Should You PAY Off MORTGAGE Early vs INVEST? or BOTH? | UK
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- Опубліковано 21 жов 2019
- Should You Pay Off Your Mortgage Early vs Invest? or Both? As I'm an investor and also have paid off my UK Mortgage in 7 years, I share with you EXACTLY what I think! Pros vs Cons, etc :) ♥.
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How We PAID OFF Our Mortgage in 7 Years UK - • How We PAID OFF Our MO...
How to Start Investing In Stocks For Beginners UK - • How To INVEST IN STOCK...
ETFs vs INDEX FUNDS | How To Invest Money In Stocks UK - • ETF vs INDEX FUNDS 202...
HOW TO INVEST £1000 | 9 BEST Ways To Invest Your Money - • HOW TO INVEST £1000 | ...
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(00:50) - How We PAID OFF Our Mortgage in 7 Years UK - • How We PAID OFF Our MO...
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I'm married to Ken and we have two boys aged 6 and 4. I'm a Londoner, born in Hackney! :)
Day to day, I run the operations of The Humble Penny as a creative - doing everything from marketing to video editing. I studied Multi-media design and technology at Uni
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KEN:
I'm a husband, dad, and a First-Generation Immigrant to the UK. I started life poor in the UK and I've spent the last 20 years on a steep journey of Personal Development.
CFO by day with over 12 years experience in the investment business. I'm also a Chartered Accountant and hold an MBA from Cambridge University.
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Ken Okoroafor, The Humble Penny.
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#MortgageUK #PayOffMortgageEarly #Investing
★★ LINKS MENTIONED IN THE VIDEO ★★
(00:50) - How We PAID OFF Our Mortgage in 7 Years UK - ua-cam.com/video/0_aWbccuZiw/v-deo.html
(09:40) - How to Invest In The Stock Market For Beginners- ua-cam.com/video/u4n8f-YL5_I/v-deo.html
(16:16) - How Much Money Is Enough (Freedom Number) - ua-cam.com/video/4L3gtYyZwyU/v-deo.html
Great video. So I’m 38 I earn decent but I also like to live a great lifestyle. I’d say from 33 I really started to think about how I can make my salary go along way before kids because they cost so so much. So my plan was to make over payments on my mortgage which I am so happy I did. Saving on the interest off banks and it’s actually become addictive to pay my yearly 10%. I love to reduce the years it’s actually an amazing feeling. I set a 35year mortgage at 28 by myself but I’ve lived, but saved and sacrificed, but by 42 il be clear not 63! So it gives me the opportunity now to say by 42 il be completely free to live on my entire salary and be comfortable or to be given the chance to go even bigger on my next property, increase the years have a low mortgage but have the bigger house for children too. Many options and ways to think about now. I think paying the mortgage is the best option or as close as you can before 40 or the children idea. Having that real bulk paid off is a massive relief, also for me saving a huge pension is impossible each month, so the more I have in a house one day, i intend to sell it, down size as bigger means more costs and take out the money and use as my pension pot. This is just my plan and idea it’s addictive and so worth it paying off your capital. Save any extra you earn, don’t go out one weekend pot it, no holidays save insane, reduce clothes how many do we really need, sell them online save it! Set that 5 year plan keep to it and man will you be smiling but even if you have not paid it all off but close enough the relief will be amazing then congratulate yourself with a holiday or a big bottle of bubbly
Great comment. Is there any particular day in a month to make an overpayment to capture the interest rate calculation to be lower? Tnx
.We paid off the mortgage early. My husband wanted to do that. Since I battled cancer in the past, when I was single and had the mortgage. And recently found another tumor in my kidney. Thankfully, this one was benign. He didn't want me to stress out about the mortgage. In case I had to stop working due to cancer OR any illness. Not having mortgage is a great feeling. And one less thing to worry about.
Really good to read this :). Are you getting better by any chance?
@@TheHumblePenny
Yes, so far so good.
Wow, I was thinking about this,thanks for the this.
Ken your videos are clear, articulate, honest and well thought out - really inspiring.
Much appreciated, Stuart! 😊
Wow, I’m just so thankful to have come across this video by chance!! I’ve subscribed instantly and can not wait to learn more from you.
You're most welcome, Delphine 😊. Thank you
Thank you so much for this video. You’ve answered a lot of my unasked questions in away that’s very easy for me to understand
Yay!! 😊. I'm very pleased to read this. Do please share the video with others.
Thanks again, Ken. GREAT output and education.
😊🙏🏽
As always amazing content Ken. 👌
I’m sure like many people I digest information easily when I see it explained on a white board 👍☺️ More of marker & board please 🙏
Sure 😉
Brilliant video. Best I've seen on this topic. Just subscribed as so impressed!!!
Much appreciated! 😊
Really enjoying your content. Good to hear your perspective on things. Refreshing to hear you reframe the modern obsession of chasing that fast buck. Financial independence is achievable for anyone, just need to educate, persevere and stick to your strategy.
Really great video your spot on clear mortgage you are much happier .Also takes alot of pressure off mentally
Cheers, Steve! Great point about pressure off mentally.
Good content boss
Excellent video Ken! So clearly and simply explained. My goal is more geared towards mortgage payment for now, with the aim of freeing up income for investing thereafter. Thanks for your wealth of knowledge and generosity with it 💛🐻
Thanks a lot! When do you hope to become mortgage free?
I love your POST framework! It is also very useful in building a mind map for other questions.
You're absolutely right, Charlotte :)
Very nice. Helped me a lot to finally make a decision. Thanks
Yay! 👏🏽👏🏽. What did you decide?
Simply brilliant video mate
Really appreciate that :)
This is an amazing video 🔥
Great video. Thanks so much for creating this, it’s very helpful and a great explanation 👍🏼. Subscribed for more content 😊
Thank you, Natasha 😀. Please share with others
Great video Ken, keep up the great work!
Much appreciated, Adam 😀
Great job sir. Fantastic video.
Cheers, John! 😀. Thanks for watching
Best video on this topic by far!!
Much appreciated! 😊
Love this video thank you so much. We're doing both methods and we're now in a quandary as to whether to pay off the mortgage in the next couple of years, or be mortgage neutral and keep investing...
Cheers, Sophie. Sounds like you're in an enviable position 😉. Do tell what you decide
What a wonderful holistic video
So much quality
😊🙏🏾
Excellent insights 👌👌👌
Thank you 😊
Great video. I'm doing both but more on the mortgage. For all the pros you when over.
Sounds great!
Brilliant video. Doing both but with more focus on overpaying the mortgage. Thank u 🙂
Thanks, Susan😀. What's your personal reason for prioritising the mortgage first?
@@TheHumblePenny want to have the freedom to reduce my income, help my son (additional learning needs) and escape the 9 to 5. Thanks again for all your efforts - yr style is really evolving. :)
Susan, I can see that your WHY is from the heart 😊.
Interesting observation about my style🤔. How would you describe the change you see? I'm open to feedback.
@@TheHumblePenny your style is becoming simpler to understand. Love the white board - part of who u are
Hehe thanks a lot 😀. The goal is to make learning simple and fun. Tbh I thoroughly enjoy teaching. I used to run a tutoring school and used to teach 10 year olds part time. And to do that, I really had to communicate in the simplest language whilst painting a memorable picture 😀
Watching this and it is super interesting. I have my emergency 1-3 months savings and a chunk of a house deposit, but no mortgage/ house yet! I'm debating investing a little to get me started as by the time I come to buy it is likely that £1000 or so won't make a difference to mortgage payments overall. And as it is time in the market... I'm feeling like no time like the present (once I have researched the field to a level I am happy with). Great videos!
Excellent presentation. I am pursuing both strategies - paying off mortgage & investing in the stock market.
Smart move! 😉
Another great video! Thank you. We do both, although stock and shares ISAs and SIPP take precedence. A mini goal which we found satisfying was having enough liquid cash so that we 'could' pay off the mortgage if we chose to.
That is a great mini goal! Options win any day. Thanks for watching
That's a great goal to be fair, I will run this by the wife!
TheSideburno good luck!
Great video Ken - very balanced and I think you make a very good point about the psychological impact of being mortgage free. I think a mixture of the two is wise. Something I'm considering is renting a room out (once I've bought a flat hopefully) and using that income to part invest passively and part overpay the mortgage.
Hey Ursula, thank you! 😀. Your idea is a smart one. I did the same when I had a flat and had a young guy from Singapore as much lodger. It vastly improved my life because not only did he keep the flat clean and pay his rent on time, he also cooked amazing Asian cuisines and boy did I love being invited to eat some of that amazing food 😁
We do this with a local language college, well worth it and our son gets to meet so many people from different cultures. It all goes towards investing and mortgage offset account.
Hi Ken. Great video your videos have really switched me on to how I can make my money work better for me.
I just wondered what was your percentage split between overpaying the mortgage and investing in your stocks and share ISA. My situation is very similar to the first example you set. 30, married, 2 kids, decent wage and about 2months expenses saved up.
Also, I have an old workplace pension that I haven't grouped together with new work place pension and I'm not using that as a personal pension plan either. Should I look to make this an active saving stream too.
So my routes to financial freedom
1. Overpay the mortgage
2. Invest in a stocks and shares isa
3. Put any spare money into a personal pension
Really good video Ken. One of my friends what he did was paid of the mortgage and he put his kids names in the property. After 7 years of there name in the property if anything happens to him or his wife the kids inherit the property and they are free from inheritance tax as there names are in the property. Deffinatly paying of mortgage is best first as that is the greatest asset as property goes up in value as well over time.
As always Ken, a great video and so helpful. We currently invest and overpay the mortgage. Looking to increase both in the future and this video will help us
Awesome! Seems a lot of people are choosing to do both.
We are doing the same, recently our fixed term mortgage was at 2.75% interest, but the new deal is 1.49% fixed term,. Rather than pay the new lower rate, we will continue to pay as if it is still 2.75% thus offsetting it classing it as an overpayment. This will shave 8 years off, without thinking about it if the interest remains similar or better. We are also investing at the same time, I cannot believe we haven't thought about this before :-)
@@DanFiftyQuidPlz really good terms what provider was that
We are doing both and into bitcoin but mostly paying off the mortgage!! Great video!
Awesome! I'm intrigued about your bitcoin investment. How do you decide on a valuation for it? I.e. assess what it is worth, etc.
Hi Humble penny. Loved your video and experience. Really informative.
I have had a similar experience.
My wife and i both work in the NHS and have good salaries as band 7 Managers. We are both now in our early 50s and have been both lucky and wise deciding to pay our mortgages off fast.
We will have paid off two properties in the next 2 years. (home and 2nd investment property securing a 6% rental profit each year for the next 10 years (then sell both for a new retirment home) in 2030
We have bonds maxed out in one account for 1-2 year safety contingency
Cash isa with 3 -6 month funds for emergencies
Wife has a 95 and 2015 pension scheme retiring at 58 in 6 years time
I have a 95 and 2015 scheme pension retiring at 58 (2 years later) (both pension each have over 25+ years invested so far)
I have a SIPP also for extra pension top up as i was late starting a pension (invested an old pension into this) add £200 each month will have this for 10 years at least
Once Mortage is paid off we will both invest the over payments each a month into stocks and shares ISA - drawing down in 10 years 4% only each year
We will unfortunately also soon recieve large sums of inheritance.
We will both also have two subtantial lump sum golden handshake pots to invest at 60 (3 times final pension prediction each lump sums).
Any investment advise would be appreciated? I'm guessing diversity. What would you do?
We are doing a bit of both. We are older and plan to downsize in the next five years if plans pan out. That way we can release equity too. We came to investing and FI late in life but can still benefit from the advice.
Hi Ken, the binary offered here is between paying off mortgage and investing in the stock market. What about saving the money you'd spend on overpaying your mortgage and putting it into a pot for your next property purchase as a BTL investment? Property is a safer investment than stocks in the UK historically and is (if done right) cash-flow generating as well as capital appreciating. Grateful for your advice.
I really like this one.
Thanks! :)
luckily living in the North West our housing costs are only about 20% of our take home pay so we decided to overpay slighlty but most of it being invested in index funds. We are both just under 30 and after watching this I think we will tip the scales to pay the house off a bit quicker and invest a little less. Its nice to see numbers on a screen but I want me some of that mortgage free happiness! :)
I have chronic illness and pain and stress makes it worse ... it is difficult for me to have an eye on stock market etc or even invest by buying a small apartment and renting ... that is why I decided to focus on paying my mortgage faster
Thank you for sharing, the framework you mention is very helpful to visualise the options - I have been overpaying regularly due to fortunate circumstances (with the mental view of getting rid of debt first), but after talking to a colleague and seeing the benefits of increasing pension contributions raised my interest and I've started a add a little more into that (it's a no brainer but hard to swallow when you won't see it for xx years!). It's also the first time I've dabbled in an S&S ISA and that again perked my thought process as to whether a 1.89% mortgage versus investment returns might be better. Very cautiously, I think I'll aim for continuing to overpay but also chuck any spare into the ISA due to the liquidity (rather than 0.35% on cash savings rate). Hoping to get shut of the mortgage as that's a big mental hurdle (possibly down from 25y to 14y if I continue as is) :) Well done on your ambitions!
Hey Umski
I like that you're really thinking carefully about where your money goes. That's the right mindset.
This is exactly what I'm looking at. I have 3 pension pots. 2 redundant and 1 active. I'm hoping to take from the 2 dead ones and put in to paying chunks on the mortgage and investing. Plus top up the active pension pot.
Aren't you currently investing the pension pot at present? Or have I misunderstood?
@@TheHumblePenny I suppose the active pension is working but the two I haven't paid into for years aren't doing much. I think I can put the money to better work following your advice and investing directly.
@@WildernessTamed can you not link all three together?? When can you access them
great video :) both it is :D
😉
Doing both. Earlier in mortgage doing higher % towards mortgage. Since earlier extra $ has a drastic better effect over the lifespan of the mortgage. It gets less effective as years go by.
Good point, Zoey. Thanks for sharing 😀
Thanks for that Zoe as the numbers are not fully adding up. I suspected it was because I had 15 years left on the mortgage!
Are Offset Accounts available in the UK? In Australia, you are able to attach an offset account against your mortgage account. What this means is that if you have a $200,000 mortgage and $50,000 in your offset account, you only get charged interest on $150,000. The advantage of this is that it is similar to paying off your mortgage early (reduces interest) and overcomes the liquidity issue as you can always access the money in your offset account in an emergency. Obviously, it does require you to be financially disciplined and not touch the money in the offset account, which is where the banks rely on most people falling over as they will be tempted to take the money out and spend it on a holiday.
In my case for example, I have a minimum payment of $603 to be made on my mortgage every fortnight. I pay $1200 a fortnight into my offset account and then make a $700 payment into my mortgage account. In this way I am slightly overpaying my mortgage, and I am also saving $13,000 a year thus creating my emergency fund and financial security, whilst at the same time reducing my mortgage interest.
Yes, they do exist but not very common.
Very good videos and keep up the good work! Could you please make a video on the best way to pay back the help to buy equity loan in London which is 40%. Thanks
Thanks and noted!
we decided to save/invest 25% of our income, realisticly we do need to up this longterm.
also, we split this 50% 25% to go towards mortgage overpayments and 25% towards investments. this way we split our risk and also have liquid funds to fall upon.
the way i see it is we can always drip our investments into our mortgage if we change our mind depending on the gains at the time.
Jamie, that's a sound move. I know people doing exactly that also. Out of interest, how big is your mortgage relative to your joint annual pay? I.e. how many multiples?
@@TheHumblePenny our mortage at the moment is 2x our annual salary. we live relatively cheeply compaired to our peers.
Great videos, finding them really useful!
I’m looking to split the money I have for overpayments/investments, however I’m already paying 10% into my pension (which my company is matching, so 20% into my pension pot). Would you class this as an investment? Therefore should pay more into overpayments with my monthly fund?
Thanks!
Definitely an investment if your pension is being invested.
The decision one what to do will depend on your needs and goals
Could you please tell if we have a saving around 100k is it better to pay off house mortgage or get mortgage for a buy to let?
Great video, excellent content! 👌
Although your be 57 not 55 when you can access your pention.
58 or 59 (currently) if he is as young as he appears to be 😉
Interested to hear if and how this advice might have changed given current events. #2020
No change 😀
@@TheHumblePenny I was thinking about this the other day again and another question arose; Given a fixed sum of for example 500 a month, with the end goal of paying off a mortgage, would it be quicker to put that 500 straight into the mortgage account, or would it be a quicker route to invest it elsewhere until such times that enough was invested, including returns, to reach the mortgage balance?
No doubt a bit tricky to answer but it's something that I ponder while coming up the m6 yesterday.
You don’t get extra 20 quid at higher tax rate, You get way more. Eg 187.50 gross after 20% tax is 150, but the same gross amount at 40% is 250... so loads more...
What a great info! Yet again!
Thank you!!!!
I would like to ask a question.your answer highly appreciated :)
After watching you video I’m going I do overpayments! For sure!!!
My question is if my bank charges interest on a daily basis, What would be the best time to make those overpayments?
My DD comes on the 7th each month.
Thank you
Hey Edyta,
Thanks a lot!!😊. Glad you've enjoyed this one too. Overpayments should be made as soon as possible. Ideally on the 1st of the month. But I'd say make the payments as early as possible and as consistently as possible.
The Humble Penny
Thank you for the answer.
Yes, thanks to you it will be a regular activity!
Ken love your videos my biggest regret is not investing earlier .My goal is pay off mortgage in april fingers crossed .
That would be AMAZING, Stephen! At what age did you start investing?
@@TheHumblePenny Thank you for your great channel .I started about 2 years ago investing .But I have a few houses as well not sure if thats good or bad definitely stressful .I have a dream to retire before 60 and spend time abroad
Hi Ken, i love your videos. The one thing i noticed you didn't touch on here was the impact of inflation. The value of a mortgage will erode over time with inflation so should you overpay now or wait to make overpayments in the future? At some point there must be a trade off with interest rates, inflation and your rate of return from your investments. With interest rates where they are at the moment and if you have secured a good mortgage rate, it may be worth investing now and making overpayments later? Is there a calculation which takes these 3 factors into consideration which can help people make these decisions? E.g. if i can earn a hypothetical 4% return on average from my investments over time, i have a 2.5% mortgage fixed for a few years and then taking into account an average inflation rate; should i invest it, overpay the mortgage now or is there a proportion of the investment return which i should use to pay off the mortgage? In the long run what would i be better off doing?
This is such a great question. There's also the factors of how large your mortgage is and whether you can invest enough to earn more than the amount of interest being charged on the mortgage. It'd be great to see a calculator that takes these into account!
Would you advise renting 2-3 properties on a 25 year mortgage or focus on paying off your single family home before expanding?
You'd need a business case for the 2 - 3 rentals. They could help to accelerate the pay Off on your primary home.
New subscriber. I have been apprehensive to overpay however have been putting it away in an account. Circa 7k. My issue is that I don't have an emergency fund at the moment - do u suggest I use these funds to over pay or hold as emergency fund then overpay what I can on top of that? Thanks for advice,
Welcome! 😀. Definitely have an emergency fund first. This could be 1-3 months expenses.
If you've a mortgage pay that off primarily and the rest that is left invest makes sense to focus on debts more while still growing your portfolio slowly 🤷♂️
Invest in what though ?? Please explain
@@exerciseisantidote9337 I'm the channel above as well sorry I'm responding with a different account
I'm investing in index funds through a company called Vanguard, personally I put aside
£250 into my sp500 or Vusa as its called on Vanguard
And £100 into my retirement fund monthly, on average the SP 500 has been know to provide returns on average of 10% returns
I will be dropping more videos on Finances unchained showing the journey from £0 to ... whatever comes in the future 😁
@@The_journeyy I approve this message
I have a 100k offset mortage.
I have buikt uo 100k in savings which is offsetting the mortgage, hence i oay zero interest each month.
The 100k savings is in my and my wifes premium bonds account (50k each).
Should i pay off the mortgage with the savings?
In this scenario, I wouldn't.
Very good and valuable information.. would like to find out more about 15 vs 30 years mortgage.. started to do overpayments on my mortgage monthly.. but maximum i can pay 10 %... i have 5 years fixed rate for a 33 years mortgage. What should i do to debt free as soon as possible? Change mortgage to 10-15 yrs? Pay more then 10 % allowance even i will be charged?
Don't pay the Early Repayment Charge.
I'd invest any excess over 10% and use that to overpay when you can or when your deal ends.
You can also change the term of your mortgage and that gives your the same effect. Many banksare flexible to reducing your term.
The Humble Penny so can i change this now or should i wait for after the 5 years fixed mortgage term?my aim is pay a debt of 90k in around 7 -8years..
Would you still recommend making mortgage overpayments if you don't plan to live in the same property long term?
Yes. It's still equity and a guaranteed return. But don't put all your excess cash into overpayments in that scenario.
Just extended my mortgage from 10y to 25y. Fixed 1.49% for 5y. Putting the leftover from the smaller payments into my S&S ISA which has been averaging 6.5%. Hopefully in 10y I can use it to pay off the mortgage in full as planned and have a tidy sum left over.
Hi David
Sounds like a sensible plan for your personal circumstances.
@@TheHumblePenny do you think there is a reason many advise against this idea? I figure when mortgage rates at 4/5% you're taking a gamble but when they're as low as they are now, it seems a no brainer.
@@david1731048 Logically, it seems like the thing to do as you're getting both tax benefits and interest rate benefits. You'll just have to keep an eye out for what happens at the end of your 5 years and where interest rates are at. Also be wary of politicians messing around with these savings vehicles - they have a habit of doing that!
Life doesn't always carry on on a straight line. Life circumstances change and things happen. Hence why I say that what works for one person isn't necessarily what will work for another.
Plus the stock market needs a decent horizon to really have it work.
Great video
Thank you so much
As a working single parent with a mortgage my aim is to do both in a different way. With a 10 year old son I want to leave London. Anyway so payoff my mortgage means selling my current property and buying just outside of London.
Investing into a emergency fund currently. From September start passive investing.
At age 47 I hope I am doing this the right way. Would love some feedback
Thank you so much for this valuable Information
You'll benefit from moving just outside London. We did the same and mortgage freedom came to us a lot quicker as a result! 😀
Thank you so much for your reply, I really appreciate your information. Next step is to search areas just outside London safer for my son and I. Thank you
Any suggestions or strategies to start?
If I could raise on worry regarding this otherwise great video ,
A point i think you haven't covered in terms of freedom vs being trapped
Living on rent and investing from anywhere in the world allows more location freedom.
People in thier 20s may not know where they want to settle ? And owning a place ( near London or high cost of living area may also cause them to be trapped )
Any clarity on this?
Great point re Single people. Yes, that's perfectly valid. I'd suggest taking a good investment opportunity (e.g. in property) if you can find one. Otherwise, stay put and keep saving until you buy where you want to live.
M one of the haters ☝🏿🤣🤣 really appreciate your free wisdom 🙏🏿🙏🏿
Not haters in the cons list 16:27 😂😂😂😂
If like you have said, you are 35 at the moment, then you will not be able to access your pension pot until you are 57. This is because according to UK government plans, minimum pension age will be raised in 2028.
Yes, 57. Although tbh, accessing it at 57 isn't terrible as we've focused on income generating assets today already.
Do you believe in the concept of using debt to make you more money ? Or you are more of a financial freedom zero debt zero worries kind of guy?
Zero personal debt. Investment debt is fine with a solid business case.
What would you consider investment debt other than a mortgage ? (Very siked you replied)
You definitely would get haters ,some people can't take others success/wisdom
Indeed! This is a mindset thing
I'm going to pay off the mortgage early.
Great decision 😉
@@TheHumblePenny Thank you. you also have one new subscriber so please keep the content coming.
With a tin foil hat on, paying off your mortgage early only benefits yourself, investing instead benefits corporations by giving them cash, Governments through taxation on returns and Gilt investments and Banks by making you hold on to a mortgage as long as possible. Someone in 1999 would have considered if they should put money into the FTSE 100 or their mortgage, wasn't a clear cut decision with hindsight.
Every video on this topic talks about “ it depends on your personal goals” isn’t everyone goal is to retire with financial independence ????
HanchoPOW well trouble is a lot of people are happy to just spend and 'enjoy life' now and they think retirement is so far off
Sadly not everyone's goal. Not even 10% of people out there have that as a concrete goal.
Could you make shorter videos please?
We try to where possible 😀. Some videos just can't be short due to them being technical and so on.
Cons: No. 3 Haters lol 😂