Retiring

[SWP's back]

talk they may be looking to reduce LTA down to £800k or £900k to balance books.

If they do, anyone above that amount will be able to apply for protection so long as they don’t continue making contributions

 

[Segga]

Thanks guys I’m learning already! This pension stuff baffles my brain as a simpleton. No I’m in not threat of going over the LTA. I had a look at my last statement this morning it’s showing 38% of LTA so I’m guessing even if I pump all this spare cash into it I’ll be fine and it’s the way to go as it comes out of my Salary before deductions?

 

[Manchester33]

Thanks guys I’m learning already! This pension stuff baffles my brain as a simpleton. No I’m in not threat of going over the LTA. I had a look at my last statement this morning it’s showing 38% of LTA so I’m guessing even if I pump all this spare cash into it I’ll be fine and it’s the way to go as it comes out of my Salary before deductions?

Obviously, a lot depends on your age, but it makes sense to contribute to the pension.

The only other options you could consider are:

1 - Invest in an S&S ISA if you plan to retire early.
2 - Pay down your mortgage if: a) you have one, b) you have an incredibly low-risk tolerance.

 

[denislawsbackheel]

Why would you want to do that ?

Bragging rights at the golf club.

Whichever choice succeeds!

 

[Manchester33]

I'm actively avoiding paying off my mortgage. I'm making the minimum payments and have released equity.

There are a few reasons I do this:

1 - Money in an S&S ISA is far more accessible than equity in a mortgage.
2 - Interest rates on mortgages are so low (I pay under 2%).
3 - There are better tax incentives elsewhere (SIPPs and ISAs).
4 - Unless you rent out your property, a mortgage-free house doesn't generate cash.
5 - Investing in Index funds means my money is diversified. I think it's risky to have hundreds of thousands of £s invested in one sole asset.

So anyone on here reading and thinking that you should try and pay off your house ASAP, the majority of the time it's actually a bad financial decision to do so. Obviously, it's still a great achievement to be mortgage-free - but think of the maths behind it. The main reason to pay off your mortgage is psychological and not financial.

 

[denislawsbackheel]

Not to those of us who remember 15% mortgage rates.
Over the lifetime of my mortgages the rate was circa 9%.
People get sucked in by the “free” money they’ve enjoyed for the last ten years.

 

[Kompany Car]

I'm actively avoiding paying off my mortgage. I'm making the minimum payments and have released equity.

There are a few reasons I do this:

1 - Money in an S&S ISA is far more accessible than equity in a mortgage.
2 - Interest rates on mortgages are so low (I pay under 2%).
3 - There are better tax incentives elsewhere (SIPPs and ISAs).
4 - Unless you rent out your property, a mortgage-free house doesn't generate cash.
5 - Investing in Index funds means my money is diversified. I think it's risky to have hundreds of thousands of £s invested in one sole asset.

So anyone on here reading and thinking that you should try and pay off your house ASAP, the majority of the time it's actually a bad financial decision to do so. Obviously, it's still a great achievement to be mortgage-free - but think of the maths behind it. The main reason to pay off your mortgage is psychological and not financial.

This is a fine approach if you have a high tolerance for risk, particularly if you are young. For most however a more balanced approach is probably more appropriate.

I would disagree that mortgage free houses don’t make money. Look at the house price inflation over the last 20yrs it’s significantly outstripped the FTSE.

I do agree it is tied up in the property but if you are needing to quickly release capital from the equity in your house to fund other things then you probably don’t have enough free cash in an account you can easily access.

I’m probably never gonna be a multimillionaire with my approach but I sleep comfortably on a night knowing that my family will always have somewhere to live should everything else go to shit.

But hey ho each to his own.

 

[worsleyweb]

This is a fine approach if you have a high tolerance for risk, particularly if you are young. For most however a more balanced approach is probably more appropriate.

I would disagree that mortgage free houses don’t make money. Look at the house price inflation over the last 20yrs it’s significantly outstripped the FTSE.

I do agree it is tied up in the property but if you are needing to quickly release capital from the equity in your house to fund other things then you probably don’t have enough free cash in an account you can easily access.

I’m probably never gonna be a multimillionaire with my approach but I sleep comfortably on a night knowing that my family will always have somewhere to live should everything else go to shit.

But hey ho each to his own.

I have leveraged like fuck all my life and as soon as i possibly can from an early age. Interest rates being so low and property price increases since 1996 when i bought my first one. Basically other people renting have paid my mortgages for me. Issue now is the Capital gains tax bills and inheritance tax planning.

 

[Wafty Cranker]

This is a fine approach if you have a high tolerance for risk, particularly if you are young. For most however a more balanced approach is probably more appropriate.

I would disagree that mortgage free houses don’t make money. Look at the house price inflation over the last 20yrs it’s significantly outstripped the FTSE.

I do agree it is tied up in the property but if you are needing to quickly release capital from the equity in your house to fund other things then you probably don’t have enough free cash in an account you can easily access.

I’m probably never gonna be a multimillionaire with my approach but I sleep comfortably on a night knowing that my family will always have somewhere to live should everything else go to shit.

But hey ho each to his own.

I read their comment as houses don’t generate cash. You’ll see a return on them in capital growth, but they are not a cash generating asset

I agree pretty much with all Manchester33’s post. Why pay of your low interest mortgage if you could get a better return than what you’re paying on your mortgage elsewhere.

As you say, each to their own and everyone has different circumstances and goals.

 

[Hayley Croppers chopper]

I'm actively avoiding paying off my mortgage. I'm making the minimum payments and have released equity.

There are a few reasons I do this:

1 - Money in an S&S ISA is far more accessible than equity in a mortgage.
2 - Interest rates on mortgages are so low (I pay under 2%).
3 - There are better tax incentives elsewhere (SIPPs and ISAs).
4 - Unless you rent out your property, a mortgage-free house doesn't generate cash.
5 - Investing in Index funds means my money is diversified. I think it's risky to have hundreds of thousands of £s invested in one sole asset.

So anyone on here reading and thinking that you should try and pay off your house ASAP, the majority of the time it's actually a bad financial decision to do so. Obviously, it's still a great achievement to be mortgage-free - but think of the maths behind it. The main reason to pay off your mortgage is psychological and not financial.

Totally agree with this.
ive paid off my mortgage once already and what a great feeling that was however taking sound financial advice is the best way forward.
I really appreciate this post mate as I am wanting to make my payments to clear what’s left oc it but maybe that money is best invested in a SIPP instead.

 

[Gareth Barry Conlon]

I have leveraged like fuck all my life and as soon as i possibly can from an early age. Interest rates being so low and property price increases since 1996 when i bought my first one. Basically other people renting have paid my mortgages for me. Issue now is the Capital gains tax bills and inheritance tax planning.

Capital gains tax on rented property is becoming a big issue.

Property capital value increases have been untaxed all these years and you cant get out unless you pay the tax. Its a very common issue at the moment with generation BTL getting on a bit and wanting less stress. For most its debt free and not really a problem just something you have to lump. For others that geared up over the years but never paid back the borrowing it can wipe out all the value.

 

[dickie davies]

I read their comment as houses don’t generate cash. You’ll see a return on them in capital growth, but they are not a cash generating asset

I agree pretty much with all Manchester33’s post. Why pay of your low interest mortgage if you could get a better return than what you’re paying on your mortgage elsewhere.

As you say, each to their own and everyone has different circumstances and goals.

Because when its paid you can divert your free cash into pensions etc and if times get tough/circumstances change, then you can stop paying into a pension, but if you have a mortgage you still have to find the dosh

 

[Kompany Car]

I have leveraged like fuck all my life and as soon as i possibly can from an early age. Interest rates being so low and property price increases since 1996 when i bought my first one. Basically other people renting have paid my mortgages for me. Issue now is the Capital gains tax bills and inheritance tax planning.

Don’t get me wrong I have 2 rental properties which have been great investments, but I would never have considered securing them against my home.

Like I said though it’s how much risk you are willing to take vs reward.

 

[Charlesfarsbar]

I’m working towards a date of 2030 to retire / slow down at which point I’ll be 56

i have a DC pension with work which will be worth around £200k by then, I have also started to invest spare cash each month into a S&S ISA with Vanguard, I’m hoping this will grow by at least 6% each year which should give me another £50-£80k depending how much I continue to put in

the question I have is that I also have enough in cash that i was going to use to put down on a buy to let , kind of a hedge against any inflation rises we may see over the coming years

am I sensible doing this or should I just plough this cash into my vanguard account ?

If I went this route the cash would be worth around £42k by 2030

A buy to let I would have 9 years rental income of around £3.5k after tax plus any gain in price I pay on the house , about another £20k by 2030

 

[denislawsbackheel]

Subject to CGT though and will you have an agent run your BTL or will you take on the hassle yourself? You need to factor in periodic redecorating and for periods without tenants. Also, there’s a big question mark about future house values once we get the post covid shake out.

 

[Charlesfarsbar]

Subject to CGT though and will you have an agent run your BTL or will you take on the hassle yourself? You need to factor in periodic redecorating and for periods without tenants. Also, there’s a big question mark about future house values once we get the post covid shake out.

Yes, I guess the question is a BTL worth the hassle

i would imagine the reason why property values are so high at the moment is because its a less risky investment with the uncertainty of a post COVID world

 

[DenisLawBackHeel74]

Does anybody have experience investing in wasting chattels ?
i know there have been some ridiculous gains in fine wine and whisky over the last few years but it requires a certain amount of expertise to pick the right vintages etc....

 

[denislawsbackheel]

Yes, I guess the question is a BTL worth the hassle

i would imagine the reason why property values are so high at the moment is because its a less risky investment with the uncertainty of a post COVID world

Less risky.
Hmm.
How many jobs are going once the govt support ends?
How many companies will go under?
How many will be able to afford the mortgage when interest rates go up?
There could be a house price slump like in the 90s.

 

[Kompany Car]

Yes, I guess the question is a BTL worth the hassle

i would imagine the reason why property values are so high at the moment is because its a less risky investment with the uncertainty of a post COVID world

Depends on who you manage to let the property to, it really comes down to how good the tenants are. Mine have been zero hassle but I have involved them when making decisions e.g. I fitted a new kitchen to one as it was a bit tired and gave them a choice of which one they would like.

If you get good tenants, look after them and they will look after you.

As @denislawsbackheel said where the property market goes post covid is anybody's guess so it's not without risk. But on the other hand there is a chronic undersupply of housing at the moment particularly at the affordable end and even more so if it's in a decent area. Whilst in the short term prices might fluctuate, in the long run a small property in a good area will never really lose money and may even go up.

 

[Wafty Cranker]

Because when its paid you can divert your free cash into pensions etc and if times get tough/circumstances change, then you can stop paying into a pension, but if you have a mortgage you still have to find the dosh

All the more reason not to pay off a low interest mortgage. Funds in ISA are much more liquid than getting equity out your house in such a case you need cash for a change in circumstances. Plus these days, overtime cash in any half decent fund will perform better than your savings from paying off your mortgage.

Your mortgage is likely to be your cheapest source of borrowed funds. Why rush to pay it back? Especially to forgo investment opportunities with much greater returns.