Finance Question

[Matthew_28]

Okay, a serious finance question:

In the current economic climate what would you do with a spare £20,000 that was sitting in an ISA account making very little return?

a) Pay some money off a £90,000 mortgage balance

b) Start a business

c) Move it to a higher savings account

d) Invest it in something else? Stocks?

e) Use part of it to start a new business?


Just interested in your thoughts. Thanks.

Cheers,
Matt

 

[LeasingEval]

Invest in gold?

 

[Matthew_28]

Invest in gold?

To be honest in the short term I think gold has become overvalued and there is quite a risk of correction coming soon.

 

[tony84]

Gold is already at quite a high price.

It would make sense to pay it off your mortgage - presuming there are no penalties for doing so, as you will be unlikely to find a savings account that will pay as much as what your mortgage is costing.

And you would probably save that amount back up in the time between clearing your mortgage and retiring.

 

[Matthew_28]

Gold is already at quite a high price.

It would make sense to pay it off your mortgage - presuming there are no penalties for doing so, as you will be unlikely to find a savings account that will pay as much as what your mortgage is costing.

And you would probably save that amount back up in the time between clearing your mortgage and retiring.

Thanks Tony for your comments I totally agree.

It has taken me two years of saving to accumulate this money from a reasonably well paid job but I went self employed in December last year and so far I'm really enjoying it, but being a service based [lifestyle] business I realise that my earning potential is totally limited to my available hours in a day.

It seems the only way I can scale-up or improve my earnings potential is to either have people working for me thereby generating more income, or sell /manufacture products on a bulk scale.

I guess it's just a case of keeping my eyes open for that opportunity which will provide the best return for the money.

Cheers, Matt

 

[popunder]

Paying off a mortgage is the worst idea unless you want absolutely no risk, you miss the opportunity to invest in something much more profitable. How much will you save on your mortgage over a year if you pay £20k off it? Could you make more investing the same amount? Almost certainly. If your mortgage payments are comfortable then look to invest - funds, structured products, ETFs, emerging markets. Depends on how much you're prepared to risk. I'm not authorised to give advice but I did make £67k from a £28k investment over 4 years... BUT that was pre-recession of course!

 

[Stephen Berry]

As popunder aludes: it's all about your appetite for risk;
Low risk - pay off the mortgage
Medium risk - buy shares / gilts
High risk - start a business
couldn't care less about risk: what the heck, blow it on champagne and a holiday

 

[tony84]

Paying off a mortgage is the worst idea unless you want absolutely no risk, you miss the opportunity to invest in something much more profitable. How much will you save on your mortgage over a year if you pay £20k off it? Could you make more investing the same amount? Almost certainly. If your mortgage payments are comfortable then look to invest - funds, structured products, ETFs, emerging markets. Depends on how much you're prepared to risk. I'm not authorised to give advice but I did make £67k from a £28k investment over 4 years... BUT that was pre-recession of course!

Your looking at that in totally the wrong way.

If you pay off your mortgage and keep your repayments the same, its not just the interest your saving for 1 year. You will be paying your mortgage off YEARS earlier (around 8) Imagine for those 8 years, saving £500 per month, your effectively doubling your money if not more.

http://mortgages.themovechannel.com/calculators/compare.aspx that will

Have a play around with that, only you know what your interest rate is and the term left.

The alternative is to look at an offset Mortgage. You only pay interest on the outstanding mortgage. If you have a £90k Mortgage and £20k savings you pay interest on the £70k only but its available for you to use it any time you want.