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My wife is from New Zealand and the idea there (20 years ago) was to get rid of the mortgage as soon as you could. Then use the extra money for investing in something else.
Timing and luck has a lot to do with getting things right financially. But it's necessary to have the right ideas all ready in place beforehand.
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Because of the interest Big G - with a big loan you spend quite a significant portion of the time just paying back the interest.
Although if you can get a good rate, as small amount as you can for as long as you can might be even better.
And overpaying, especially in the early stages of the loan, is always a good idea.
My dad actually paid cash for his house in about 1990. It was pretty small and pretty cheap so he cashed in some investments and bingo! Puts the coach's Porsche into perspective
I over-payed my mortgage reducing the projected interest from £67,000 to £20,000, knocking 15 years off the term.
Best thing I ever did.
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That's what we did. All paid off in 15 years instead of 25.
screamapillar....i bought my mothers flat 2 years ago on my overdraft as she hadn't sold her house.......
it was attached to my mortgage account and a low interest.......
she repaid me and the interest when her house sale went through........
and thats where there is a problem in this country............I only receive £50 a week income and my hubby is on a low income.......so low that the boys got EMA in sixth form and get maintenance grants which are not repayable for uni......
yet our one bank account.....not even the one we get our money paid into......lets us borrow without even seeing anyone enough to buy a flat...i just wrote a cheque out and paid it to the solicitors......
how many people would have used that facility to get themselves totally into debt
I haven't bothered paying mine off because I'm on a 2.5% mortgage and the corresponding investments are earning more than that. Of course if things change (I lose my job, mortgage rates go up), I have the option of paying it off later. That's what the decision not to pay it off has given me - options.
Horses for courses I suppose.
Several years ago I remortgaged to buy a place in New Zealand. Once the prices had topped out, I sold and banked the cash.
The interest rates over there were 8.8% and the tracker rate that I had, had gone down to 0.79%.
So I have a mortgage. Which pays me. (4% now)
Its luck. It wasn't planned.
However, if I had been stretched financially, I would never have been able to buy another house in the first place.
Also, (apparently) like a mug I've been paying thousands into a private pension fund ever since 1988 when it was clear I'd never see the money in the fund. Then out of the blue some politician moved the goal posts and said I could have all the money after all.
Bob Geldof is behind my long term financial approach. He said.
Its about this. If you have enough money that no-one has any leverage over you, that you can say "Fuck you", then you've made it.
If you owe money, someone (creditor) has leverage over you. You have to rent a house (your landlord) has leverage over you. You still owe money on your house (the bank) has leverage over you.
Your boss (if employed) has leverage over you since he knows you have to pay bills.
The aim is to be able to stay in bed indefinitely and not lose whatever life style you currently have. That's being able to say 'fu'.
What can I say?
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Overpaid and paid off here too.
Btw, I've never earned as much as was considered the average national wage. Ever.
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Ric, yes I agree a lot of it is down to luck. If my mortgage was significantly higher in interest % I would think differently. I know I am "lucky" to have the mortgage I've got - it wasn't particularly planned. In a way, I feel I'm sticking two fingers up to the bank as I am better off having a mortgage at the moment (I know this may change, and I keep an eye on things). I definitely get your "fu" points though.
I suppose it just goes back to what I said that not all debt is bad and (if you're lucky) you can make it work for you, which is what you've done.
Back to the other thread though, sinking £100K in cash into a car is something I would never do. Or sinking however much he said it was (£5K, I think he said?) into a private number plate. I don't understand this.
Me neither.
Paying megabucks for something that's only ever going to depreciate in value is foolish.
If your plan is to stay in a profession that keeps you wealthy your pocket can take it. If you're planning to go off and raise Yak in Tibet, it can't.
Ultimately people can spend their money on what they like, as long as they can afford it - either now, or on projected incomes.
So to a degree screamy is correct in that if your pocket can take it, that's OK, but one ought to have a plan.
However we all, I would imagine, waste money on things that will only depreciate or have no 'holding' value: who doesn't spend ANY money on holidays? Arguably the benefits are non financial but in a monetary sense it's a black hole. I assume we don't have cyclists on here - another money pit. But again the rewards are non financial.
Some have also repeated what I said initially about the 100k car purchase. If you can leverage (interest free periods, VERY low rates), then its more cost effective not to pay cash. The 100k can then be put to work and earn more.
Some have also said the same re mortgages: if you are paying base +0.5% (yes, we had those deals a few years ago) , then it makes (financial) sense NOT to pay the mortgage off which costs you, at present 1%. Indeed there were offers of base less 60-75 basis points meaning that when rates went to 0.5, the bank were actually paying you. The capital can - if invested wisely - earn multiple times that value. Obviously the smart thing is to be aware of the pitfalls, tie-ins, break fees and so on, plus have a contingency plan.
The opposite is true with higher rates - I too at one stage was paying 17% - so therefore it makes sense to overpay.
Well you buy holidays for pleasure, for relaxation and for the memories so they obviously have a value that isn't, in itself, monetary.
The point is that you shouldn't be buying the sort of holiday you can't actually afford. If you want a once in a lifetime trip or round the world cruise you should be planning it in advance and saving for it.
And part of the fun/anticipation (for me) is saving up and looking forward to a holiday.
But Screamy, we're all different. I can think of a lot of scenarios where people may want to borrow money to go on holiday or whatever. To state "you should be planning it in advance and saving for it" is your view (which of course you're entitled to) but isn't correct for everyone in all circumstances in my humble opinion. It's not always as black and white as that, for lots of different reasons.
If I felt I wanted that £100K car (I don't) and had a spare £100K rattling around (I don't), I still wouldn't buy it out right. I would finance it and keep the cash invested elsewhere.
some people get pleasure , relaxation and memories from owning/driving a porsche 911 gt4 turbo. you could argue you get a longer or tangible benefit from owning a prestige car than going on a prestige holiday.
people are different. but as long as your pocket can afford it then spend it on what gives you a smile.
Borrow money to go on holiday? That's crazy.
Spend your money on what you want. just don't moan about it on the news afterwards because you can't afford to pay Wonga back
Or, as the saying goes, "cut your coat according to your cloth."
Some of my best holidays were virtual freebies spent in Cornwall with relatives.
I also wouldn't consider a loan to be a debt if you had the money in the bank to pay it off should you want/need to. Yes, it technically is, but it's not "being in debt" - i.e. owing more than you own. It can be a good financial planning tool, but only if you keep an eye on it and don't get greedy.
There's a huge difference (in my opinion) in putting a £1k holiday on a credit card that will be paid over 3-4 months, and buying a £100k car on HP without reliable means of paying it off.
I rarely use cash or my debit card - everything goes on my credit card and gets paid off when the bill is due. 2 reasons for this - it's a reward card so I get points (Tesco) which fund holidays etc, and I have an offset mortgage, so the longer the cash stays in my current account, the less interest I pay on my mortgage. We've saved £12k over 10 years as a result of that and some savings also offsetting.
My mortgage will be paid off at the end of next month. At 46, I consider that quite an achievement.
I wonder what that "I'm just a coach" chap is up to now?
Blowing it all on number 13 in Vegas?
Scraping up roadkill for Sunday lunch?
It's almost like the old day. Someone starts a piss-take thread and it turns sensible. Someone asks a serious question and the thread ends up discussing the relative merits of flip-flops and vodka.
Makes me all nostalgic..................
Sorry, that maybe slightly my fault.
I wonder if he's sold his number plate?
I thought it was brilliant that this tread has turned into one of proper sensible debate. I'm just waiting for someone to come on and start swearing at everyone just to make things normal again.
How about a thread about how offended we all are for a TV presenter grunting an offensive word in a clip that we weren't meant to see and wouldn't have been offended if someone hadn't decided to dig the clip up. Looks the news is trying to make the news again and telling us all how offended we should be. Even if the person in question is the sort of D1CK we hate.
I'm quite sure Karen will be along soon (or 6 months from now) to start a thread on that one, Philo.
I remember being called into see the headteacher once for my 5 year old who had been reported (by a parent helper) for allegedly saying something rude in the French class when they should have been saying 'trois'.....
For Flips Sake...
Having been brought up with that version of the rhyme being "normal", I sometimes have to check myself when my 5 year old is using the rhyme to choose which book to read or whatever.
The modern version is "fisher", in case anyone is wondering. Unless you are vegan, as that may also be offensive.
(Just joking..........)
It seems like they are on a mission to brand someone a racist everyday. Ridiculous.