Would you overpay mortgage in this instance or not?

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We have just upsized into what we call our interim home - with a view to buying a larger house in a nicer location in 6-7 years time. Our upsizing has pushed the mortgage up and these are our prime FT nursery/small infant school child wraparound care years so money is tight. We can possibly afford small regular mortgage overpayments - BUT - given that we will aim to sell in 6-7 years is that money best spent in -

1. Mortgage overpayments
2. Investing in our stocks and shares ISA
3. Further modernising this house

If this was a forever home it would make sense to decrease the term. But for a sale in 6-7 years all being well where’s that money best spent oh wise MNers?!

For info - mortgage is a ported one which is 2/3s on a 1.08% rate and 1/3 on a 3% rate….

Sorry to jump on your thread OP.

We have a mortgage with an interest rate of 2.19% which we always overpay on… sometimes £200 a month, sometimes up to £500 a month.

Should we be doing the stocks and shares ISA? How do I go about this? Sorry I am completely thick when it comes to investments.

We probably hope to move house in approximately 3-4 years.

Hi @larkstar that makes sense when the aim as you say is to pay your mortgage off sooner. In our case the aim is to have the most cash Available in 6-7 years time to fund deposit towards further upsizing - in which case it does seem that continuing saving into our stocks and shares Isa As a priority is the way to go over and above over payments into the higher interest part of our mortgage

@RogueV Yes probably. Return higher than the saving you're making due to low interest on mortgage and reliable (dyor) return on stock market.

@RogueV

Sorry to jump on your thread OP.

We have a mortgage with an interest rate of 2.19% which we always overpay on… sometimes £200 a month, sometimes up to £500 a month.

Should we be doing the stocks and shares ISA? How do I go about this? Sorry I am completely thick when it comes to investments.

We probably hope to move house in approximately 3-4 years.

It would be my own preference to put the money in an S&S ISA, but there's a risk, obviously, because stocks can move down as well as up.

I would look at someone like Vanguard, if you're new to this. They have plenty of info about how it works, how to start, etc.

www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

It really does depend on your appetite for risk and what your aims are, though, and it may not be for you.

Thanks for the reply folks.

Have looked at Vanguard and Nutmeg websites and have had a bit of a read. It’s actually eye opening!

I think I’m going to do a half and half and put some away in Stock and Shares ISAs. It’s a little bit exciting

@RogueV individual stocks are more risky than something like a tracker fund, that aims to replicate the performance of a particular index, eg the FTSE100. So that might be a good introduction to S&S investing.

It’s good to buy when the market is depressed (there were some huge bargains at the start of lockdown when the ftse 100 dropped under 5000) but it’s tricky to time the market as instructions for deals can take a day or more to be executed.

Stocks are risky, you can get good returns, but that's precisely because you're taking a risk.
Normally the advice with money is pay off all debts first, but with interest rates low at present you might be better investing at least some of it- you might be able to switch some back into the mortgage from the investment scheme but find out if there is a penalty involved in taking money out of your scheme. TBH I think you need an independent financial advisor, not asking us here.

@RogueV

Thanks for the reply folks.

Have looked at Vanguard and Nutmeg websites and have had a bit of a read. It’s actually eye opening!

I think I’m going to do a half and half and put some away in Stock and Shares ISAs. It’s a little bit exciting

If you go to an independent financial advisor, they should assess your risk profile and how long you want to invest the money, how soon you might need some of it in an emergency, or for a planned move, and advise you accordingly. They should also redo your risk profile from time to time to be sure your risk factors haven't changed. They charge, but in my experience the one we have consulted for ourselves and my elderly parents has been well worth the charges he makes. He was able to get them out of some shares in time which my Dad had bought many years ago before they had become risky, which then tanked, for example. And their ISAs are doing a lot better now he is managing them- more than enough to pay his charges, keep up with inflation, and then some. He was a tremendous help when we moved house, too; sorted out all the money information with our solicitors and was able to assure the vendor's HA that we had the money for the purchase. Made things a lot smoother.

Returning to the topic of my OP - done some calculations and much thinking and have decided to set up a regular £100 a month overpayment on the higher interest part of our current mortgage. This lessens our mortgage debt by close to 10 grand in 6 years time.

Have also set up a recurring £100 trickle monthly into my existing Hargreaves Lansdowne portfolio - split evenly across those investments in my portfolio which have done well in the years I have held a Stocks and Shares ISA.

Have also scrutinised my expenses thoroughly and made myself a personal spending budget covering all sorts from hair cuts, to kids' extras to home stuff to parking and takeaway - which should - in theory - leave leftover money in the account which I will keep at hand for easy access savings. If and when they reach a level of rainy-day comfort in easy access account, will periodically trickle more into the Hargreaves Lansdowne.

This is the best way I think to prepare for a further upsize (All being well, fingers crossed, as my grandpa used to say) in 6-7 years time. It needed to be a combination of investing into existing S&S ISA + some overpayment on the higher interest part of the mortgage and + overal general budgeting carefully.

Thanks for the advice all :)

Have also scrutinised my expenses thoroughly and made myself a personal spending budget covering all sorts from hair cuts, to kids' extras to home stuff to parking and takeaway - which should - in theory - leave leftover money in the account which I will keep at hand for easy access savings. If and when they reach a level of rainy-day comfort in easy access account, will periodically trickle more into the Hargreaves Lansdowne.

Out of interest, do HL not allow easy access to your S&S investments?

We use Intelligent Money (as direct private clients, not via an IFA) and with them you can invest in any of their funds at any time, transfer between them, or withdraw in full or in part back to cash, within not much more than a day. Because of that we tend to keep most of the savings we want to be easily accessible in one of their lowest risk funds which is still way above a tradition ISA or savings account.

Not suggesting for a minute that it's a good idea for you but just wondered if it's maybe not possible with HL.

@SofiaMichelle it’s also never taken more than that with HL (although have only needed to withdraw once) but still prefer to hold some instant access stuff in a non investement account.

Stocks and shades are risky but if you follow an index it can only really go wrong if you need the moment when the market is down eg covid.. Other wise your buying lots of successful companies, and if the become unsuccessful they drop out of the index.

Thanks all