simoan wrote:IMHO it makes more sense to reduce mortgage payments to a minimum whilst you’re still working and invest the excess capital each month into equities. I feel quite fortunate in that I’ve been doing that during the longest bull market ever and am now in a very comfortable position. All I can do now is balls it up by taking on more risk than is necessary.
yes, that's what I am doing currently. I have a large IO mortgage - very happy not paying it off, and investing instead. I just want to extend this further and carry the mortgage into (early) retirement too.
Gerry557 wrote:
What is your plan to exit at the 10 years time point?
During covid the markets dropped rapidly, so not the best time to be selling. Can you imagine being a forced seller at the bottom of the market because you cant get a new mortgage and base rates could be back to 15%+
So if you are serious what is the exit plan. If you have one great but you could end up in a cliff edge situation and nowhere to jump too.
Mortgages like investments are great if you have lots of time. You can use this time to adapt over the course of events especially if things turn against you. what do you do if there are only six months of your time left.
Of course you might be able to roll over the mortgage again, the SVR might be much lower than my case above in which case great, you won the risk/reward for a bit longer.
Looking forward to hearing what your plans are to exit.
The "house fund" is really a subsection of the whole FIRE plan, so it makes little sense to consider it alone in isolation, but ideally, if the numbers still support it and it is possible to roll over the debt in 10yrs time, then why
not do that?
However, I am also aware that things do change. We get older, our risk tolerance changes, our health changes, and our ability to adapt changes. I will be 45yo this year and am in good health, and hope to retire before I am 50. Ask me again when I am 55 and I might say that I'd prefer to begin to derisk, but as of today I'll take the leverage - my feelings about that might change in the future, in which case, fine, I can just start paying down my mortgage quicker.
Mark66 wrote:Hear my view is completely different to yours. I view risk as more than one dimensional. When we are young, we don't have wealth but have plenty of working years ahead of us to earn an income. We initially use the gearing of a mortgage to help start to build our wealth. But to me, as my wealth started to build, it was important to keep an eye on securing a roof over my head and a reasonable standard of living by retirement. Money in excess of this, for an even more luxurious life, I am happy to risk. So to me wealth is not fungible, it has distinct compartments.
My home being one such compartment is not an investment to me it is a place to live. If there was a major downturn where property prices significantly fall, using a mortgage in later life to gear could risk the basics so it would be a no no for me.
But statistically I would agree there seems, on past performance, a very good chance it should work. If your and (just as important) your families attitude to risk is accepting of all this then I see no reason not to do it.
I like most it seems prefer the security and feeling of owning my own home in retirement.
A good response, and a perfectly sensible point of view. While it may seem an aggressive option to leverage up your investments with a mortgage, in other ways I am quite risk adverse. As a household we live well below our means and have a high saving rate, and in investing terms I have always learnt to pay great attention to the risk in the portfolio, and run a well diversified portfolio.
It's strange and not logical to me that many people will not consider leveraging up with mortgage money but will happy run an aggressive high beta portfolio in their investments. I am almost the opposite, I pay great attention to portfolio risk but am also happy to leverage up a sensible amount and not pay down my mortgage doing so.