The aspect I think a lot of people miss in this debate is the impact & probability of downside. In your trip to the airport example, the real question is: What happens if you miss that flight? Is it a 2day business trip that can be easily rescheduled or is it a once in a lifetime family holiday? Similarly with the mortgage it is essential to realistically assess the probability & impact of not being able to make your payments in the future. Do you have dependents living under your roof? Is your career one that has a high rate of redundancy or burnout? Those Qs are far more important than whether an estimated growth rate of investments outweighs the leverage of an interest rate. Luckily it’s often easier to accurately assess the lifestyle factors.
A salient point Peter and agreed. 👍 Definitely matters about your obligations, to your family or yourself. Appreciate you watching and providing an insightful comment. 🙌
Been hammering down my morgate at least i know where i am with that. And now theres been a big jump in interest rates im planning to give it every last penny till the end of my fixed.
When you have experienced homelessness in a foreign county with your pregnant wife, when you return to your homeland, every fibre in your body wants to clear the debt and have a secure roof over your head for you and your family,,, anybodys circumstances can change in the blink of an eye,, my priority was having our house paid off in 12 years, from a 25 tear mortgage..... Ditch the debt asap is my way of thinking... Enjoyed your video....
Thanks David, glad you enjoyed the video. Yes, can't imagine how difficult that would have been. A home is so much more than an asset and is why it is so individual to each.
I think this is the best video on the topic that I've ever seen - really thoughtful and detailed. I watched it when it first came out and then couldn't find it again, until today. I'm bookmarking it so I can rewatch it again when I inevitably need to. Thank you for the fantastic video!
New to channel and subbed - great content. I think that age plays a part in the decision making process. I paid my mortgage off a year ago, ten years early. Regrets? Hell no. Now saving and investing more than 60 per cent of income while still having a life.
Dont buy a bigger house than you need, and don’t drive an expensive car you can only just afford. For me paying down my mortgage makes sense As a seafarer my tax free income would become taxable when taken out from my pension at a later date (assuming i hit the taxable income rates through withdrawals) so I’m using my tax free income to pay my mortgage down. In the future when i’m shore based and almost mortgage free I will use my taxable land based income to pay larger pension payments, and keep me in a lower tax bracket. There are thousands of merchant/super-yacht UK crew on well payed tax free incomes. Its very hard to find financial advice specific to our unusual financial situation. Great channel - good video, thanks 🙏
You have 3 options but what about the 4th? If you put £2O0 a month into an ISA and made more money (on average) and then the rates went up or you lose your job that ISA cash is actually useful, either to pay down your mortgage or to live off while you find a new job. Either way paying down debt is a one way bet. Investing gives you options. Options are ALWAYS good.
Just come across your channel - very unique take compared to the other finance guys. In the rigid airport example, i’d guess most will take the back roads as not to miss the flight (myself included). In reality, what I would do is allow myself the 90 minutes and take the motorway. That way you get the potential faster journey by taking the chance but also reach your destination with no delays. As with every thing in life the answer usually lies somewhere in between.
That's an interesting take and a good way to look at it. Arrive early or have time to be stuck in traffic. I guess the only real-life consideration is around accounting for the unknown and uncertainty. As far as, your reducing uncertainty in the backroad in that example (as there has never been a traffic jam) but in the motorway, there is precedent for long delays so that is less certain and would depend on your conviction for it being just 90 minutes. Perhaps the answer is.... take the motorway and have early holiday pints in the airport bar. 🙃 All a massive hypothetical anyway. Appreciate your insightful comment and watching 👍
Great vid, now on the hybrid approach. For many years, it was no overpayments capabilities. Now I have got some emergency funds, got much better pension contributions, and am paid enough to overpay. My aims were clear, reduce the mtg term to finish before retirement, bring mtg payments to a nice %age of salary which is my biggest driver, bring down the LTV to get best rates when remortgaging. I know don't invest enough but am doing that now. The tricky thing is how to allocate the spare cash as I agree that investing more and overpay less should help in the long run but I hope it all works out
Thanks for watching and for your kind words. There is no 'perfect' with this scenario. Sounds like you've been very intentional with your actions recently which is the key thing!
Thanjs, like they say its never too late. It's just a minor thing that I know that it took years to be in this position but naggingly the years of compounding interest that I never could afford.
The issue that I have with overpaying the mortgage is that it pays off the mortgage too quickly! Imagine paying it off early and then deciding you would like a mortgage in later life, say to buy another house. As the applicant is older, the lender may easily refuse to lend or make it more short term. Another reason for NOT paying down the mortgage is that buying properties is one of rhe few investments where the bank will leverage/gear up your investment power! For example, with £75,000 you can get a 75% BTL loan-to-value mortgage to buy a £300,000 property. This property can then be let out to provide a rental income to pay the mortgage interest and, hopefully, some profit. So, for me, paying down the mortgage on the first property is a huge opportunity cost since that money can be leveraged towards making a profit. In addition, any inflation reduces rhe real value of rhe debts. In my lifetime, RPI or CPI figures have only extremely rarely gone below zero.
When interest rates went up I pushed the button and paid off my interest only mortgage. I’d made the investment decision 7 years earlier when I could have paid it off. I didn’t want to push my luck.
It can be a very under appreciated part of this all. If it helps you sleep better at night and it's sorted. There's a lot to be said for securing your financial position. Thanks for watching Mark 👍
So happy came across this, as pondering on paying off couple of BTL mortgages, didn’t make sense previously with low interest rates but as you mentioned with high interest rates , it is same formula with slightly different game ! Thank you 🙏
Bear in mind the potential tax relief (especially if held in a SPV/Ltd Co.) you could be getting on that mortgage interest! This changes the figures significantly! Or purchase additional BTL's with those funds.
I understand what you mean, but the counter argument is that property is an actual asset that will persist (barring earthquake, nuclear meltdown etc), so you can always re-mortgage or sell. Equity investments can lose your money if you have to sell during a downturn, or can be wiped out completely - just ask Credit Suisse shareholders today.
It's an interesting debate. As the below comments indicate. It depends on liquidity requirements and time horizons. Weirdly you could make the same case for property and equities as both can have liquidity issues. In diversified global equity, the chance of going to zero is extremely low (never happened in developed markets.) There can still be long periods of bear markets though. Appreciate you watching and taking the time to comment 🙌
I'm living in a mess of a building with major works, hikes in service charges, terrible smells from neighbourhood etc. plus concrete builds do no last as long as eg brick. I'm not confident that my flat is as rock solid an asset as some may think.
I think this video has cemented my decision that i made 13 months ago, I have been overpaying my BLT for the last 13 months and will continue to do so till the my current deal on a low interest rate expires then use the surplus rental income to invest back into my S&S ISA I believe blending is the way forward but having that clear plan and sticking to it is key i think. anyway great video 🙂
Hi Marcus, thanks for watching. No I don't and to be honest it's not areas that I'll looking to make content on. That's purely because of regulation. As a regulated individual, the minute I start making comparison on funds and providers I get into a very murky water with compliance. I can talk on general financial planning, tax etc but the minute I get into specific funds and providers. It is possible, but it add a considerable level of complexity on how I make content and it's just not worth it. Appreciate that's not much help to you query though, sorry, joys of regulation!
@@marcusnelson3520I'm not a financial advisor or anything like that, so I'm not as restricted as PPF. If your work place offers a pension which they will contribute to, take it. Take all you can. Pay in what you need to take the maximum that they will pay in. That's going to be the best return on investment that you'll get. I'd then open a SIPP which I combine all my other old workplace pensions in (except final salary, if you're lucky enough to have had one of those). If you want/need to make more pension contributions than what you need to do to max your employers contributions, then stick it in your SIPP.
All it takes is 2 years of -5%-10% growth and a few flat years where no gains are shown before you are considering retiring and your whole retirement plan is out the window. Diversify! Pay extra on your mortgage. Its common sense. Invest but do not put all your hard earned money on Stocks and shares. Mix it up with ETFS, BONDS, GOLD and Resources and established companies Simply Save in a savings account Get Premium Bonds If you are left property Rent it. Add to work Pension, Add to SIPP PENSION Make sure to check your NI contributions are full each year if not pay for any shortfalls. This is important to get full state. Be proactive. Create a Business start small, sell it! The earlier you start being serious about saving the better. Just do not place everything in one of the above. That's the danger!!!
I'm sorry, I've only listened to 1m15s but you've quoted performance statistics according to CREDIT SUISSE. Hmm, possibly not the most reliable example 😂
😂! I didn't even think about how that might sound. For what it's worth... the Yearbook that Credit Suisse publish I'm referencing is just replaying the Dimson, Marsh and Staunton data which is widely considered some of the best historical financial data in the world. Sure it hasn't been tampered with... 🤨
The aspect I think a lot of people miss in this debate is the impact & probability of downside. In your trip to the airport example, the real question is: What happens if you miss that flight? Is it a 2day business trip that can be easily rescheduled or is it a once in a lifetime family holiday? Similarly with the mortgage it is essential to realistically assess the probability & impact of not being able to make your payments in the future. Do you have dependents living under your roof? Is your career one that has a high rate of redundancy or burnout? Those Qs are far more important than whether an estimated growth rate of investments outweighs the leverage of an interest rate. Luckily it’s often easier to accurately assess the lifestyle factors.
A salient point Peter and agreed. 👍
Definitely matters about your obligations, to your family or yourself.
Appreciate you watching and providing an insightful comment. 🙌
Been hammering down my morgate at least i know where i am with that. And now theres been a big jump in interest rates im planning to give it every last penny till the end of my fixed.
When you have experienced homelessness in a foreign county with your pregnant wife, when you return to your homeland, every fibre in your body wants to clear the debt and have a secure roof over your head for you and your family,,, anybodys circumstances can change in the blink of an eye,, my priority was having our house paid off in 12 years, from a 25 tear mortgage..... Ditch the debt asap is my way of thinking... Enjoyed your video....
Thanks David, glad you enjoyed the video.
Yes, can't imagine how difficult that would have been. A home is so much more than an asset and is why it is so individual to each.
I think this is the best video on the topic that I've ever seen - really thoughtful and detailed. I watched it when it first came out and then couldn't find it again, until today. I'm bookmarking it so I can rewatch it again when I inevitably need to. Thank you for the fantastic video!
Thank you, your kind words mean a lot!
Other things to consider are liquidity and decreasing mortgage interest rates as the LTV falls.
Yes, good point!
New to channel and subbed - great content. I think that age plays a part in the decision making process. I paid my mortgage off a year ago, ten years early. Regrets? Hell no. Now saving and investing more than 60 per cent of income while still having a life.
Thanks Tina, very grateful for your support.
I agree, there's a lot to be said for owning your own home!
Dont buy a bigger house than you need, and don’t drive an expensive car you can only just afford.
For me paying down my mortgage makes sense As a seafarer my tax free income would become taxable when taken out from my pension at a later date (assuming i hit the taxable income rates through withdrawals) so I’m using my tax free income to pay my mortgage down.
In the future when i’m shore based and almost mortgage free I will use my taxable land based income to pay larger pension payments, and keep me in a lower tax bracket.
There are thousands of merchant/super-yacht UK crew on well payed tax free incomes. Its very hard to find financial advice specific to our unusual financial situation.
Great channel - good video, thanks 🙏
Important stuff - key point - think about your future and not bury your head in the sand!
Agreed! Thanks for watching
You have 3 options but what about the 4th? If you put £2O0 a month into an ISA and made more money (on average) and then the rates went up or you lose your job that ISA cash is actually useful, either to pay down your mortgage or to live off while you find a new job. Either way paying down debt is a one way bet. Investing gives you options. Options are ALWAYS good.
Just come across your channel - very unique take compared to the other finance guys. In the rigid airport example, i’d guess most will take the back roads as not to miss the flight (myself included). In reality, what I would do is allow myself the 90 minutes and take the motorway. That way you get the potential faster journey by taking the chance but also reach your destination with no delays. As with every thing in life the answer usually lies somewhere in between.
That's an interesting take and a good way to look at it. Arrive early or have time to be stuck in traffic.
I guess the only real-life consideration is around accounting for the unknown and uncertainty. As far as, your reducing uncertainty in the backroad in that example (as there has never been a traffic jam) but in the motorway, there is precedent for long delays so that is less certain and would depend on your conviction for it being just 90 minutes.
Perhaps the answer is.... take the motorway and have early holiday pints in the airport bar. 🙃
All a massive hypothetical anyway. Appreciate your insightful comment and watching 👍
Great vid, now on the hybrid approach. For many years, it was no overpayments capabilities. Now I have got some emergency funds, got much better pension contributions, and am paid enough to overpay.
My aims were clear, reduce the mtg term to finish before retirement, bring mtg payments to a nice %age of salary which is my biggest driver, bring down the LTV to get best rates when remortgaging. I know don't invest enough but am doing that now. The tricky thing is how to allocate the spare cash as I agree that investing more and overpay less should help in the long run but I hope it all works out
Thanks for watching and for your kind words.
There is no 'perfect' with this scenario. Sounds like you've been very intentional with your actions recently which is the key thing!
Thanjs, like they say its never too late. It's just a minor thing that I know that it took years to be in this position but naggingly the years of compounding interest that I never could afford.
I find that most content on this subject does not mention the effect of tax and investment fees, which could completely flip the winning strategy.
The issue that I have with overpaying the mortgage is that it pays off the mortgage too quickly! Imagine paying it off early and then deciding you would like a mortgage in later life, say to buy another house. As the applicant is older, the lender may easily refuse to lend or make it more short term.
Another reason for NOT paying down the mortgage is that buying properties is one of rhe few investments where the bank will leverage/gear up your investment power! For example, with £75,000 you can get a 75% BTL loan-to-value mortgage to buy a £300,000 property. This property can then be let out to provide a rental income to pay the mortgage interest and, hopefully, some profit. So, for me, paying down the mortgage on the first property is a huge opportunity cost since that money can be leveraged towards making a profit.
In addition, any inflation reduces rhe real value of rhe debts. In my lifetime, RPI or CPI figures have only extremely rarely gone below zero.
Airport journey was excellent visualisation
Thanks, glad you enjoyed it!
When interest rates went up I pushed the button and paid off my interest only mortgage. I’d made the investment decision 7 years earlier when I could have paid it off. I didn’t want to push my luck.
It can be a very under appreciated part of this all. If it helps you sleep better at night and it's sorted. There's a lot to be said for securing your financial position.
Thanks for watching Mark 👍
Absolutely fantastic….your story telling and explanations are next level 👌
That means a lot, thank you!!!! 🙌
Very grateful for your kind words and support.
Excellent video, thank you! Really enjoyed the airport analogy
Cheers, appreciate your kind words and thanks for watching. 🙌
So happy came across this, as pondering on paying off couple of BTL mortgages, didn’t make sense previously with low interest rates but as you mentioned with high interest rates , it is same formula with slightly different game ! Thank you 🙏
You're welcome and thank you for watching! 🙌
Bear in mind the potential tax relief (especially if held in a SPV/Ltd Co.) you could be getting on that mortgage interest! This changes the figures significantly!
Or purchase additional BTL's with those funds.
Money paid off a mortgage is ‘gone’ money invested can be cashed in and used.
I understand what you mean, but the counter argument is that property is an actual asset that will persist (barring earthquake, nuclear meltdown etc), so you can always re-mortgage or sell. Equity investments can lose your money if you have to sell during a downturn, or can be wiped out completely - just ask Credit Suisse shareholders today.
@@follystone I agree with you.
It's an interesting debate.
As the below comments indicate. It depends on liquidity requirements and time horizons. Weirdly you could make the same case for property and equities as both can have liquidity issues.
In diversified global equity, the chance of going to zero is extremely low (never happened in developed markets.) There can still be long periods of bear markets though.
Appreciate you watching and taking the time to comment 🙌
I'm living in a mess of a building with major works, hikes in service charges, terrible smells from neighbourhood etc. plus concrete builds do no last as long as eg brick. I'm not confident that my flat is as rock solid an asset as some may think.
I think this video has cemented my decision that i made 13 months ago, I have been overpaying my BLT for the last 13 months and will continue to do so till the my current deal on a low interest rate expires then use the surplus rental income to invest back into my S&S ISA I believe blending is the way forward but having that clear plan and sticking to it is key i think. anyway great video 🙂
Thanks George, glad it was useful and helped guide your decision.
Very grateful for your watching and support! 🙌
Food for thought - thanks for covering a complex subject in an understandable way!
Thanks Simon, appreciate your support. 👍
A very useful video. Thanks for sharing
You're welcome, thanks for watching and taking the time to comment.
Do you have any videos on pension provider fees and pros and cons of workplace schemes vs personal/SIPP ?
Hi Marcus, thanks for watching.
No I don't and to be honest it's not areas that I'll looking to make content on. That's purely because of regulation. As a regulated individual, the minute I start making comparison on funds and providers I get into a very murky water with compliance.
I can talk on general financial planning, tax etc but the minute I get into specific funds and providers. It is possible, but it add a considerable level of complexity on how I make content and it's just not worth it.
Appreciate that's not much help to you query though, sorry, joys of regulation!
@@PrinciplesPersonalFinance Makes sense. Thanks for the reply. Appreciate all the informative videos you produce.
@@marcusnelson3520 you're welcome, grateful for you watching and your support. 🙌
@@marcusnelson3520I'm not a financial advisor or anything like that, so I'm not as restricted as PPF.
If your work place offers a pension which they will contribute to, take it. Take all you can. Pay in what you need to take the maximum that they will pay in. That's going to be the best return on investment that you'll get.
I'd then open a SIPP which I combine all my other old workplace pensions in (except final salary, if you're lucky enough to have had one of those). If you want/need to make more pension contributions than what you need to do to max your employers contributions, then stick it in your SIPP.
Totaly awesome video ...I guess this could be one of your best videos .
Thank you! Means a lot as I know you've been following the videos for some time now so great to hear that from someone like you. Cheers 🙌
Thanks for another excellent video!
Thank you, appreciate you watching and taking the time to comment 🙌
All it takes is 2 years of -5%-10% growth and a few flat years where no gains are shown before you are considering retiring and your whole retirement plan is out the window. Diversify!
Pay extra on your mortgage. Its common sense.
Invest but do not put all your hard earned money on Stocks and shares. Mix it up with ETFS, BONDS, GOLD and Resources and established companies
Simply Save in a savings account
Get Premium Bonds
If you are left property Rent it.
Add to work Pension,
Add to SIPP PENSION
Make sure to check your NI contributions are full each year if not pay for any shortfalls. This is important to get full state.
Be proactive. Create a Business start small, sell it!
The earlier you start being serious about saving the better. Just do not place everything in one of the above. That's the danger!!!
Agreed that the onus is on taking action.
Thanks for watching!
I'm sorry, I've only listened to 1m15s but you've quoted performance statistics according to CREDIT SUISSE. Hmm, possibly not the most reliable example 😂
😂! I didn't even think about how that might sound.
For what it's worth... the Yearbook that Credit Suisse publish I'm referencing is just replaying the Dimson, Marsh and Staunton data which is widely considered some of the best historical financial data in the world.
Sure it hasn't been tampered with... 🤨
Aww, it's okay. Only a gentle tease. Made me smile. ☺
Completely agreed
Excellent video mate
Thanks Simon, appreciate you watching and your support. 🙌
Great video. Good points to get across to people ❤
Thanks Shaun, appreciate you watching.
Always nice getting support from a fellow content creator! 🙌🙌
@@PrinciplesPersonalFinance Ah no worries man. Keep it up. I’ve seen your videos really progress over the time I’ve been apart of your channel ❤️
Interesting stuff
Thanks!