Best way to invest 60k

[lostintransit]

We have a mortgage for around 85k and house worth around double that. We have no other debt and currently manage mortgage payments on a p/t wage no problem as we are pretty frugal.

We have 60k which we had put away to extend our home however we no longer need to do this.

My dh feels the 60k sitting in saving account not earning, not doing much at all and that he'd like to invest it in another property.

We live in an area popular with tourists and also hard to find rental property esp on the cheap side. Plenty available if you have 1000pcm but next to nothing for less than 500. The odd cottage comes up through word of mouth for cheap and these are always snapped up.

There is a little holiday style chalet for sale. Old person has died and now lying empty. It was their permanent home although not standard construction. needs new roof etc but was valued at 100k end of last year. Its on a nice plot with a decent garden which i am sure alone would be worth 60/70k.

Its on the market at offers around 75 but open to offers.

Does this sound like a crazy idea? We might not be able to do much initially but in years to come when we have a bit more cash I'm sure we could do plenty.

Any advice?

[ChrissieLC]

Depends on what mortgae you are on now. If you have a low fixed rate repaymen mortgage then yes maybe look to invest the money elsewhere, however property isnt necessarily the way to go as the markets are not rushing up, if anything they are likely to go down.

If you dont have a low fixed mortage rate maybe best to pay down your existing mortgage.

I can't give advise without knowing the ins and outs and therefore am not doing so, just suggesting a few things to look at. Mortgage rates are rising. Just bear that in mind! There are plenty of options out there that can keep yoou cash 'guaranteed' with earnings up to 8% so maybe thats a good place to start as well

[lostintransit]

We have thought of paying off a bit of the mortgage but not so far advice has been that this is not the best option. I don't have the first clue.

[everythingtodo]

You will earn about £100 a month on an instant access fixed rate - more if you put it in an ISA. Personally I would pay off the mortage but I am debt averse!

[Fayrazzled]

Really, you should speak with an independent financial advisor and explore all the options with them.

[ChrissieLC]

Bad IFA's will often tell you not to pay down the mortgage as they want you to invest to get their commision!

In all seriousness if you are paying 3% or above on the mortgage I would look at paying it down, paying less then than look elsewhere for investments...this is not advice (disclaimer)

[ChrissieLC]

ps I know this as I have worked with bad IFA's...there are plenty of good IFA's around though so go to unbiased.co.uk and have a look for one in your area, make sure they are not a one man band, ask them if they review their funds under management and how frequently (they should be doing this at least once a year, though will charge a fee for it). Most importantly, make sure they are fully independent, not multitied.

[lostintransit]

Thanks for all the advice.

We've pretty much ruled out another property.

We are thinking hard about maybe paying off a large part of our mortgage.
We are with Nationwide on variable base rate which is currently 2.5%. According to the calculator on mse website if we paid around 45-50k to mortgage and then overpay mortgage by keeping payments same as what we pay now, we could be mortgage free in 6 years.

This would leave us 5k to put in an ISA and also leave money to do the immediate big jobs in our home.

Does this sound sensible?

My dad is ranting at me saying 'cash is king', why not drip feed the mortgage, you will never get your cash back. Can't see the benefit of being mortgage free as cheap loan in his eyes.

[GrimmaTheNome]

Pay off the mortgage. Interest rates are liable to rise. There are very few investments which make a decent post-tax return nowadays.

A 'cheap loan' is still more expensive than no loan at all. There was an argument in favour of keeping a mortgage in the days when there was tax relief on it but that was decades ago - maybe that's influenced your dad's thinking? Its outdated now.

Your idea of paying off a lump but keeping some for saving and some to spend is sensible.

[ChrissieLC]

2.5% is a cheap loan. Rates will go up though but I doubt very quickly. At that rate it may just be worth doing something else with it, but depends on whether you want any risk to your capital or not. How would you fel if you lost half of it due to stock market crash or property crash?

if you want safe capital and to beat your borrow rate of 2.5% you may want to look at structured products (ONLY DEPOSIT BASED ONES...BE CAREFUL, this is where you need advice.) You get your capital guaranteed by the bank ie you put in 50K you get out 50K (no charges deducted from this)

you could get 6% per annum as long as you dont mind locking it up for 5 years. Its covered under the FSCS (compensations scheme set up by the gov)

You can use your ISA wrapper for these products too.

Where's the catch?
You may or may not get 6% depending on whether the stock market goes up or down. you are effectvely gambling the interest on your money. There are some really good products out there which will give you several chances to 'win' and have so far given the customer their 6% per year (not compounded)

It takes some explaining which i cant really do on here otherwise its bordering on advice which I am not allowed to do on forums, but may be worth you looking into. Plenty of banks do them but go through an IFA as there are some rubbish ones out there.

ANother sensible option is to lump some your pension some of that amount. Instantly get 20% or 40% relief. Thats the first option I would look at depending on what pension scheme you are in.

Talk to an IFA, no IFA should charge to talk this through with you, if they do, run away! :-)

[Jins]

What about an offset mortgage? If you stick the money in the savings side of it you'll pay virtually no interest but you'd still be able to access it if the perfect investment came along

[CogitoErgoSometimes]

Investing in your home is rarely a bad move. So paying down the mortgage and doing some improvements would be high on my list. Yes, take advantage of tax-free ISAs. Have a look also at longer term bonds as they can be reasonable safe with attractive rates. Do you have pensions that could be topped up? If there's any left I'd also have a punt with some of it on a long-term stock market investment like unit trusts or managed funds. 'Investments can go down as well as up' of course but, as part of your overall saving strategy, it's worth having a little risk in the mix. Hate Premium Bonds :)

As for being mortgage free... tell Dad that if you do that you'll have whatever you pay per month 'spare' to invest, spend or save as you see fit - plus your house will probably keep increasing in value. Can't wait personally.

[ChrissieLC]

think you will have a long wait for house prices to really increase in value!! reckon they will bumble around where they are now for at least 5 years (unless you are in london)!

[lostintransit]

I honestly think being at home with the children for the past 7 years i have lost some brain power. Some of this financial chat just reads like a foreign language yet years ago i felt reasonably on the ball with such matters. Was the first of all my uni friends to get a mortgage and was always debt free other than mortgage. It seems so much more complicated now or perhaps i was naive back then and only scratching the surface.

I put money in an ISA two years ago and perhaps I should have looked into it more myself than I did but I perhaps stupidly presumed that the bank (who i have current a/c with and have done for 30 years) would give me all the necessary info (and I was underwater with 3 small dc 1, 3 and 5). However for the last year it has done nothing as i didnt realise you had to reinvest it. Makes me feel like I just dont have the first clue.

I think paying off a bit of the mortgage would be appealing if this allows us to pay it off in the next 5 years. By then our kids will be 8, 11 and 13. I am sure they will be costing more by then!

I dont have any pension currently. My dh has just started paying into one as his new job is with the nhs.

I think we would prefer to have as little risk as possible. Not sure we are great risk takers! I have problems sleeping as it is! Don't want anything else to worry about!

Again thank you for all the much appreciated advice.

Must go and see what to do with the isa. Is it worth transfering what is already in isa to another and add to that rather than just start afresh?

[seb1]

Your ISA from two years can be transferred to another provider at a better rate, (don't not take the money out or it loses its tax free status, it must be transferred), this year both your and your husband can each invest £5,640 in cash isas. Examples of cash isas around are 4% fixed for 2 years this also takes transfers in) HTH.

[lostintransit]

Thanks I will look into this now.

[Mike1973]

In my view, you need to consider your overall circumstances. Most of the views above have some merit, when considered in isolation. Paying down debt is normally a good option. However 2.5% is also a "cheap loan", relatively speaking, and a fixed term cash ISA/bank account will probably yield more in terms of interest paid.

There are some others things you may want to think about, though. For example with the kids being 8, 11 and 13, have you ever considered school/uni fees? Sorry to add to the confusion, but in todays world of high youth unemployment it may be something worth considering.

What you should do with the money depends very much on what you want from life and what is important to you. This a where a good IFA can help you. When I work with my clients (yes I am an IFA too), I look at their various goals and objectives collectively rather than in isolation. If you think you have enough money set aside to achieve all of these, then go ahead and reduce your debt. If not, then you will need to prioritise.

unbiased.co.uk is a good way to find an IFA local to you, but do they really need to be local in todays world of communication? Word of mouth and recommendations from your trusted friends are the best way to find a good adviser. I hope this helps rather than adds to the confusion.

[lostintransit]

Thanks Mike1973. The kids are currently 3, 5 and 7. Those ages i gave were how old they would be after paying off mortgage if we did it in 5 years.

I have saving accounts that i pay into for the dc. I pay in what i can. Used to be alot more when money was not tight. But every little helps. All three have a couple of thousand each so far and hopefully this will continue to grow.

Am currently trying to find somewhere to transfer the money in my old isa but cant see any at the mentioned 4%. 3% and allows transfers is best I can see.

Seb1 mentioned 4% for two years but not sure who that was with.

[CogitoErgoSometimes]

Places like www.moneysupermarket.com offer lists of ISAs for comparison and you'll be able to see which allow transfers in and which don't. Some of the better-paying ones come with strings attached like having to have a current account with them etc.

[Jins]

I really would recommend looking into offset mortgages if you are risk averse. Ours has saved us a fortune in interest annually and we still have the money.

You won't make interest on your savings as such but the amount saved in interest is much bigger. You can make overpayments too.

It's honestly been the best thing we've done.

[ChrissieLC]

I'll second that. offset mortgages are great as long as you are disciplined in your approach to them (it ain't money you can just keep using up!)

[lostintransit]

Would we have to 'remortage' to have an offset mortgage?

Just there is no way we would be able to remortgage as mortgage amount was based on hubbys f/t wage before being made redundant. Gone from 40k to 15k.

[Jins]

Yes you would have to remortgage and there are costs with that.

Oh well.

[lostintransit]

oh well! Thanks for the suggestion anyway Jins.

[ChrissieLC]

pay the mortgage down if your income is lower. without doubt. even on offsets will usually allow you to pay a certain amount in lump sum off per year.

[Copper]

If you are with Nationwide and not on a fixed rate you can pay off lump sums and still get the money back out again later if you need it (though yor repayments would then go up to compensate).