What would you do with these finances? Advice

[Fishywishy1]

I have NC’d for this.
We are at a bit of a standstill with what to do with our money. We are not in the uk so investing is not the same here. But I’m not looking for specifics in what to invest in I suppose if anything.
so here it goes
we have a property worth 500k and owe 400k mortgage
we have cash saving of about approx 200k
we earn 120k ish between us
save 2k per month generally
2dc with 30k savings in a account for them.

pensions are good and being worked on.
we want to get solar panels for the house as we feel it would be beneficial in the long run so that 20

The big question is, what would you do with the rest of the cash say that has cash would you pay off some mortgage or what? I really don’t know what to do. Which is the best option in general. Thank you.

I would keep an emergency fund of a year's salary plus other savings (whatever you intend to spend on holidays, house improvements etc). Do you need savings for the children's future education?

Anything over that I'd put towards over-paying the mortgage.

We have 30k there for the DCs education, this is being added to monthly by 400. They are only 10 and 12. So it will be ample by the time they get to university etc.

It’s a lot of money to keep as cash I suppose. I want to make it work a little bit in a way.

Look at your interest rates - if you have a cheap fix from before the rate increases then saving may make sense, but (beyond an emergency fund or savings for a specific event) it doesn't make much sense to save £2k a month if you are getting less interest on that than you are paying on the mortgage.

I'd probably put 6 months living expenses in an accessible ISA / premium bonds, see if you can get a high interest fixed term account for the DCs education fund and then overpay the shit out of the mortgage.

The amount we pay in interest vs capital on our mortgage each month makes me want to cry, cannot wait until childcare years are over so we can start overpaying!

Mortgage!! Use a calculator to show how much an overpayment now will save in the long run it’s huge

Other than that yes invest 50-75k in global funds they usually deliver long term well above the interest in an account. Not sure what the tax is where you are so I’d take independent advice on that

We are on a variable rate so we can make overpayments. I will look into this. Definitely want to keep a lump of cash. Maybe 60k?

£50k cash put into a savings account or ISA. Pay the rest off your mortgage and see if you can get a fixed rate as good ATM.

But what is that rate? Is there a reason you're not on a fix atm?

Are all your savings in ISAs, cash or S&S??

Consider more pension provision fir your DH.

Because it’s a new mortgage and we want to overpay with no penalty as such. Dh is a fan of variable, it has always worked for him. I would like to fix eventually I think.

it’s all cash right now.

Do you want to share which country you live in OP? People are suggesting saving/investment schemes which are irrelevant to you.

rep of Ireland

I mean, it really depends what you're paying per month for your mortgage.

I would question saving only £€2k per month from a €120k salary - after my monthly bills I could easily save €7500 a month so we'd need to know where your salary is currently directed

Income is 7500 per month, mortgage alone is 2k. Bills food etc, we save 2k into main saving as and assign 500 to holiday fund. That leaves 3k for bills, food, fuel, other car costs (tax/insurancesx 2) clothing, gifts, eating out, pocket money for dc, dc activities etc etc.

I thought we were doing quite well with savings 😅

Don’t keep a years salary in cash. I think I would have 6 months expenditure maybe in cash as a max. Maybe also a holiday or project type account that will get emptied and replenished as needed. The rest in funds or other investments for 5-10 years or perhaps a proportion overpaying the mortgage. Reality is investments will earn you more than overpaying the mortgage over a 5-10 year period. Depending on your countries tax rules also a portion of this in pension could be good if you reclaim income tax on it…. At least that’s how it works in England so great 20 or 40% return right there.

also investments in a tax free wrapper if possible ie UK have s&S ISAs

How new is the mortgage and how long are you locked into it for?
To me, paying off a large chunk of the mortgage just makes sense - none of us know whats further down the road.

Less than 6months. It’s for 28 years. We definitely want to pay off a chunk. We are so unsure of how much though, and if it’s the best think to do.

I will have to look into this thank you.

Right okay - so is the 200k newly acquired since the mortgage or did you deliberately only put down 100k on the house for a specific financial reason that no longer exists? Just trying to understand if there was a reason you wouldnt have taken a smaller mortgage to start with.

Yes it was acquired after purchase.

Right, okay! Then id be looking at how much you can pay down on the mortgage before penalties, although to be totally honest its such a large mortgage and large sum of savings I'd possible be looking to do the maths on early exit from the current mortgage to get a new smaller one, vs paying extra gradually up to whatever you are capped at and paying out so much in interest. You'd definitely have to do the sums on if it was worth it though.

We have a variable rate so no penalty as it is…

I will do calculations thank you.

I think if pension and emergency savings are taken care of then for me it would be getting that mortgage down. Make sure you understand any overpayment penalties, I didn't properly and actually they weren't that bad! I'm trying to max out ISAs so I can get tax free interest now and in the future, I've put a small bit into a stock and shares ISA, which right now is giving me 8% returns but I can't get my head around moving all of it into S&S, I like security not risk but I know long term I need to use risk to grow my money.

Mortgage is variable, so no penalties.