Inflation & loans & Mortgages to invest

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brehon6789

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Hi All

I have a quick question. At the moment i have a mortgage of 210k at a rate of 5.25%, but i have recently recieved 60k by cashing in one of my investment properties so i am looking at investing this money in the stock market. So heres my question.

by not paying off my mortgage i have to really look at making more than 5.25% on the 60k but do i also have to factor in inflation? So if i invest 60K, my investment has to yeild the 5.25%(Interest on loan) & 4%(rate of inflation)? So in effect i have to make a return of 9.25% on my 60K.

Have i got this right?

Thanks

Brehon
 
You may not be paying a full 5.25% on your mortgage if you factor in owner occupier mortgage interest relief (20% relief on up to €8K per mortgage holder). On the other hand inflation is actually 5%.
 
I'm not 100% sure if you just add the two percentages together to estimate what you need to better paying off the mortgage! Sorry... :eek:
 
No - you need to make the 5.25% (in this example!).

The inflation is eating in to your mortgage repayments (i.e. making them "smaller" in real terms) in the same way that it will eat into your investment...so these things cancel each other out.

Don't over-complicate things :)
 
You might want to factor in capital gains tax? 20% I believe so net 5.25% is gross 6.6%, but I've forgotten the allowance...
 
Ok thanks guys for the info.

Just curious and never thought that the repayments were being impacted by inflation.

thanks

Brehon
 
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