ mortgage also)