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Mortgage advisor was saying he takes out interest only then puts what he would have paid as capital repayment into ETFs like S&P500 which generally give a pretty reliable rate of return (even if you look at the drop last march/april he will still be up over period).
French_Touch-
Yep, I think if you’re disciplined enough to actually save the difference then it makes sense
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Over the long term index have historical performed well especially if your drip feeding in.
Remember the ftse100 index is roughly were it was at the height of the dot com bubble in 1999. So nil capital gains for a lump sum invested then.
Dividends are the key especially when compounding would have roughly doubled your return in that time but it is over 2 decades.
And also dividends are not consistent they often get slashed/halted during down turn or recessions, and should not be relied upon.
Consistently drip feeding in capital and sheltering from tax (via isa or pension) are key to index investing for most people.Edit: putting into a foreign index also puts in currency risk. S&p 500 is priced in USD
duncs
wildwest
It's a bit flawed.
If you've got the money and you're earmarking it to pay a lump sum later then you may as well overpay as you go. That way you're reducing the interest throughout the term rather than just in chunks every 2/3/5 years.
This assumes you're allowed some overpayments. Most do allow some.
If the mortgage is 1.8% then any way of saving that lump sum and earning more than 1.8% (riskier certainly, but historically not too tough to find) would make you more money than you're spending on the extra interest, so even though you'd spend lots on long term interest, you'd earn that plus some more on the investments.