Jon P Posted October 27, 2013 Share Posted October 27, 2013 Can anyone work out which of these options I will be better off. I am buying shares through work at £70 per month for the next 3 years. I get a deal which buys them fixed at £3.12 per share no matter what the actual price so I will get 807 shares for the 3 years. The deal is worse case is I get my money back if they don't make any money so £2520 or if they are more than £3.12 in 3 years I make the difference, (price at Friday was around £4.35) if it did finish around that I would make around £1000 profit for the 3 years. I need to figure out if I will be better off putting the £70 per month towards my mortgage as and reducing the time so less interest. I took it out over a long time to give me initial low payments and now have 33 years left with only £62500 left on it currently at 3.99% As there is no telling what the shares I am going to buy will finish at can anyone work out if either has a bigger financial advantage? Thanks Link to comment Share on other sites More sharing options...
big_g Posted October 27, 2013 Share Posted October 27, 2013 Sharesaves will often give you a small bonus at the end of the three or five years. Used to be about five months payments - but with low interest rates - may be less than a month. Things to look at is how well the company you work for has done and whether the price is likely to go up based on the historic trend. I do them at work - put the maximum in - currently they are at over double the option price - so about 110% profit for five years paying in. I did once cash in the money but every other time I've 'won'. Link to comment Share on other sites More sharing options...
Gleadly Posted October 27, 2013 Share Posted October 27, 2013 Without knowing what the shares are, it's anyone's guesses how the market is going to go. The market's probably at a low point at the moment, so things could only get better. If you pay an extra £70 a month on your mortgage, you will, of course, reduce your interest payments, be it not much. Looking at it from the pessimistic side, if you can comfortably afford paying this amount to your shares over the next 3 years you may make zilch however, if things go good, you may make somewhat more than £1000. Do you have to stay in for the 3 year period? Can you stay longer? If you put it towards your mortgage you know it will go down. If you invest in any shares, then who knows what you will get? Link to comment Share on other sites More sharing options...
alternageek Posted October 27, 2013 Share Posted October 27, 2013 Youre best to call your mortgage company and see if you pay £70 a month over you min payment how many years it will knock off the total mortgage, which in turn could reduce your payments in the future. Take that info on and compare it against the shares. Depending on your needs, depends on whats best for you. Link to comment Share on other sites More sharing options...
Jon P Posted October 27, 2013 Author Share Posted October 27, 2013 Its doubtful the share will grow beyond £5.00 but who knows. Need someone who is good with figures to work out how many years my mortgage will reduce and the interest saved over 3 years compared to a potential profit of anything from £0 - £2000 going on past history ---------- Post added 27-10-2013 at 14:25 ---------- The scheme is set for 3 years, I can take them out at any point but if I do take them early I just get my the money I put in no matter what the share value is Link to comment Share on other sites More sharing options...
Gleadly Posted October 27, 2013 Share Posted October 27, 2013 Its doubtful the share will grow beyond £5.00 but who knows. Need someone who is good with figures to work out how many years my mortgage will reduce and the interest saved over 3 years compared to a potential profit of anything from £0 - £2000 going on past history ---------- Post added 27-10-2013 at 14:25 ---------- The scheme is set for 3 years, I can take them out at any point but if I do take them early I just get my the money I put in no matter what the share value is I made a small investment 4 years ago and the price was 8.34. 2 years ago they were 17.9 Currently they are 7.9 Who knows what they will be in another 2 or 3 years. It can only get better. Link to comment Share on other sites More sharing options...
alternageek Posted October 27, 2013 Share Posted October 27, 2013 Its doubtful the share will grow beyond £5.00 but who knows. Need someone who is good with figures to work out how many years my mortgage will reduce and the interest saved over 3 years compared to a potential profit of anything from £0 - £2000 going on past history ---------- Post added 27-10-2013 at 14:25 ---------- The scheme is set for 3 years, I can take them out at any point but if I do take them early I just get my the money I put in no matter what the share value is Your mortgage provider can do this for you. I used to work for a mortgage provider and the software we had, let us quote you over the phone. We could calculate how much a customers term would reduce to and, with a few moments of calculation time, provide a verbal quote of interest saved, etc. Link to comment Share on other sites More sharing options...
big_g Posted October 27, 2013 Share Posted October 27, 2013 The amount of interest that you will save is about £155 over the three years if you stick £70 on your mortgage per month - you will then save £8.40 per month from month 36 onwards. Assume you stick the £70 in a share save and you make £1000 profit and whack that onto your mortgage then the capital will reduce by £3520 which will reduce interest by £11.70 a month from month 36 onwards. Extrapolate those figures for 120 months and doing the sharesave will save you £994 whilst doing the mortgage reduction will save you £858. Basically, if you do sharesave and 'lose', you stick the £2520 onto your mortgage and have lost £155. If you do the sharesave and gain £1000 - whilst you'll only gain £136 after 10 years - you'll gain an extra £3.30 per month from month 120 onwards Lot of assumptions. One is that interest is charged on your monthly/daily mortgage balance and that you can make monthly overpayments and a lump sum payment. Hope that makes sense. Hope my workings are correct too. Do you have Excel on your computer? I can give you the formula to use so that you can play with the figures. Link to comment Share on other sites More sharing options...
poppet2 Posted October 27, 2013 Share Posted October 27, 2013 But many believe that interest rates will go up straight after the election as at the moment interest rates are all artificially low. Link to comment Share on other sites More sharing options...
Expat owl Posted October 27, 2013 Share Posted October 27, 2013 I may be wrong but don't you also have to pay tax on any profit that may arise from the share purchase. You also need to take this into account. Link to comment Share on other sites More sharing options...
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