Achtung financial types: Best way to pay off a mortgage?

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bimboman
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by bimboman »

backrow wrote:Offset mortgages are great if your income and outgoings vary, and you are disciplined: otherwise, they can be risky should the temptations for holidays, new kitchen etc prove to be strong.

As has already been mentioned, you can have various different mortgage subaccounts, you don’t need to have one product only - I have most of mine fixed repayment, but have in the past had interest only variable rates as well - I was able to lock in everything at a fix rate for 5 years at the same rate as variable ones avail at that time, so consolidated.

My investment mortgages are of course interest only

How are you planning to own your investment properties ?
backrow
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by backrow »

bimboman wrote:
backrow wrote:Offset mortgages are great if your income and outgoings vary, and you are disciplined: otherwise, they can be risky should the temptations for holidays, new kitchen etc prove to be strong.

As has already been mentioned, you can have various different mortgage subaccounts, you don’t need to have one product only - I have most of mine fixed repayment, but have in the past had interest only variable rates as well - I was able to lock in everything at a fix rate for 5 years at the same rate as variable ones avail at that time, so consolidated.

My investment mortgages are of course interest only

How are you planning to own your investment properties ?
Ultimately , I’m not. No point whilst you can still offset any mortgage interest for tax, even at the lower amounts. There will hopefully reach a point when I can sell 1 or 2 that will pay off my own home and the others, and or pass to the kids to save them having to rent before they can buy.
Am still in the ‘accumulation stage’ of getting places where you can spend 20k doing them up and adding 40k to the value.
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nardol
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by nardol »

I hope those prices keep going up for you then.
backrow
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by backrow »

nardol wrote:I hope those prices keep going up for you then.
Even if they don’t, the net rent is more than double the mortgage and I should be ok until interest rates reach 9%
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RuggaBugga
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by RuggaBugga »

Edinburgh01 wrote:
RuggaBugga wrote:
Edinburgh01 wrote:I'd advise caution on fixed term deals if you are trying to save money.

Banks are trying to make as much of a profit on fixed rate loans as they are on any other type. They employ professionals to make sure they do this, so essentially if you are trying to save money with a fixed rate, you are backing yourself against the bank's professionals. They will have predicted where interest rates are going over the life of the fixed period, and will have priced that into the product. It may or may not be built into the interest rate so you need to look at all the costs and restrictions for a fixed rate loan and you may find it is not as great as it appears on the surface.
Pretty much bollox tbf. Interest rates are hedged as the professionals in the bank have no more idea of where rates will be in the medium to long term than you do.

Also the interest rate on a short term fixed rate mortgage in NZ is significantly lower than a variable rate. The standard two year fixed rate is on average 1% p.a. lower and the margin can be wider than that.

For someone in Jeff's position fixing the bulk of it is a complete no brainer.
This is exactly why I made the point. Far too many people look at the headline rates and ignore other costs or restrictions.

I have no knowledge of the NZ financial market, but that fixed rates are current lower than floating in NZ does not negate my point. Make sure you take into account all relevant costs as well as the headline interest rate, and also look at what terms you are committing to so you get the full picture. If you are still confident it is a good deal, then fine (and just getting security of knowing payments will not vary can be worth it for some). But make sure you properly understand the contract.

It is true that banks use hedging techniques to balance the interest risk in their mortgage (and other) portfolios. That they take steps to mitigate portfolio risk does not alter the fact that they are trying to make money out of each contract.
No argument there. Fixed terms can be very costly to break which is why I advocated short term fixes only. You just never know what is around the corner and when circumstances can change dramatically. Even more so for expats with family back home etc...

That being said a combination of short term fixed rates and offset variable loans would be the way to go for jtb imo.
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nardol
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by nardol »

backrow wrote:
nardol wrote:I hope those prices keep going up for you then.
Even if they don’t, the net rent is more than double the mortgage and I should be ok until interest rates reach 9%
Your whole setup it geared to the underlying asset going up in value. As you said you are using any proceeds from the rentals to accumulate (aka reinvest). If the underlying asset starts declining your business model is kaput.
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RuggaBugga
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by RuggaBugga »

nardol wrote:I had an interest only mortgage that I switched over to a standard one. Just to start nibbling away at the capital. Previously I was making annual one off lump sum repayments.

I have now fixed my mortgage interest rate at 1.6% for 10 years as rates have bottomed out. I'm not going to be making any additional repayments on the mortgage as interest rates are so low and I have now guaranteed they will remain so for 10 years. I'm saving up to invest in a buy to let property / make current property buy to let instead. No point repaying a mortgage when credit is almost free.
Christ that's a good deal. Is this in Ireland?
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nardol
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by nardol »

RuggaBugga wrote:
nardol wrote:I had an interest only mortgage that I switched over to a standard one. Just to start nibbling away at the capital. Previously I was making annual one off lump sum repayments.

I have now fixed my mortgage interest rate at 1.6% for 10 years as rates have bottomed out. I'm not going to be making any additional repayments on the mortgage as interest rates are so low and I have now guaranteed they will remain so for 10 years. I'm saving up to invest in a buy to let property / make current property buy to let instead. No point repaying a mortgage when credit is almost free.
Christ that's a good deal. Is this in Ireland?
Netherlands. Ireland you won't get below 2.8% and that would be with an LTV below 60%.
backrow
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by backrow »

nardol wrote:
backrow wrote:
nardol wrote:I hope those prices keep going up for you then.
Even if they don’t, the net rent is more than double the mortgage and I should be ok until interest rates reach 9%
Your whole setup it geared to the underlying asset going up in value. As you said you are using any proceeds from the rentals to accumulate (aka reinvest). If the underlying asset starts declining your business model is kaput.
Oh I didn’t say I was reinvesting it ALL into yet more property .... :smug:

But yes I’ve kept it to London as that is where I see the sustained demand mid to long term.

Even if there was a period of no capital growth, if I still make X hundreds net on each place each month, then I’m happy. It makes more sense to me to pay interest on assets that appreciate (like flats) than liabilities that depreciate (like cars)
backrow
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by backrow »

Jeff, where in the U.K. is your house ? Is it currently let out? Do you intend to keep it ?
Does your current provider know you are abroad or have you already moved it to a buy to let mortgage?
bimboman
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by bimboman »

nardol wrote:
RuggaBugga wrote:
nardol wrote:I had an interest only mortgage that I switched over to a standard one. Just to start nibbling away at the capital. Previously I was making annual one off lump sum repayments.

I have now fixed my mortgage interest rate at 1.6% for 10 years as rates have bottomed out. I'm not going to be making any additional repayments on the mortgage as interest rates are so low and I have now guaranteed they will remain so for 10 years. I'm saving up to invest in a buy to let property / make current property buy to let instead. No point repaying a mortgage when credit is almost free.
Christ that's a good deal. Is this in Ireland?
Netherlands. Ireland you won't get below 2.8% and that would be with an LTV below 60%.


Bloody hell. That's free money. Dutch bank credit and a view on growth (that's scary).
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nardol
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by nardol »

Growth in NL is solid, as is property price growth. Rates are low due to ECB policy (rates & bond purchase programme).

Rates only going up from here with bond buying end being announced next week. Its why I have fixed it for 10 years.

non performing mortgage loans on dutch resi property are as close to NIL as almost possible, hence the 120bps divergence with irish banks while still in the eurozone. Legacy of our big crash a decade ago.
Last edited by nardol on Fri Jun 08, 2018 5:04 pm, edited 1 time in total.
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danthefan
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by danthefan »

nardol wrote:
RuggaBugga wrote:
nardol wrote:I had an interest only mortgage that I switched over to a standard one. Just to start nibbling away at the capital. Previously I was making annual one off lump sum repayments.

I have now fixed my mortgage interest rate at 1.6% for 10 years as rates have bottomed out. I'm not going to be making any additional repayments on the mortgage as interest rates are so low and I have now guaranteed they will remain so for 10 years. I'm saving up to invest in a buy to let property / make current property buy to let instead. No point repaying a mortgage when credit is almost free.
Christ that's a good deal. Is this in Ireland?
Netherlands. Ireland you won't get below 2.8% and that would be with an LTV below 60%.
You can get 2.6% with 80% LTV.
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nardol
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by nardol »

danthefan wrote:
nardol wrote:
RuggaBugga wrote:
nardol wrote:I had an interest only mortgage that I switched over to a standard one. Just to start nibbling away at the capital. Previously I was making annual one off lump sum repayments.

I have now fixed my mortgage interest rate at 1.6% for 10 years as rates have bottomed out. I'm not going to be making any additional repayments on the mortgage as interest rates are so low and I have now guaranteed they will remain so for 10 years. I'm saving up to invest in a buy to let property / make current property buy to let instead. No point repaying a mortgage when credit is almost free.
Christ that's a good deal. Is this in Ireland?
Netherlands. Ireland you won't get below 2.8% and that would be with an LTV below 60%.
You can get 2.6% with 80% LTV.
Who is that with?
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danthefan
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by danthefan »

nardol wrote:
danthefan wrote:
nardol wrote:
RuggaBugga wrote:
nardol wrote:I had an interest only mortgage that I switched over to a standard one. Just to start nibbling away at the capital. Previously I was making annual one off lump sum repayments.

I have now fixed my mortgage interest rate at 1.6% for 10 years as rates have bottomed out. I'm not going to be making any additional repayments on the mortgage as interest rates are so low and I have now guaranteed they will remain so for 10 years. I'm saving up to invest in a buy to let property / make current property buy to let instead. No point repaying a mortgage when credit is almost free.
Christ that's a good deal. Is this in Ireland?
Netherlands. Ireland you won't get below 2.8% and that would be with an LTV below 60%.
You can get 2.6% with 80% LTV.
Who is that with?
Ulster Bank, 4 year fixed.
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nardol
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by nardol »

Fair enough. I wouldn't fix for 4 years though... Rates will be significantly higher in 4 years.
Last edited by nardol on Fri Jun 08, 2018 5:21 pm, edited 1 time in total.
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danthefan
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by danthefan »

nardol wrote:Im not fixing for 4 years... Rates will be significantly higher in 4 years.
Ok, then don't?
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nardol
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by nardol »

ok :P
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Spell
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by Spell »

I used to be a financial advisor too. terrible job. But I do have some opinions.

You don't have to pick one option/strategy for your whole life. Rule of thumb set the amount you need and want to live off and spend the rest paying off your debts. Typically the first 5 years after buying are the hardest financially so you could say pay the minimum amount of a 30 year mortgage, and reassess after each discount period.

Offset mortgages are great if you have cash in the bank. If not they are not usually the deals with the best rates. I like them as i can invest any time I like, its like a cheap floating loan for me. I find it works best once you have owned for a while. If your mortgage has onerous early repayment terms, then simply reduce the term for a small fee which will increase your repayment amounts automatically. In any case most companies let you pay off 10% a year penalty free, here at least.

If you have investment properties maximise your exposure on them and minimise on your home. Even better if they are in a ltd company.

The most important thing is choose the option that suits you and your attitude to risk best. Everyone's circumstances are different and the priorities change over time anyway. Think in 5 year plans with only a view of the term. Then reanalyse every renewal.
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Spell
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by Spell »

Just a further thought, I decided I wanted more money in my pocket when i started out as I figured my Income would be highest (in comparison to my mortgage at least) in the last quarter of my career. What's the point in having a high income and no mortgage at the same time.
backrow
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by backrow »

Does the ltd company thing really help you now the amount of interest thing you can claim has changed ?
Not averse to having a company as have had one before and exposure to the family firm (nowt to do with property though)
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Spell
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by Spell »

I wouldn't change to a Ltd company due to the allowance change, but if the market goes bust and they get repossessed its handy that they cant take your home or saddle you with the mortgage debt if there is an outstanding amount after disposal. If they are in a ltd structure already then definately keep all the debt off your home.
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shanky
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Re: Achtung financial types: Best way to pay off a mortgage?

Post by shanky »

backrow wrote:
shanky wrote:
backrow wrote:
shanky wrote:
backrow wrote:For my many sins, I am a formally trained financial advisor (was)
Jeff, an you give any more info as to your age, attitude to risk etc ?
The more info you give, the better (for you) advice you will get.

Interest rates in the U.K. are still very low, so no real rush to pay off any mortgage really - you could even (like I did) borrow more and buy yourself a couple of rental places within a year or two of releasing equity, rather than waiting ten years.
So how long are interest rates going to stay low then?

I’d like to use your licensed advice to dabble in some futures.
Nobody knows for sure, anyone who claims to know that is a liar
OK. It’s just that you were advising him to load up on retail debt in order to concentrate on one asset class. All in a time of interest rate uncertainty. I naturally assumed you knew something the rest of us didn’t.
Eh? You have wildly misunderstood, I merely suggested what he could do in response to his initial thought about getting an investment property. Wtf do you mean by retail debt anyways?

He’s talking about his mortgage , not a credit card.

For the average punter and for the purposes on this conversation, home loans are retail debt.

And I see you’ve backed away from the initial attempt at ‘advice’, so am happy to drop it now.
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