Do you have any questions about mortgages? let me know below!
@BobBob-uv9fq
2 жыл бұрын
Not that but ,any idea if I’m taking pension pot out(avoid tax)55 yrs
@The_Couch_Critic
2 жыл бұрын
I'm at the stage of remortgage and in 2 minds to release some equity and reinvest in BTL? It's tempting to get rate of 1.3% for 5 yrs fixed..suggestions?
@michaelkidd7123
2 жыл бұрын
Do you do remote sessions at all? I think it'd be better to pay to have you make sure I'm on the right track that way rather than just treating you youtube comments lol.
@JamesShack
2 жыл бұрын
@@The_Couch_Critic hi Nirav, I can’t give any personal recommendations. I imagine finding a propert that works is the harder part!
@Turtytreeandaturd
2 жыл бұрын
And his annual/disposal tax bill?
@FennaVa
6 ай бұрын
My wife and I's monthly payment was $3415 month. We would pay an extra $500 a month towards the principal. We currently just refinanced to get a lower interest rate and to get off of PMI. Our new monthly payment is $2918 a month. We plan on still paying $3700 a month but are now going to do bi-monthly payments.
@ralfbrown-kl1gp
6 ай бұрын
Instead of extra payments, I suspect you would be better off putting the $782 per month into shares of Apple and Amazon. The video more or less describes how you can get out of being a debt slave When you have cash you have options. Smart people hold on to cash. They don't instantly shove it toward debt. Once it is used to pay on the debt, it is no longer accessible.
@marcellasilva4015
6 ай бұрын
One part of this vid that I do like is the idea of not taking on a large debt in the first place. I think there should be a balance between the amount of debt you incur and the amount of cash you can invest. I would rather have a $1000 house payment and $1000 going into stocks than a $2000 house payment and no stocks. If you have cash and you’re confused I will suggest you contact a finance advisor
@oliverdavis-tw2xl
2 ай бұрын
Market behavior can be complex and unpredictable. Mind if I ask you to recommend this particular coach to whom you have used their services?
@marcellasilva4015
2 ай бұрын
Sharon Ann Meny is the name , Just search the name. You’d find necessary details to work with to set up an appointment.
@McCachren
2 ай бұрын
I just googled her now and I'm really impressed with her credentials. I reached out to her since I need all the assistance I can get.
@tonycarboni2002
2 жыл бұрын
I'm pretty sure that the number one mistake regarding a mortgage is getting married and obtaining one.
@bigwill0236
2 жыл бұрын
🤣🤣🤣
@fontane007
Жыл бұрын
Lol
@jackhusbands8462
Жыл бұрын
🤣
@valentine_mckee
Жыл бұрын
😂
@andyscottow2250
Жыл бұрын
🤣🤣🤣🤣🤣🤣
@GeorgeAusters
2 жыл бұрын
The thing is.. Most people don't use extra money to invest - they just spend it rather than paying off their mortgage early
@damianleah6744
2 жыл бұрын
I paid my mortgage off at age 39, like other comments, piece of mind is a huge factor (for me anyway). I am now in my early 50s, I find I don’t need to work if I don’t want to. I didn’t want to be forever paying debts off into my 70s. Just my debt averse view.
@johntheman2006
Жыл бұрын
I paid ours off at 35, had 19 years left and even at a low interest rate we were still accruing debt from the interest rate at something like £50 per day.
@edi8656
Жыл бұрын
This is priceless. I'm mid thirties and bought a project house cash a few years back. Sitting here with minimal outgoings and no pressure to do what I don't want to. Quit my well paying secure but stressful career after buying the house as needed the time more than the money at that point and continue to value time more than money for now too
@Luke-tb7fv
Жыл бұрын
Well done mate. Your comment is inspiring for me. For the past few days I'd been tossing and turning regarding pension Vs early repayment of mortgage Vs S&S ISA Vs BTLs! Since my overall aim is peace of mind I think you have just answered my question.
@MIchaelGuzman737
2 жыл бұрын
Home prices will come down. Look at how much the monthly payment has gone up with the new mortgage rates. Add to that the recession and the fact that mortgage guidelines are getting more difficult. IMO home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes...
@kashkat987
2 жыл бұрын
I was actually in the market to purchase a home recently but obviously it isn’t a buyers market right now. There was “last minute” price increases, and the demeanor that new home builders and realtors are “if you don’t pay that amount then someone else will”.
@MatthewVinson
2 жыл бұрын
Soon affordable housing will no longer be affordable so anything you want to do i will advise you do it now because the prices today will look like dips tomorrow . Until the Fed clamps down even further I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off. The Booms and Busts are the ebb and flow and any assets will be affected by it. If you are in cross roads or need sincere advise on the best moves to take now it will be best you seek an investment advisor for proper guidance.
@TruckeeFam
2 жыл бұрын
@@MatthewVinson I will be happy getting assistance and glad to get the help of one, just how can one spot a reputable one?
@notwothesame
Жыл бұрын
Interesting video, especially a year on with everything that has happened. Currently inflation above 10% in the UK. Would be good to get your take on the same situation now.
@garethedwards5159
2 жыл бұрын
I paid my mortgage off at the age of 31, knowing that I could have made a much better return investing it all, but one thing not mentioned in James' (otherwise excellent) video is the potential mental 'peace of mind' benefits of being mortgage free, especially working freelance like I do. Contract ending, or redundancy looming? No problem, I'll take a few months off before find work again, go on holiday etc. I'm growing tired of the work that I do, and I'm planning a career change into something more rewarding and with a lot less stress soon. The line of work I want to change to is also much less money, but that's not a concern to me now really, I can afford to go back to college, uni to re-train, and/or take lower paid but more enjoyable work now I'm not a prisoner to my current high earning work. It's a good feeling to know I can quit it at a time of my choosing. None of this would be possible with a big monthly mortgage payment. Another benefit, is that investing (and don't get me wrong, I also invest a lot) is for a benefit at some point in the future, whereas paying off the mortgage young is a guaranteed benefit that you get to enjoy now whilst you still hopefully have good health (depending on how quickly you pay it off). Food for thought, everyone's different, just thought I'd post my personal experience.
@thomashogan1985
2 жыл бұрын
Very well put and I totally agree
@theseoldbeats
2 жыл бұрын
Was going to comment something similar. Totally agree. Unfortunately like the chap in the first example, people think nothing of taking out multiple, massive, interest-only mortgages to bet on house prices continuing to rise and basically at the expense of people who can’t afford to get on the housing ladder at all. If anything did happen to the housing market then they’ll be up shit creek without a paddle, especially if they’ve transferred even more debt to their main residence to pay for it all.
@MP-ux1dn
2 жыл бұрын
Thanks for some great content. Your section on High Interest rates slightly confused me: "The cost of borrowing money is not the interest rate you're being charged; it's the difference between the interest rate and inflation." - This only seems to make sense in the scenario where your salary is indexed to inflation. Where your salary is not keeping pace with inflation, then interest rates seem to be a pretty important factor. I might have misunderstood, and would welcome you explaining, please!
@JamesShack
2 жыл бұрын
That does not change the statement. But yes, if you did not have the Cashflow to continue to service the debt then you’re stuck!
@DSLRguide
2 жыл бұрын
brillliant video, great to see those real world examples
@JamesShack
2 жыл бұрын
Glad you enjoyed it
@yarnybart5911
Жыл бұрын
You also have to consider the time to maturity on any mortgage. I did exactly what you outlined, paying off expensive BTL mortgage with a very cheap residential mortgage which was fully flexible, so that I kept under 65% LTV on my BTLs. But a residential mortgage, even a flexible one, has to be repaid at some point. Mine is due in 2025 so I am overpaying each month, but that's because it's an interest only mortgage and in 2025, I don't want to sell the residential property (hich is actually now a second home, my primary residence was purchased mortgage free).
@dantalksmoney3310
2 жыл бұрын
Loving the examples here James! I recently paid off my mortgage in full which is a massive weight off my shoulders but am looking at doing a self build at some point so no doubt I'll be jumping back on the mortgage bandwagon before long!
@JamesShack
2 жыл бұрын
Good stuff Dan, good luck with it!
@susanlewis1953
2 жыл бұрын
Negative costs of mortgages. No brainer to have one. Investing £500 pcm and overpaying £50 on a 1.49% mortgage (30% LTV) to reduce the terms to 10 years.Thanks Sue
@christianmcivor6015
2 жыл бұрын
Or, invest that £50 over the full term of the mortgage and you can have over half a million pounds lol
@anthonyward2433
2 жыл бұрын
@@christianmcivor6015 or possibly zero pounds and a mortgage
@mattsennett
2 жыл бұрын
You are so right James in what you say but for many the psychological benefit of knowing they are mortgage free is worth a great deal too. It was in my case last year due to concerns about future work so paying the mortgage off then investing more each month since is what I have done.
@RobertGillontheinterweb
2 жыл бұрын
This is really important. No point being a clever clogs that can't sleep at night due to their cleverness
@robertyeo9070
Жыл бұрын
100% agree. paying off your mortgage early gives substantial optionality which is essentially valued at zero in any FA or economic model.
@omardude39
Жыл бұрын
Oh how wrong the numbers were... one year later and I've just been offered a mortgage at 6.29% 😱
@umutkarakus
2 жыл бұрын
My summary: 1. Borrowing against your own home gets you the lowest rates. If you have a 5-year car loan with a high rate, you can borrow against your own home at a low rate and pay off the car loan. You might complain that the mortgage extends this loan over a long period, e.g 25 years. However, you can pay off the loan early, e.g after the 5 years of the original car loan, so the longer duration is not a concern. The risk is that you have now allowed your home to be repossessed if you fail to keep up payments. 2. Investing spare cash gives a higher return than the interest you save by repaying early. The risk is that many investments are very volatile, e.g stock market. Property investment is much less volatile but you need to save up over a long time, unlike the stock market which you can invest in every month. 3. A 2x increase in the interest rate does not mean a 2x increase in the monthly payment of a repayment mortgage. This can be seen from the approximate equation M = (C + 0.55rCY)/12Y = C/12Y + 0.55rC/12. M is the monthly payment, C is the value of the loan, r is the rate, Y is the duration in years. We see that r is present in only one of the terms. As r gets very large (>= 0.1) the proportional increase becomes more and more true (2x increase in r results in 2x increase in M). For an interest only loan, this does not apply.
@Kavanhugh
Жыл бұрын
6:25 "and [inflation] is expected to peak at just over 5% next year" - this aged well!
@aboveboard4046
2 жыл бұрын
Arbitrage is always a good starter for 10, but for me, paying off the mortgage allowed me to reduce outgoings and to invest in higher return, higher risk investments without the worry of not being able to maintain where I live. So horses for courses, but sound advice to play the game and lower outgoings.
@blumousey
2 жыл бұрын
Agreed, also when you have a family to support putting some of your money into something 100% secure is a good idea. Market conditions being what they are right now it would actually have been better for me to have overpaid my mortgage rather than invest in anything! Luckily I did do a lot of that, and paid off the cars ages ago. But now the market mania is over the opposite is likely true. Best now to invest every month and let the mortgage be for a few years
@Zimpaz
2 жыл бұрын
5 years ago We spent 2 years working like crazy and renting out our spare room to pay off our mortgage before we had kids. Whilst not the financially best thing to do, it gives us a amazing feeling knowing we own our house outright and no matter what happens we have our house. It’s not all about money
@JamesShack
2 жыл бұрын
Absolutely. The numbers can say all they want, but I cannot put a value on the feeling that people get from being debt free. Which is why this varies so much from person to person.
@rosiewang5920
2 жыл бұрын
Healthy amount of debt will not do any harm to you. For life to get better, you always need to take some risks here or there. 😄
@KenSharp
2 жыл бұрын
It's not all about money, but you're watching a video from a professional investor.
@haamctslpm
2 жыл бұрын
THIS CHANNEL IS AMAZING- this is the kind of stuff that they should teach at schools… I’m 22 and starting out my professional career and I have all of this ahead of me and need to be informed! Thank you!!
@DanFernandesBenficaSaint
2 жыл бұрын
You never get one lesson at school about saving money. If you’re in debt you’re a slave to the system. There’s a reason why the most important subjects are not taught.
@sirhc8972
2 жыл бұрын
2 superb comments. Spot on
@kimhegethornketsanoi200
Жыл бұрын
Here in Sweden we have this saying “Lagom”. Which means you do something in balance (kinda). Which I use when it comes to paying off and investing. You can’t avoid the interest rate expenses that are increased- and you should be at least do some adjustment to pay off a little more then usual. However do not forgot the opportunity to invest and get the bigger return in the long term. Aka do some of both. Ideally if you have taken too big loan, you should of course try to minimize the expenses. But of course don’t take huge risk in the beginning
@ianwynne5483
2 жыл бұрын
Putting your home at risk to finance investments instead of self financing investments is a bad idea.
@MarkWebster1
2 жыл бұрын
Your channel is going to blow up. This is genuinely the best personal finance information I have seen on KZitem. Thanks for giving away so much value in your videos.
@JamesShack
2 жыл бұрын
Thanks Mark! I appreciate the comment!
@Laxton_Himself
2 жыл бұрын
One key thing to mention is that it’s fine to say inflation eats away at the interest rate you’re charged, or the debt you owe. But that’s only true if your income rises at an equal amount, which most companies won’t be doing, mine isn’t anyway!
@JamesShack
2 жыл бұрын
It’s true irrespective of that. But yes, if your income does not rise in line with inflation it will become harder to keep making the interest payments. In fact, it will become harder even if your income does rise with inflation. But that’s why we use longer term fixed rates to make cashflow planning easier!
@rendorHaevyn
Жыл бұрын
Of course, the "real" costs of money are purely theoretical until one's salary actually indexes in a timely manner (rather than lagging, as is usual). Good vid.
@RichardFoggin
Жыл бұрын
Sometimes the hardest thing can just be to look at the numbers in the face. My stomach flipped when I saw this video crop up in my feed. I’m in the process of buying a property and I’m terrified that I’m making the wrong decisions…everything I heard reassured me that actually it still is right for me. I’ve done my due diligence and am fortunate to have locked in a lower interest rate before things got a bit crazy
@abbotsford85
2 жыл бұрын
Good luck getting that through compliance. Securing unsecured debt on your residence and losing equity in your home isn't great advice
@nh8383
2 жыл бұрын
The first guy you mentioned must live in a totally different world to me.. one 900k house,two buy to lets & a 50k car loan 😭
@Nathan-yv2rg
2 жыл бұрын
I know lol. If I had those sorts of assets I wouldn't be on this KZitem channel....
@Shmuklidooha
2 жыл бұрын
I still make overpayments on my mortgage (1.9%) because in 2 years I'm planning on remortgaging to buy more property. That extra 1.9% I'm saving on interest is better than what I'd get in a savings account and safer in the short term than the stock market. Though I do agree that in the example presented there is one disadvantage for remortgaging the primary residence to reduce the LTV on the BTL properties - If you default on the BTL loans and they get repossessed, you are on the hook for a larger portion of the property. It might be a fringe case, but it might happen.
@JamesShack
2 жыл бұрын
That is a good point yes. If you need the money in the short term and can get it back out money via remortgaging or and offset mortgage. It can be a useful way to save interest.
@KenSharp
2 жыл бұрын
@@JamesShack So where does inflation come into it?
@christianmcivor6015
2 жыл бұрын
You can get 20% on cash which beats your
@Shmuklidooha
2 жыл бұрын
@@christianmcivor6015 Where, the casino? A 100% equity portfolio averages to 8-11% gains and that's still fairly risky for a short-term investment.
@christianmcivor6015
2 жыл бұрын
@@Shmuklidooha Anchor protocol on Luna.
@glasgowsports
2 жыл бұрын
Some good points but for most people the uncertainty of life means investing the in the stock market instead of repaying your mortgage is a major risk. The FCA will not allow mortgage advisers to recommend doing so for good reason (I'm a mortgage adviser). There are of course some people wealthy enough to be able to take the risk but for most it's not sensible. A wealthy client close to retirement who can get 40% tax credits on pension contributions and has investment property they could sell if they had to is a fairly unique situation.
@JamesShack
2 жыл бұрын
Hi Robert, thanks for the comment. As you say, it depends on the client and also ensuring you have the additional safeguards in place (cash flow planning, longer term fixs, investment risk management) to reduce the risk of the strategy.
@glostergloster6945
4 ай бұрын
What is missing from the example given here, of someone with a residential mortgage and BTL mortgages, is there is income tax relief for mortgage interest on the BTL income, there is no tax relief on the residential mortgage. Even if this person is a higher rate tax payer and holds the properties in their own name, there is still a 20% tax credit given on the mortgage interest for BTL vs 0 on residential. Because of this the mortgages arent interchangeable
@chopper1lady
Жыл бұрын
I've done it differently. Borrowed more on my residential to buy a BTL. The profit from that BTL covers both mortgages.
@ihague4568
2 жыл бұрын
It's important to use (or consider) wage inflation instead of CPI when making these calculations / assumptions. For example, CPI may be 6%, but your wages may only be rising at 2%. In this case, a borrowing rate of 3% would be negative in 'real terms' but positive in practical terms (i.e. in terms of your ability to repay the loan). You can only 'inflate away' your debt if borrowing rates < wage inflation. If not, your wages may be inflated away, but your debt isn't. Also, when your wages aren't keeping up with inflation, non-mortgage expenditures start to eat away more of your monthly budget, putting more stain on your ability to service your debts.
@HappySinghT
2 жыл бұрын
Hello! Fellow Financial Adviser/Planner here. I won't say there wasn't anything in this video that came across as 'new' news to me (in fact I've had these exact conversations!) but I really enjoyed how well they were articulated and presented. Looking forward to viewing your array of videos.
@JamesShack
2 жыл бұрын
Wow! Means a lot coming from a fellow professional!
@HappySinghT
2 жыл бұрын
@@JamesShack Praise where praise is due! The cherry on top would be if they counted towards CPD.
@JamesShack
2 жыл бұрын
@@HappySinghT yes my colleague mentioned that the other day. He often writes articles on particular areas of financial planning for which he has to do research, and yes added that as unstructured CPD 🤷🏼♂️. Maybe I can too, I write about 2000 words for each video.
@edchaudhry9448
2 жыл бұрын
Hey james, great video, well presented and clear, concise points. Gained a subscriber and look forward to more good content!
@edi8656
Жыл бұрын
My partner and I worked our assess off and saved hard in our 20's, we seen an opportunity a little out of town and bought our first home cash. On reflection, best decision of our lives.
@edi8656
Жыл бұрын
Also fitted a multifuel stove when we moved in, another great moneymaker I would recommend to minimise paying the obscene energy costs these days
@skb817
2 жыл бұрын
Wow, how well explained was that! I can completely resonate with the mental accounting point and some similarities with your client example. This has really cleared it all up for me in terms of mortgage payments, interest/inflation and options if you have excess cash. Great job James!
@richardclark6113
2 жыл бұрын
As a mortgage broker myself this video is a SHAM. 1) buy to let mortgages are normally 75% LTV and interest only. 2) Getting a larger residential mortgage is also a repayment mortgage which must be paid off before retirement. Therefore a larger debt also means larger payments. 3) The large debt on the car is often a HP agreement where they want a nice car but they plan to keep the car only a few years. 4) The interest rates claimed are also wrong. Most people want to reduce their home mortgage for security reasons plus if they have a spouse they will be wary of increasing their residential mortgage. Buy to let’s get income and have to support the mortgage. They are self sufficient. Rates improve little below 75% anyway. The car finance was a personal decision as for £50k it’s probably a bloody nice car. As someone that has advised hundreds of people I am careful of raising money on peoples main homes as it must be repaid in full before state retirement age.
@JamesShack
2 жыл бұрын
Hi Richard, thanks for your comment. 1) You can get an LTV of up to 80% on a BTL mortgage. The 90% mortgage came about from a reduction in the value of the property. You can remortgage at 90% LTV however. 2) You can get an interest-only mortgage up to 50% LTV on a residential home. You can even do a split mortgage if you like with half repayment and half interest only. 3) That was not the case here 4) The original rates had been fixed many years before. The new rates I have rounded up/down for ease. Is there something else you see wrong here? Richard - there are plenty of residential mortgages that allow you to go on beyond retirement so long as you have a repayment strategy of either downsizing or paying it off with investments. It's even possible to take mortgages out based on pension income! Sounds mad but there are lenders that will do it. That's why I think working with a financial planner that can give you an overview of the whole picture, debt, property and investments will give more comprehensive advice. To be clear, mortgage availability and rates change all the time so although this was all true when we did this case. It may not be available now. As I said in this video, this strategy is not right for everyone but in this situation, it was the correct thing to do. And it saved him a lot of money.
@Magicalfluidprocess
2 жыл бұрын
The biggest mistake is assuming the bank uses existing assets to fund the mortgage, this is not true ( check the Bank of England website) . Money is borrowed into existence, the agreement made with the bank is an embryonic form of currency it is monetised by the treasury
@pressiyamu2187
2 жыл бұрын
This is a great wisdom thanks for sharing. I could easily see myself stepping into this mess whilst unaware.
@BateserJoanne
10 ай бұрын
Basically , mortgage rates have reached their highest point since 1998, spanning 25 years. Considering inflation trends, there's potential for them to rise even further. Just a year ago, a 28year fixed rate was only 6%. This prompts the question: should I wait for a housing market downturn before buying or shift my focus towards the equity market?
@Rodxmirixm
10 ай бұрын
Indeed, I primarily engage in buy-and-hold, but my portfolio has been in the negative for an extended period. To achieve substantial gains, consistency and regular portfolio adjustments are essential.
@AlexanderDanielley
10 ай бұрын
I think investing was simpler in the 70s, but it's more complex now. Those consistently profiting today are usually professionals. That's why I've had an advisor for 7 years to steadily grow my retirement portfolio.
@Jason9o669
10 ай бұрын
My partner is also thinking about taking a similar approach. Could you please provide more details about the advisor who assists you?
@AlexanderDanielley
10 ай бұрын
Her name is Stacey Lee Decker and she' a genius at her field. You can easily confirm her expertise by searching for her online. She possesses extensive knowledge of financial markets.
@VickyAlvy
10 ай бұрын
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
@Weakeyedominant
2 жыл бұрын
How is your client obtaining BTL mortgages with less than 10% equity. I haven't been able to speak to a single bank that will provide BTL with less than 25%
@JamesShack
2 жыл бұрын
The price of the property fell.
@buytolet-landlords
2 жыл бұрын
James, this is a fantastic video. Well done.
@JamesShack
2 жыл бұрын
Thank you!
@pushpanathannanjappan6513
2 жыл бұрын
Brilliant James.. just subscribed after watching a couple of your videos
@oliverhorn4853
2 жыл бұрын
His interest alone is double what I make a year,, don't know how to relate this back
@usmanamin7080
2 жыл бұрын
Just a Quick question 🙋🏻♂️, which lender lending you 90% LTV on BTL mortgage??
@saraandstuartshannon2160
2 жыл бұрын
Great video. But one thing I don't understand, at 11:09 you say inflation is 4% and mortgage rates are 1%, which means the lender is losing 3% in real terms. Why are lenders prepared to lose money like this?
@JamesShack
2 жыл бұрын
They’re not losing money. People that hold cash deposits with them are. If you have cash in the bank, the bank pays you 0.1% interest. The bank then lend this out to other people at 1%. So they make a margin there. People with cash in the bank are the ones losing out.
@saraandstuartshannon2160
2 жыл бұрын
@@JamesShack Thanks, that makes sense. Your answer has helped me clarify my thinking. I guess I was really asking why aren't the saving and mortgage interest rates both above inflation. I'm guessing it's because inflation fluctuates relatively quickly and also it's really an estimate, and so these rates change more slowly over time to reflect this.
@joshuuaaaa440
2 жыл бұрын
Watching this even though I can’t get a mortgage to buy any form of property 😂
@Neil-qo4nv
Жыл бұрын
Thankyou Sir for this very useful informative eye-opening revelation on these matters..... Gonna go through me paperworks re : debts etc and find them solutions. Many Blessings 😎👍
@JamesShack
Жыл бұрын
Glad it was of use!
@MrDee397
Жыл бұрын
I heard someone say that longer term mortgages are better IF the interest rates are also lower, because basically what you pay in the present moment is less, therefore more money in your pocket to do as you wish (invest the difference etc). Conversely, someone else said that it's better to get a shorter term mortgage so that you pay it off quicker, less money goes on interest etc. I'm buying property at the moment and I'm more inclined to go with the longer term, mostly due to more money that is actually available in my pocket. But my question is there anything else that I'm missing, that the longer term is better than the shorter term mortgage for?
@JamesShack
Жыл бұрын
It all depends on whether the return you’ll get elsewhere is greater than the rate on your mortgage.
@MrDee397
Жыл бұрын
@@JamesShack Thanks!
@danodonovan8805
Жыл бұрын
"inflation to peak at 5% by next year" hahahhaahhah
@adambritain5774
2 жыл бұрын
Interesting bloke. Thanks for the info and taking the time to make the video. Will definitely subscribe.
@jonathanmarshall9124
2 жыл бұрын
I feel like risk is ignored here or at least not well considered. Having a paid off home with the the risks in investment that could fall through without impact to my primary residence is a benefit not considered. The same with switching to interest only and then putting the cash into stocks is higher risk.
@JamesShack
2 жыл бұрын
This advice was considered in line with the risk appetite of the client. It doesn't matter if the debt is on the primary residence or on the BTL, if the BTL fails and you owe the bank, you're still on the hook for it. The 'protection' is just in your head - this is mental accounting. However, it would be different if these properties were held in a LTD business. If you're going to downsize in 5 years time, and release the equity from your home, you have two options: Continue paying off your mortgage - which would deliver you an almost guaranteed negative return (with inflation what it is), or invest in the stock market via a pension, which is what we did in this scenarios. Which gave him a guaranteed 66% uplift from tax relief + whatever return he can achieve in the stock market over the next 5 years. He will of course have to pay tax on pension withdrawals but we'll manage those to keep tax to a minimum. So, by being rational, and laying the facts out clearly we've been able to dramatically improve his position and REDUCE the risk of him running out of money in retirement.
@christianmcivor6015
2 жыл бұрын
I get 6% on my cash. 10% if I lock it in for 3 months. You don’t even have to use the stock market anymore.
@JamesShack
2 жыл бұрын
@@christianmcivor6015 you’re either talking about staking stable coins or you’re in Turkey with a shit bank.
@christianmcivor6015
2 жыл бұрын
@@JamesShack Nexo. Not a stable coin, GBP.
@jonathanmarshall9124
2 жыл бұрын
@@JamesShack Appreciate the response. To be clear I'm not saying it was bad advice I actually think the opposite. I get it was specific to a client/situation and it clearly had some good benefits. I just think a level of risk comes into play, there is typically more aggressive risky options and safer less risky options, which I didn't think were really mentioned. I've also watched a couple more of your videos that talk about behavioural finance, so I understand your position in the video a bit more now, which I didn't on my first watch. Either way, I think it was an interesting video and led me to watch a few more of your videos. Thanks again for the response.
@werdsmyth
Жыл бұрын
Inflation is "...expected to peak at just over 5% next year". Well that didn't age well!
@JamesShack
Жыл бұрын
The markets have been getting in very wrong recently.
@danpearce4547
2 жыл бұрын
I think some of his points on inflation offsetting interest rate rises assumes one gets inflationary pay rises.
@MANUFANAKADAGOAT
2 жыл бұрын
Hello James, great content like always. Please do a complete series (step by step guide) for first time buyers. Thanks
@JamesShack
2 жыл бұрын
Sure thing!
@bradburyrobinson
2 жыл бұрын
Quite a timely video as I was just this week looking into these very scenarios. Although I should say, I'm more towards the £200,000 scenario than the £1,000,000 one.
@JamesShack
2 жыл бұрын
Good stuff! The thing to bare in mind with smaller mortgages is that the mortgage fees bite much harder!
@bradburyrobinson
2 жыл бұрын
@@JamesShack - Not at that stage with our own yet but I've seen that previously with my parents' house. Too large a value to pay off outright but too small a value to make moving worthwhile, due to fees, so pretty much stuck with what the current provider offers until they were able to pay it off at a later point.
@adejuwonodugbesi3102
2 жыл бұрын
@@JamesShack really? does that apply when you have a 60% LTV?
@BennyBen9
2 жыл бұрын
Very well put. Thankyou
@PompeyMatt17
2 жыл бұрын
I had 7 years left on my repayment mortgage but I'm now overpaying to bring that down to 3.5 years..I've adjusted my lifestyle to account for that "temporary" increase. So in 3.5 years I will have more disposable income to invest..is that a bad strategy?
@anthonywatts2033
2 жыл бұрын
It may be different in the UK, but in Australia moving debt to your primary residence is simply not tax effective.
@JamesShack
2 жыл бұрын
We can only claim 20% of the interest as a cost of the BTL portfolio. It used to be 100%. Yes it still needs to be taken into account , but it often does not swing it.
@PrettyPennyClub
2 жыл бұрын
Very interesting and nicely explained.
@JamesShack
2 жыл бұрын
Thank you, I'm glad you found it well presented!
@georgecaplin9075
2 жыл бұрын
The only mistake so far that I thought he would make, (and he seems to have made it), is treating the 8% interest on the car loan and the 1% interest on the mortgage as if one is eight times the size of the other. They are almost certainly not. The 1% on the mortgage IS cumulative. The 8% on the car loan is _probably_ simple interest. Also, increasing mortgage debt on a property to make sure the car’s paid off? Not likely. Take the car, I’ll pay the bricks off. Aaaaannd there it is. I KNEW he was going to say it. “[Don’t pay your mortgage off, put it on the stock market]”. No, thank you! I know he’s probably talking about a solid fund with steady growth, but no. Kill the mortgage. Right at the end he compares mortgage rates to inflation rates. Both are cumulative, but one is a simple annual figure, (which is cumulative year on year), the other (mortgage) is divided by 365 then applied daily. He needs to correct one for the other in order to compare them. Geez!
@danteburritar2822
2 жыл бұрын
Well the general principle stands to be fair. £50k debt on a car over 4 years at 8% means paying £8k in interest. £50k on the mortgage for 10 years means paying only £2.5k intersest. Even paying £50k off over 25 years at 1% is cheaper than 4 years at 8%. Some people don’t mind having more invested in the stock market - it usually pays off but it is higher risk of course so it should. Best to spread your nest eggs - you can’t live in stocks and shares - so I like some assets with real life utility like property.
@georgecaplin9075
2 жыл бұрын
@@danteburritar2822 £50k at 8% simple for 4 yrs is £16k £50k at 1% compound for 10 yrs is £5258. My point was more don’t add risk to your mortgage to pay off a car. Concentrate on paying off the biggest potential asset which is usually, currently, everyone’s biggest liability. The car’s no use to you if you have nowhere to park it. Same with the stocks. If spreading money about increases your mortgage risk, you end up using the bond certificates to keep you warm on your park bench. (I’m exaggerating, but the share performance has to at least keep up with the accruing mortgage interest to be worth it).
@tancreddehauteville764
2 жыл бұрын
The rich man with three properties is a bit of an idiot. For a start why does he need three properties? He could sell the buy-to-lets, pay off his mortgage and car finance and invest the rest in the markets.
@EnTHuSiAsTx94
2 жыл бұрын
Your videos are always so easy to understand, love that
@JamesShack
2 жыл бұрын
Anytime!
@MarlonKingShow
2 жыл бұрын
Some nice advice, the issue with investing in stock market in this case is if your isa allowance is already maxed which would be assumed for a higher tax payer.
@JamesShack
2 жыл бұрын
Pensions, even better for a higher rate tax payer!
@Azel247
2 жыл бұрын
Good video James! I have a 700k mortgage for 30 years at 1.5% that I'm choosing not to pay off. Instead, I invested 700k into the market because I believe the returns will far outpace the mortgage cost in the long term.
@JamesShack
2 жыл бұрын
Hi Nicol, fair enough. If you can fix is at 1.5% for as long as possible that will help you stay the course!
@manishrana6
2 жыл бұрын
Really good video ..with case study and example it becomes very easy to understand.
@JamesShack
2 жыл бұрын
Thanks! I’m glad you enjoyed it.
@AYACOHENSTEIN
2 жыл бұрын
Thank you for this video. It’s very informative.
@arunmenon6513
2 жыл бұрын
Informative as always 🙏
@AmirReviews
2 жыл бұрын
Great video. Sound quality of these videos is crisp. Which mic do you use?
@uncleskies8163
2 жыл бұрын
Hi James another excellent video. Here's my question with background. My wife and I are lucky to own and live in a property worth £250k, I also own a property worth 150k rented out £695pcm. Both paid off -no mortgage. I'm nearly 50 have 27 years of pension (defined benefit) and I'm nearly at 40% income tax rate. I have s&s ISA and 10k cash. I would like to retire at 55. Should I get a mortgage interest only on my rented house to buy more rental property for cash flow, or accumulate cash to buy property or max out S&S ISA ? Any comments gratefully received.
@JamesShack
2 жыл бұрын
I can't give any personal recomendations. But how much of your retirement income will be covered by your DB scheme?
@uncleskies8163
2 жыл бұрын
@@JamesShack thanks James-of course I didn't expect recommendations just considering options-they can't give much detail on this until just before I'm 55, but ball park around I expect around £700 pcm ( around half of full pension at age 67) from DB. I estimate I need £1500 pcm total
@stephen6262
2 жыл бұрын
James great video i could pay off my residential mortgage in feb. But i not sure. I would get hit with a 200 erc charge. I realise that inflation is getting high
@JamesShack
2 жыл бұрын
Yes, you need to be careful with all the charges. In this example they call lines up nicely, that’s rare tho!
@anantg6749
Жыл бұрын
Your suggestion would work if wages went up aligning with inflation which sadly isnt happening 😔
@justplaying4292
4 ай бұрын
7:07 how are you making profit, when you are paying 2.2% interest to the lender and then what you borrowed unappreciated by 4.2% (due to inflation)? The £1000 you borrowed now is valued at £958 and you still need to pay £22 to the lender.
@justplaying4292
4 ай бұрын
I'm not a financial advisor or accountant, but damn... if that's your daily job you have to be really careful.
@JamesShack
4 ай бұрын
Your debt has depreciated. If you owe less than you did before, that's a profit. Of course this is in real terms, nothing has changed in nominal terms.
@justplaying4292
4 ай бұрын
@@JamesShack okay..., the 4.2% inflation on the 2.2% interest (£22) is 92p. So, debt has been depreciated by 92p. So where does 2% profit come from? The inflation affected both borrowers and lenders.
@JamesShack
4 ай бұрын
@@justplaying4292 2.2% deflation on the £1000 debt is £2.20.
@terryjlee1531
Жыл бұрын
Fantastic video, very informative and clearly delivered
@JamesShack
Жыл бұрын
Glad you enjoyed it!
@aerotus888
2 жыл бұрын
Robbing Peter to pay Paul is a good strategy.
@person.X.
2 жыл бұрын
Aren't you missing another factor - wages. If like many people your wages are also going down in real terms then your mortgage is still as expensive as before.
@JamesShack
2 жыл бұрын
That’s a good point, but as you say only if wages are rising less than inflation. But inflation will eventually push through higher wages, it has to for it to be sustainable. The problem comes where there is inflation which is sustained by uneven wage growth, with only some people benefiting.
@MEtter17
2 жыл бұрын
While I realize James lives in the UK, I think these examples are very specific to UK residents. I do not recall the last time I saw an interest only loan on physical property, especially on three different properties simultaneously. Great information about the $1000 loan and inflation and restructure debt, but I do think these are extremely specific nuances, and definitely not common, at least in the US.
@umutkarakus
2 жыл бұрын
Interest only is standard for buy-to-let mortgages in the U.K. The number of buy-to-let mortgages you have doesn’t matter because lenders are mostly concerned with whether the rental income is enough to comfortably pay off the interest. As for residential mortgages, interest-only is very rare. It is given only if you have large equity: 40-50%+.
@MEtter17
2 жыл бұрын
@@umutkarakus appreciate this detail. That makes a lot more sense then how I was thinking about it haha.
@nauxsi
Жыл бұрын
@@umutkarakus but do they still check payslips?
@Macbobob
2 жыл бұрын
Cost of borrowing / inflation as a reason not to overpay mortgages isn't so important unless your income is also increasing by at least inflation.
@greennewdealoxford
2 жыл бұрын
After an average annual growth rate of >10%, my diverse ethical pension funds have dropped almost 7% this month (Jan 2022). What should I do?
@gaznaz
2 жыл бұрын
Aha. Load you main residence (the roof over your head) with more debt albeit at a lower rate but over a longer period of time means that the total amount of interest is likely to be greater than higher short term debt. These simple solutions ignore the risk free rate of return, personal security of owning your own home gives you. Helpful, not helpful.
@garethchambers11
2 жыл бұрын
Excellent video, well done. The emotional reward of paying off a mortgage early vs investing may be what some would prefer? The numbers don't make sense financially though. Because by the time my mortgage is paid off at 45 if by savings and overpayments my investments would be back to zero meaning I'd be screwed in retirement for even basic living expenses. (Self employed also so no employer pension contributions to take advantage of)
@JamesShack
2 жыл бұрын
Hi Gareth, indeed the right choice is often a balance between the two!
@jaspermccrea5441
2 жыл бұрын
Comparing to inflation assumes that pay increases by at least inflation, too, surely.
@xz9904
2 жыл бұрын
Well-explained and inspiring video!
@mrsamdraperinit
2 жыл бұрын
Great video but it once again doesn’t mention the psychological security that’s comes with having no mortgage
@nqm20
2 жыл бұрын
Hello James. I am planning to buy buy to let property. Value is 345000. I am additional borrowing money from my current residential home to pay 25% deposit. Rest 75 percent taking mortgage Even though I can borrow more money from my residential property my mortgage advisor insisting me to additional borrow only 25% . Can you plz advise. Kind regards
@A190xx
2 жыл бұрын
As an adviser, I would add: 1) Rather than move the existing mortgage to interest only, he could have selected part be on repayment (perhaps the original £100K); 2) Interest only loans have been restricted as very people get to the end of their term and want to downsize sufficiently to repay their mortgages, so this is very risky advice; 3) Selling the buy to lets would incur capital gains tax.
@rochellebrant
2 жыл бұрын
I'm not sure how much a video you can make of this, but I was wondering about how quick to pay off a 4 year student loan? Of course majorly depends on your income - but I'm in a situation where I earn around £32k, soon to be £40k, and I know that my career in Data & Tech is incredibly likely to see a regular increase in salary (I know many people in my field earning £60k and more, well into the 6 figures). I was wondering if I should wait for my salary to increase a lot more to the point that paying off my student loan quickly would be beneficial, or if I should start paying off a bit more at this moment in time (despite not being at the point aforesaid). PS: Thanks for all your videos! I've learned a lot. :)
@Ugi5
2 жыл бұрын
It all depends on the interest rate that's currently on your student debt, if its bad debt aka very high interest rate, you should try and pay it off as soon as possible, but IF its just a normal debt lets say 3%, you're better off not repaying early and instead investing the money, as that money will generate you more ( take s/p 500 as an example 10% on avrg) so it all pretty much comes down to opportunity cost.
@ChrisLee-yr7tz
Жыл бұрын
The general advice on student loans in the UK has always been to delay paying it off. Whilst that makes sense if you're not a high earner and are most likely to stay that way, I personally think it's nuts if you're earning over the repayment threshold. The rate is currently 6.3% and if you're earning only just over the threshold then the debt is snowballing upwards. So really it's a balancing act of trying to predict your earnings. My advice is set it out in excel, model it and look at different earning levels over your career to see how much you end up paying off over time. I think it's awful that the Gov't charges such a high rate. They're basically making higher rate taxing paying graduates pay for all the other graduates.
@MidnightIam
2 жыл бұрын
I've got tons of books on real estate investment, this video made it sound interesting enough to read them
@jeremys1019
2 жыл бұрын
Interesting video thanks. In terms of overpaying on your mortgage, is this not a sound investment as its investing in an asset that has out performed interest rates? Essentially overpaying is creating more wealth if house prices still outperform?
@matthewkelly4107
2 жыл бұрын
No, the property value is independent of how much you've paid down the mortgage
@jeremys1019
2 жыл бұрын
@@matthewkelly4107 of course, but if that asset goes up (property prices) and yet you're buying it at a cheaper price (mortgage interest rate), then its a sound investment and you're making money above interest rate
@matthewkelly4107
2 жыл бұрын
@@jeremys1019 well it's safe, but you're capped at 1% return or whatever your rate is. Which is below inflation rate so
@matthewkelly4107
2 жыл бұрын
@@jeremys1019 you're only saving the interest expense on the additional repayments you overpay, hence 1% (or so)
@snf321gotti6
2 жыл бұрын
The BTL on property is not possible as min 25% deposit would have been required . If the house was worth 500k he could not have done the lending of upto 425k as max lending is 400k.
@JamesShack
2 жыл бұрын
If the value of the property has fallen and it goes up to 90% LTV you can remortgage at 90% LTV. Which is what happened here.
@patricemeijboom9004
2 жыл бұрын
Hmmm economics 101 wrapped in an interesting video. Anyone that had any economics classes will already know this....
@JamesShack
2 жыл бұрын
Unfortunately not many people take economics classes, and even fewer remember them!
@ADHDNurse79
2 жыл бұрын
I’m been pondering this also to either overpay mortgage monthly or invest. I’m a nurse and currently working 7 days a week as wanted to pay off credit cards which I just did last month. New to investing and I can either now pay the £400-£500 a month on overpaying mortgage (£84,000 2.79% 17 yr mortgage) or into my S&S ISA? We live in south so won’t be moving from our terrace small house as would triple mortgage.
@JamesShack
2 жыл бұрын
2.79% is quite a high rate. When you get up or over 3% cost of debt then investing becomes less attractive. You could always do a bit of both.
@ADHDNurse79
2 жыл бұрын
@@JamesShack Thankyou, yes unfortunately got a 5 year fix. At the time it sounded good but not so much now. Would 50/50 be a good idea or actually paying more off the mortgage instead of investing each month due to interest rate?
@Ghhyuttgg
2 жыл бұрын
I wish I had this guys problems. I’m struggling because I own my own company through which I bill my consulting fees and only take a minimum salary. Mortgage companies say I don’t earn enough for a £200k mortgage when the company makes over £100k. Any advice there?
@guyr7351
2 жыл бұрын
Take more as a salary? not meaning to sound flippant and I know that often for tax reasons self employed will take the minimum out of the company, but there comes a time when you need to be seen to have a good income.
@garethchambers11
2 жыл бұрын
Take a low salary to minimise tax and pay yourself dividends monthly to make up the salary you need to afford the $200k mortgage. Dividends are charged tax at 7.5%. after the mortgage is agreed you can reduce your salary again if you wish. Get a good accountant. Worth their weight in gold.
@JamesShack
2 жыл бұрын
You can find banks that will take dividends as an income stream. The rates they offer will be higher but they will be comfortable looking at the bigger picture.
@tommytip123
2 жыл бұрын
@@bartz4439 sort of missing the point. Anyone owning a company is paying 20% corporation tax and dividend tax already. If they pay more salary they become liable for both employers and employee national insurance and income tax on top. Meaning they effectively pay more tax than a standard paye employee. It's not always the "tax dodge" people think....
@tommytip123
2 жыл бұрын
@@guyr7351 how do you take more salary without paying a much higher overall tax rate than a standard paye employee? A company owner paying employers and employees NI plus income tax the overall tax rate is much higher than a standard employee.
@STORMCLOUDGREY
2 жыл бұрын
Interesting points here. So considering present inflation & likely interest rates rises next year, would it be economically better to take out the lowest available interest loan for say a home improvement or car purchase at present rather than taking a lump sum from a pension a fund?
@JamesShack
2 жыл бұрын
I can’t say whether that is right for you. It’s a high risk strategy and you need to fix it for 5 years. But in theory, in this environment, piling up on low interest debt and buying inflation protected assets (stocks/property) could be a good bet. The risks being that you don’t fix for long enough and either of those assets crash in the mean time.
@TheWellnessAbbey
2 жыл бұрын
This is amazing information- thank you.
@JamesShack
2 жыл бұрын
You’re welcome!
@ToddCopeland
2 жыл бұрын
What if, he's paying 8% for 4 years and you just had him move $50k over to 1% for 30 years? 1% is not a typical mortgage amount.
@umutkarakus
2 жыл бұрын
The money that you would pay on the 8% loan over 4 years can be used to pay off the newly-borrowed $50k mortgage within 4 years (early repayments) and have cash to spare.
@ToddCopeland
2 жыл бұрын
@@umutkarakus that does not make any sense as to what I mentioned in my post.
@isctony
Жыл бұрын
Hello from the future - Inflation ain't 5% this year, it's twice that
@rtyrtyrtyus
2 жыл бұрын
Do I have to declare capital gains tax on my Vanguard profits if applicable? I'm new to making money from Vanguard. I understand the allowances etc. I just want to clarify if Vanguard stocks and shares profits are to be reported through capital gains if applicable. Thanks.
@DHaslop
2 жыл бұрын
Can you illustrate how a 1% rise in interest rate only causes an 8% raise in costs ? Unless this is being brought down by the capital repayments part of the mortgage ? On an interest only mortgage doesn't it increase linearly ?
@JamesShack
2 жыл бұрын
Yes, it because the majority of the monthly payment is repayment and only a small element is interest.
@DHaslop
2 жыл бұрын
Thanks. I think in the beginning of a mortgage it's the other way around . One day :)
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