Відео

200% interest rates... disguised as 5% "yearly"

Yikes!! Watching this video one year later.... cryptos went up x 3. House baught and paid for.

This is very England specific advice. The usa has fixed rate mortgages, england has variable rate mortgages.

The idea that inflation being higher than your mortgage interest rate makes the debt cheaper and therefore you shouldn't overpay is complete nonsense. If you have say £200 a month either to invest or overpay with, inflation will affect that capital the same regardless of what you do with it - that's why mortgage rates are affected by the base rate/SONIA...! Ultimately, what you mean by "inflation" is the debt vs the price of the underlying asset, ie your house price, such that your house price will increase faster than the debt. But that's an assumption no individual should be making about their home equity. Besides which, house price is irrelevant to the question, since the "rate of return" from paying off your mortgage is agnostic to house price - it's purely what you would save on servicing the debt. There could be no underlying asset at all, just an unsecured loan, and the calculation of loan interest vs investing would remain the same. You also say that you're taking on overexposure to property by overpaying - again, not true. Your effective rate of return is a result of the interest you would have paid on the principal you paid off - it has *nothing* to do with property value. If anything you're *decreasing* your exposure to property by reducing your leverage. You already own the asset regardless, so if house prices did tank, you would lose just as much net worth.

Great forecasts - LOL. No way you can use a forecast mixing equities and stocks to get a true picture of your financial options. So far - and last year was a boon too - I have made over 26%. Welcome to call this luck. However, S&P and NASDAQ500 have both made over 17%. Average over time for the two is above 10% - a far cry from 6%.

Right now the math shows investing is _probably_ better than overpaying. But there is a psychological/habit factor to consider. Personally I pay 8k on shares and 7k on property. Per month.

This is a great video. I'm not sure why you stopped making them but you have a bright future ahead if you carry on 🙏

You look about 12... shouldn't you be out kicking a football with your mates? 🤷‍♂️

My rate is 1.8% and fixed for another 17 years. My focus is just on investing now and optimizing whatever gets the best return (Mortgage at 1.8%, student loans at 0.18% and investments at 9% average per year so far)

Clear my mortgage in 3 months. Then I'll start capping my isa yearly for another 20 years in time for retirement.

How to overcomplicate a very simple concept

average stock returns are 10%, average index funds / ETFs are 12%. Logically it makes more sense to invest, compound interest is your best and most important investing power. However the peace of mind of being mortgage free is priceless. Its ultimately down to what you want.

I was literally working this out the other day. Overpaying by 30% on a cheap mortgage or a buy to let will have me done In 10 years compared to 20 and will cut more cost than stock market Ona. 12% return lol.

Now revisit this video! Lol

You haven't included tax....work in the investment lives in a ISA or better a SIPP it massively out performs overpaying a mortgage

Good video but ONE HUGE FLAW. The trailing 10 year annual average return of the S&P500 for example the Vanguard US equity index find here in the UK. Is 14.6%!!!!! That won't continue at that rate forever, but plug those figures and it's a TOTALLY different story. And all you had to do was buy the index, put it on auto invest, and ignore. You didn't even have to stock pick for those returns.

Take the risks you can afford and research best you can. Like you say it’s not always in your power to control all of the cogs that affect the outcome.

25 year mortgage paid in ten best decision I ever made. It's not about the percentages it's about ease of mind.

Bro, you deserve 1m plus subscribers

I did the math a bit different as you have two different scenarios with at least two different timespans you need to consider. If you only do one 25 years timespan it's worthless. You need to consider your purchasing power for a potential stock portfolio and the budget you keep parked your your overpayments. With this in mind I have seen it's good to at least do both in the beginning and then go towards even more additional down payments. Because once it's all paid. It will releave not only the mortgage payment plus the parked budget as well. So please do the math in written by yourself.

Now compare overpaying your mortgage compared to investing in Bitcoin using historic data.

You made a bad financial decision? Seriously, interest on investment (index funds) is way higher compounded than what you're saving on mortgage.

So, in short, we should get out of debt quickly because we don't know when the lender will change the rates?

You forgot that investment profits are taxed in your UK self assessment tax return

the s&p has done 11% on average over the last 60 years… you’re misleading people.

You also forgetting about tax to be paid on investment earnings.

All nice and well, but Ive got a 1,8% interest over 30 years. Id rather put 200k in investments than paying off my mortgage. Even my savings account beats that interest. Plus I got an extra tax break on my mortgage interest, which makes me pay 1,2% actually

you also could argue that renting + investing gets you a house faster and cheaper then getting in debt

dont pay back your mortgage, and investing that money instead, is the same as : having a payed off house, taking a loan against it, and using that money to invest yet lots of people would do nr1, but ive not heard many that would do nr2

one point i noticed you glossed over - Even if property values tank in your area effecting your net worth your debt doesn't vanish. You just end up whats referred to as negative equity. So by the numbers you have lost money but by reality you haven't actually lost anything physical just theoretical money. Another side that people forget when we talk about this - your house is a asset, but you also need somewhere to live. If you ever tried to liquidate the value in your home you generally have to buy a new home, and if the cost of homes has gone up the relative price of the new property will also have gone up. Which makes downsizing easier but climbing the property ladder more difficult. Renting is a possibility but difficult currently and if it became much easier the cost of buying would drop. basically - your house/home is a asset with value but its not a value asset that you can liquidate without replacing(at least without changing your and your families entire lifestyle), so paying off the debt on it reduces your risk and exposure - plus you don't get taxed on money saved but you may well be taxed on gains (depending where your living)

Great video - first time someone’s talked about this topic, isn’t a financial planner and given a fair explanation as to what the key variables are that determine the optimal decision. Every planner uses the S&P returns as a guideline but if you have diversified your portfolio then you probably have lower returns shown by your vanguard research

Another factor is that for every payment, the money you pay in interest goes down. So what you could do is to "match" the interest savings by increasing the amount you pay off.

For American listeners: investing into an IRA or 401k has an effective return 20-40% higher than market return because of the tax preference.

Seems you have neglected tax… for many the benefits of paying into a sipp to gain tax back (and NI if using salary sacrifice) combined with tax free lump sum (often of a couple) really tips the balance. Obviously it varies based on personal situations.

your mortgage is not fixed ?

Se você tem dívida, nem gente vc é!

It always depends on the circumstances and the person in question. Objectively, reinvesting the "overpayment" amount into the markets is always better in almost every situation, especially if its over a 30 year period. No questions. But debt is never objective for the person in question, and it always varies by person. Someone who doesn't find a mortgage scary, and has enough financial discipline to save that "overpayment" amount and invest it in the market index should definitely not over pay the mortgage, because in the long term, they will always benefit from the inflation (which makes the loan and monthly mortgage payments worth less over time), and B: the growth of the market investment. But someone who lives in fear of debt and it has a strangle hold on them, lives pay check to pay check, and has a 10% loan because they have terrible credit, should prioritize paying off the mortgage early.

Multiple points: * Inflation doesn't matter. Just compare nominal to nominal, because inflation will (roughly) also inflate house and other assets (not bonds, though) * Taxes, man, TAXES. Investment gains, dividends, and interests are all taxed. You can't compare 6% mortgage with 6% investment return. * What you "invest" into the house you already have doesn't add how much you're invested into the housing market. You already "invested" 100% of your house's value, whether you have 100% or 0% mortgage. IOW: Your mortgage doesn't double when your house value doubles.

I am on a fixed 1.1 rate for the next 22 years. So never paying that of early

All I could focus on was the reflection of the ring lights in ur eyes, did you say something about a mortgage?

One year after this video was made, I have had two years of 17% returns on my investments, so perhaps this video hasn’t aged very well…

Overpaying is worth at the beginning, stops being worth it latter on.

All the best and good video. In my opinion it is still a good time to invest in different stocks like gold, silver and digital currencies. This is one of the most important skills to learn and everyone should invest instead of saving. Some may agree, some may disagree. My big compliments to Natalie Rose Strayer for improving my portfolio!!......

You can never predict which way a rate will jump. Rule of thumb is that every 20 years money halves in purchasing power. 4% compounding is doubling every 20 years. Historic trends forever. A mortgage is a compounding liability. Overpay it and you increase the size of the shovel clearing the debt every month. Or another analogy, the bucket bailing out the boat gets bigger and thus more effective each month as the boat becomes more sea worthy. Assets minus liabilities equals capital. Your house should appreciate in value as you maintain it and the liabilities should decrease as you pay it off. Focus on one thing and do it well, then focus all newly available cash flow on the future investment until funded to a level you can leave for something else to invest in. Your mortgage is a current liability until it is paid. Maintance is a smaller liability throughout ownership but you can always dispose of the asset at any time.

Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.

Perhaps it is better to invest in over paying your mortgage when interest rates are low. Hear me out; your monthly payment will be lower and you’ll be better able to afford over payments. When the interest rates rise, you can stop over paying (so you don’t feel the financial hit) or you’ll have already paid it off.

Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market

I wouldn’t overpay on a mortgage as over the longterm an aggressive portfolio of equities should outperform what ever savings you make on overpaying on your mortgage. I think the secret is to not to buy a house that’s too big for your needs. The individuals that borrow as much as they can to buy their main residence can often trap themselves into a life time of high mortgage payments and not having any cash to invest. Don’t get caught in that trap. People also think it’s a good investment buying a large property when in reality it’s not if that’s the only asset you own. I’d take a semi detached property with 75k mortgage and a 75k investment portfolio any day. It’s all about mind set and life outlook.

The money that you are borrowing, not "lending' (sic).

Thanks for the video. It was very useful. I have a further question if you don't mind. I am on the last stretch of my mortgage, we have around 18 k left and this summer, when we remortgage, we could pay it off. Of course we started questioning if we would better off using the money and just keep the mortgage going as it is quite a little monthly payment. So your video was quite helpful on this side. Unfortunately, what really confused me, was a colleague a few weeks ago. He told me, do not pay it off your mortgage, because it is beneficial to have a small mortgage open and for the bank to still partially own your property. Now, I have no idea why he said so, he told me, this is what he heard. It does sound like a stupid question. But I was wondering if you had any insight or extra suggestion of what would be the best thing to do. Thanks!! Andrea