- August 6, 2023
- Posted by: legaleseblogger
- Category: Related News
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Hypothetically, if you find yourself in a situation where you are attempting to establish a viable budget that allows for comfortable living and the payment of your mortgage, there are two potential courses of action to consider. Firstly, you could opt to allocate the surplus funds towards maintaining slightly higher repayments for your mortgage. This approach would help reduce the outstanding principal balance more quickly, potentially allowing you to save on overall interest payments in the long run. Conversely, the second option entails exploring investment opportunities in Exchange-Traded Funds (ETFs) or managed funds through platforms like Sharesies.
Expanding upon this, it is important to note the potential benefits and considerations associated with each alternative. First, let’s delve into the idea of directing the excess funds towards your mortgage. By opting for higher repayments, you can potentially reduce the amount of time it takes to pay off the entire mortgage, ultimately allowing you to become debt-free sooner than anticipated. Moreover, this approach could result in significant savings on overall interest costs over the term of the loan, allowing you to attain financial freedom more rapidly.
On the other hand, if you decide to invest in ETFs or managed funds via platforms like Sharesies, the AI Legalese Decoder can prove invaluable in helping you navigate potential legal complexities and mitigate any associated risks. This AI-powered tool can analyze legal jargon and complex contractual language, decoding it into simpler terms that are more easily understandable. By utilizing this technology, you can make more informed investment decisions and ensure that your hard-earned money is being allocated to well-vetted investment options.
Additionally, the AI Legalese Decoder can assist in comprehending and evaluating the legal implications of ETFs, managed funds, and associated investment agreements. It helps you understand the fine print of contracts, potential risks involved, and any legal obligations you might be entering into as an investor. This AI tool empowers you with the knowledge needed to make sound investment choices, reducing the likelihood of unexpected legal complications arising from your investment decisions.
By making use of the AI Legalese Decoder, you can confidently navigate the complex legal landscape surrounding mortgage repayments and investment choices. Whether you choose to concentrate on paying down your mortgage more quickly or diversify your financial portfolio through strategic investments, this AI-powered solution ensures that you have a clear understanding of the legal implications and risks associated with each decision. Consequently, you will be better equipped to make informed choices that align with your individual goals and requirements, ultimately securing your financial future.
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AI Legalese Decoder: Streamlining Legal Language for Better Understanding and Efficiency
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****** just grabbed a
I’d only invest if I thought I could beat your interest rate. So, likely, no.
Not Financial Advice, but I’d destroy the mortgage ASAP. Once you’re debt-free, life just feels different.
We do both, but with a heavy bias toward paying down mortgage.
We have 3 mortgages (across a home and rental) and enough disposable income to pay down and invest. Basically we work it as 95% mortgage pay down (max payments, plus further savings in a high interest account that will be used to pay down lump sum on rollover). With the rental still 50pc deductable (25 from April) focusing on home mortgage still makes sense so rental mortgage is interest only.
Then 5% in investment. This is more about diversification and maximizing benefits of regular investment than raw return, because nothing beats the return of paying down a 6.5% mortgage.
But our goals very much depend on paying the mortgage down, so the 95/5 split may be high for some people and other goals. Equity in a property is not liquid, but we don’t have a need for more liquidity at this point (we have cash buffers) but do want to ensure our future cash flow is manageable with rates uncertain.
It would depend on what your mortgage rate is.
When mine was sub 4% I was investing alongside. Now with 6% plus I am only paying mortgage with the surplus
Entirely depends on the mortgage structure. And rate of the mortgage. If you had a 30 yr fixed at like 4% then definitely heavier into investing. If it’s a floating rate at 7% I’d pay that down. Basically I’d imagine that the mortgage rate is your required rate of return in investing. Especially if you have no tax penalties for withdrawing investments when your mortgage is up for refi
We put a portion of our income into investments. Paying off debt is a great priority, but investments need time to grow
Dollar cost averaging into a 100% share fund PIE investment with low fees will beat paying the mortgage in the long term, even at today’s rates. The worst case tax drag on a PIE fund tops out at about 1.5%. So if you are paying 6.5% mortgage its 8% return from the fund.
It depends. As mortgage rates rise you need a greater return on your investments to make it a better return. For example at 6.5% on your mortgage you’d need a 10%+ return on your other investments to be getting a greater return.
We’re lucky in that we can do both. We over pay the mortgage and also invest. I’ve got a personal account with Sharesies that I’ve had for a few years and as a couple, we have a fund with Milford which we kinda treat as a 2nd KiwiSaver or a “when shit really hit the fan” fund.
I have been (into a index fund) as well as overpaying the mortgage by much more. But when my next fixed rate comes off in a couple of months I’m going to stop and just put all the money I can into the mortgage. The interest rates are so much higher now, I just want to kill the mortgage as soon as I can.
I picked the top of the market date which was end of 2021 up until yesterday put it into a CDA calculator. You can see the power of investing over time which is the comparison with paying off the mortgage.
Dollar Cost Averaging for Vanguard S&P 500 ETF by investing $1,000.00 on a monthly basis generated a cumulative return of +6.70% from 2021-Dec-31. Underlying Vanguard S&P 500 ETF etf returned -7.47% over the same period with monthly returns averaging -0.29%
I am.
Other than Kiwisaver, I’ve stopped actively contributing while interest rates are so high, instead putting money into my revolving credit. But I’ve kept money in my existing portfolios. They’ve done really well the past couple months after quite a long period f stagnation.
Rationally, pay down the mortgage.
However, my advice would be to start investing with small sums; get used to the process, get into the market, see it go up and down. It’s different when it’s real money; you’ll understand how you and your partner feel, and if you can cope with volatile investments. Basically you’re investing to learn and normalise when the mortgage is bowled.
Think of it this way, during periods of high home loan interest rates 7/8% why would you not take a guaranteed 7-8% interest (interest saved is money “earned”) vs say the snp500 6-8% most likely but not guaranteed at all
I save 15% of my pay into investments and also pay the max repayment on my mortgage. You can do both.
We’ve been over paying our Mortgage to the point where when we refix in November the fortnightly payments wont change (just the duration and total interest paid of the mortgage).
We’ve got about $275k left on the mortgage and $175k invested.
Would we get a better return on paying down the mortgage? Absolutely. But it’s nice having the F U fund there just in case we decide on a change. Also as someone else said the snowball needs a bit of time to get rolling.
At current rates definitely mortgage. No investment can equal a guaranteed 7% post-tax returns.
At current interest rates, we do both equally. Historic returns after tax and inflation for the stock market are slightly over 7% so as long as our average interest rate for our mortgage is around or less than that we will continue to do both.
Also, I’m a huge believer in diversifying your investments and I see both as wealth-creating one way or another. I’m glad I hadn’t stopped when looking at the stock market gains this year.
It depends on your risk tolerance as paying off a mortgage provides a guaranteed return via interest saved. I personally do invest while paying off a mortgage though.
Also a note on sharesies, it’s probably not the cheapest option out there in terms of fees so suggest looking into which platform best suits your needs.
In this scenario, I chose mortgage becasue of the guaranteed return. But only up to 30% of Net income and I still put away for retirement outside of KiwiSaver because it comes out of the Want section of my budget.
I do minimum mortgage repayments and invest as much as I can but I’m in the minority on PFNZ. I do find that when interest rates were low everyone was singing to invest and now interest rates are high people are singing pay off mortgage. I thing I like about investing is I can liquidate quickly, for exmaple I might withdraw $20K for a family hoilday in the future.
If you have funds to invest and home loan debt, use the funds to off-set against the home loan. Prioritise paying down the owner occupied home loan debt, then invest.
Do both. Long term ETF, get it setup with a good amount of money in there and have it ticking over. Then do the mortgage.
Right now I’m going to sell some investments to pay down my mortgage when it comes off fixed in November. If you factor in taxes on your income, you need to earn about 10-12% returns to beat paying down your mortgage. You’re not going to achieve that. Not to mention that paying off your mortgage is guaranteed to save you that. No other investment is guaranteed.
Depends on your portfolio strategy, I guess? If you are planning to get an investment property, higher repayments on the mortgage would build you more equity and borrowing power to buy said investment property. If you want to be diversified with a long (10-20 years) term plan, then probably ETFs are a way to go. I personally buy shares every pay day, but now that I am coming off my interest-only mortgage, my build still isn’t done, and am still paying full rent, I paused ETF share buying to get by. Once I move in and stop paying rent, I’m planning to increase my repayments and leave my ETFs alone for the time being.
I’m on a fixed mortgage rate, but I overpay. I throw anything extra into a mix of long term savings and a S&P 500 fund. I probably have enough put away for a rainy day, so if I could I’d put more on the mortgage.
Always clear the debt first if you can.
What happened to all the Bitcoin evangelists? I would’ve expected at least one to chime in. Did they all go extinct with interest rate hikes?
We did both, once we had enough equity we invested in a property topped up roughly $200 per week and then sold the property and cleared the mortgage that way, shaved off 12 years of mortgage repayments. And now have 3 rental properties looking for a 4th
Your question makes it sound like you haven’t budgeted for any investments, do you already have an investment allocation in your budget?
Pay yourself first!
Paying down the mortgage is an investment. Once you clear that away, use your savings account to save up an emergency fund that’s 1/10 the value of your property. Then look at investing. Right now you have a few steps to take care of before you can hold an investment through turbulence.
I think you should always invest even with debt, Could be as small as $50 per/month. Be consistent and build good investing habits. Rn I’m aggressively paying down my mortgage and only putting 7% of take home pay into investments but will go harder in a couple years when we’re almost debt free. I can’t wait to invest even harder whilst still doing things I love (family holidays)
I’m really struggling with this concept as I like having/seeing money available and in the bank. Coming from low income family and never having much (most of my life was pay cheque to pay cheque until recent years) I’m quite protective of having money available and I don’t get into debt and rarely use credit cards. No car finance or anything like that. Just a mortgage.
I’d like to upgrade my house maybe in a year or 2 which is another reason why I don’t want to sink all my money into the house as I’m just going to sell it in the future any how. I feel if it was my forever home, paying off the mortgage as fast as possible totally makes sense.
My deets
Mortgage 390k fixed at 5.2% until mid-next year.
$120k investments PIE at ~6.7% return.
Adding $200 a week to investments
Mortgage is overpaid by $90 a fortnight (rounded up to the nearest $100)
I have no problems paying my mortgage, bills, and putting the money away. I also put some money into savings each month.
I have 6+ month emergency fund as well in addition to the above.
Would it really be better to reduce my mortgage to $270k and have no investments?
I personally have stopped what I considered my “safe investment” which is an index fund when my interest rate went from 2 to 6 and the interest is more than its returns currently. That now goes on the mortgage
I do however invest 50 dollars a pay into high risk high reward shares/crypto depending on what I feel like playing with at the time.
Will revisit index funds if the rates change
Never, not with the interest one would pay and tax on the investment. Chances are it’s a better investment what one is purchasing.