To pay off mortgage?

Hi all
My Wife and I are early 30’s and have been accumulating ETF/LIC’s over the last few years. To my pleasant surprise our shares are now worth more then the mortgage.

I never actually thought too much about how difficult the decision psychologically would be when we exceeded the mortgage amount with our share portfolio.
We have been thinking about whether we should sell the shares and pay off the mortgage (In mrs name she is studying so cgt would be minimal) then start accumulating shares again, or to just keep the portfolio and keep dollar cost averaging in ETF/LIC and slowly pay the mortgage off whilst accumulating.

Thought I would put this up to see what everyone has done/doing in accumulation stages, your reasons, would you do it again the same way, etc?
Looking forward to hearing some of the responses
Cheers
Jimmy

 

Very generally in the accumulation phase the idea should be to maximise exposure.

but debt recycling (paying off non deductible debt and reborrowing for
Investments) is likely a good idea.

the numbers sound strange though. If you have been buying shares for a while, and have enough to pay off the mortgage (at least a couple hundred k?) then capital gains is unlikely to be minimal.

what is the amount of the mortgage? If its small then the impact of the tax deductibility isnt much anyway.

 

Personally, I would be tempted to. I would also then be looking at purchasing an investment property with a new mortgage. But you might structure things so you don't actually pay off your current mortgage entirely, just pay down and then redraw the fund to use as a large deposit for the IP. Thus 'recycling' the debt, so it is tax deductible.


But really, whichever way you go, you are in a good position. Even just keeping the shares and the mortgage can make sense at this stage, as the rate of return on the shares would be higher then your current mortgage interest rates.

How much longer do you have left on your mortgage out of curiosity?

Run the numbers on your options -
A) keeping as is,
B) paying off and buying more shares,
C) paying off / down and buying an IP.

A or B will probably come out ahead financially. But it really depends on your goals and personal values. Sometimes the things that make the best mathematical sense, aren't always the best for the individual. And sometimes they are.

 

had you been debt recycling or using cash to buy the shares?

 

We have over 20 years left on it.
I have run the numbers of A and B (not interested in C investment property ) and A comes out on top. As you say though things that make mathematical sense arnt always right for the individual. Which is why we are finding it difficult to make a decision on what to do.

Yes some debt recycling, majority is not and in the mrs name.

I was trying to start this thread to see what others have done and why over their journey not so much about myself (probably included to much of my own info in there).

 

You SURE cgt is minimal?

 

Yep have run the numbers and verified with accountant. Mrs isn’t working, we have a capital loss to offset and all shares are subject to CGT discount . So might be a few grand give or take.

 

If there's over 20 years left on the mortgage, the CGT would surely NOT be minimal.

 

Sorry I’m a bit confused.
I’m thinking of selling our shares to pay off our PPOR. We have been accumulating shares for about 4 years.

 

Personally I would pay out the mortgage as the interest you are paying is not deductible. If cgt is a problem then spread the payout over two tax years by selling, this year, sufficient earlier purchased securities to maximise cgt discount so that the quantum of cgt will max out your spouses tax free threshold or at least stay within her 19% tax band. Repeat next year.

 

from a pure tax point of view work out what the CGT would be and the interest savings going forward each year and see how long would it take to break even. With interest rates so low it might be worth not selling or doing it in stages.

 

How about selling all of the shares and then re-buying about half? That way you’re taking advantage of this opportunity to minimise CGT while your partner is not working, paying off some of the mortgage and leaving some money for investment.

 

This was my thoughts also
With rates so low at the moment is it worth while ......
You could sell equivalent to the CGT loss so no tax payable, putting the retained balance off the mortgage.
If a deal comes up then redraw/split to buy more shares (making the debt deductible).
Regardless of the above, keep hammering that mortgage, it's like forced savings, if you don't have that commitment will you still save or increase "lifestyle choices"