With the Euro Crisis still making the headlines and no end in sight, world markets remain in turmoil. Knowing where to invest is a big issue many are facing. In this post I’ll share 3 stocks I’m investing in in 2012 and explain the reasons I’m investing in them.

1. Apple

I recently wrote about the 7 reasons to invest in Apple. When I look around companies to invest in there really aren’t that many at the minute where I feel comfortable in their ability to keep customers buying more of their products during a global recession.

It’s two main products (iPhone/Smart phone and iPad/tablet) are both in markets that are experiencing rapid global growth. In both markets Apple is positioned at the premium end of the market, the company that is setting the benchmark for al others to follow.

Apple’s recent history of product development, and in fact market creation (think iPod, smart phone, tablets) is phenomenal. It has a history of creating products that become must haves for customers and I see no reason for this to stop. While it doesn’t currently pay a dividend I think there is potential for strong future growth.

2. BP

BP has been through a tumultuous couple of years. After seeing it’s share prices crash following the Deep Water Horizon drilling disaster in the gulf of Mexico (when the stock plunged from about £6.50 down to about £3.05

Perhaps one of the best reasons to own BP at the minute is because of it’s dividend yield of 3.64%. With global economies struggling for growth and interest rates across the developed western economies at an all time low such a high yield is an attractive prospect.

Post crisis the company had to raise significant capital in order to fund the clean up and reserve against future litigation and claim. As a result the company sold of many of it’s non-core assets. At the time the market deemed this necessary however in the long run I believe it forced BP to shed it’s non core assets. As a result the company is leaner than it was pre-crisis and is now focusing on it’s core competencies of exploration, deep water extraction and managing large oil fields.

The cynical would say that Uncle Sam’s thirst for Oil far outweighs their outrage at the company for the handling of the disaster. The facts are that drilling for oil has now resumed in the Gulf of Mexico.

In summary I view BP as having both good growth and yield potential. It’s re-focused strategy and recovery post crisis has the potential to offer the investor capital growth while at the same time the company is back to paying decent dividends.

3. Vodafone

While Vodafone is susceptible like most companies to a global slowdown, it is ell placed to be less affected than most. The way the mobile industry works is to tie in customers to increasingly long contracts (2 years is now common practice). Vodafone’s market share and expansion into Emerging Markets means it is well placed to resist any economic downturn.

You can see Vodafone’s defensive nature in it’s historic stock price. In the short term while the Euro crisis has been developing and markets have been plummeting it has traded steadily in the range of 160-170. In fact in the last 6 months the price trend has been an upward trend.

Finally, as with BP the dividend yield of Vodafone is a very attractive 5.19%. With interest rates at an all time low this type of yield is a must for any portfolio.

Overpaying your mortgage is a great way to not only save thousands but also to help you become mortgage free years before your current mortgage payment schedule aims for. Here we look at some of the things to consider if you’re thinking about starting to over pay your mortgage.

Consistency is key

Unless you’re earning big, big money paying off a mortgage is a long process. By overpaying your mortgage you can save thousands as well as significantly reducing the time it take to pay off your loan. However you’re still going to need a bit of patience. Reaping the benefits of over payments is a gradual process that will take a period of months to years to benefit you.  Be prepared to be consistent with your efforts to overpay.

Redemption Penalties

Many mortgages have what they call redemption penalties which are subtly different from repayment penalties. Check with your mortgage provider but they usually mean you’ll be charged a fee if you repay all of your mortgage loan within a specified time frame. You’ll be charged this fee whether you are remortgaging to a different provider or paying off your loan in full and going mortgage free.

Mortgage Overpayments

image by woodleywonderworks

For this reason it may be worth not repaying your mortgage completely If you’ve been overpaying and are nearly mortgage fee it may be worth leaving a small balance (a single pound or dollar will do) to avoid these repayment charges.

Repayment Penalties

Many mortgages have a restrictions on how much you can overpay each year. A common figure is 10% of the outstanding balance. Overpay more than this in a year and you may have additional fees to pay. Be sure to check the details of your mortgage agreement before embarking on over payments.

Pay off expensive debts first

Overpaying your mortgage and being mortgage free in a few years time can be an exciting prospect. However before embarking on an over payment spree, in order to maximize the benefit of your money, be sure to pay off more expensive debts first. Debt such as credit cards, store cards, personal loans will almost certainly be charging higher rates of interest than your mortgage. To ensure you get the biggest bang for your buck be sure to pay these off first.

Every little helps

Paying off a 25 year mortgage can be a daunting prospect however you should remember the snaowball effect created by compounded interest. Every payment you make is a combination of interest and capital repayment. The more you can reduce the capital (by overpaying this month) the less interest you’ll be charged next month.

Mortgage Overpayment Table

Making say a £50 overpayment may not seem a lot on a loan of say £100,000 but do it every month and the effects soon add up as you can see in the table below. On a £100,000 loan if you made no over payments you’d pay £75,377 in interest by the time you’d paid the loan off.

If you can manage to overpay £50 each month you’ll end up paying off the mortage 2 and a half years early and save a whopping £7,319 in interest payments. Make the overpayments £200 per month and you’ll have the mortgage paid off nearly 7 and a half years early and save over £20,000 in interest.

Don’t Neglect Savings

You never know wghat is round the corner – the car breaking down, emergency repair at home, expensive medical fees. On most mortgages (the exception being offset loans) once you’ve made an overpayment you won’t be able to take the money back out if you need it for an emergency (home repair, new car etc). As a result you’ll need to be prudent and ensure that you can afford to make over payments.

One way to build a safety net is to ensure you have an emergency savings pot of cash set aside. Don’t neglect your savings regime in order to increase your over payments.

Summary

In this post we’ve covered some things to bear in mind when thinking about over paying your home mortgage loan. Now you’re raring to go take a look at our other mortgage over paying tips to make sure you give yourself the best possible start. Good luck!

I’ve been blogging quite a bit recently about how, why and when to over pay your mortgage. In this post i’ll break down some of the reasons and methods that have helped me reach a stage where I hope to pay off my mortgage within the next 5 years.

I Am On A Tracker Mortgage

Luckily when I decided to re-mortgage my home loan and move away from my then lender Northern Rock shortly after they became one of the first victims of the financial crisis. Interest rates at the time were about 5.5% and I was very close to opting for a fixed rate mortgage deal. At the time however I felt that the Bank of England would reduce interest rates by a quarter of a percentage point in the following quarter so I opted for a tracker mortgage from First Direct.

My current mortgage deal charges interest at the Bank of England base rate (currently 0.5%) plus 0.47%, meaning I am currently paying only 0.97% interest on my mortgage. The net effect of this is that the current monthly repayment amount on my 20 year mortgage is well under half what it was when I took out the loan about 2 years ago, saving me a large amount of money each month.

I Regularly Make Mortgage Over Payments

With all of the savings I am making on my mortgage I could have significantly increased my monthly disposable income. Instead when interest rates began to tumble I instructed my mortgage company to keep my repayments at the same level, effectively making over payments to my mortgage each month. As rates began to fall further the size of my over payments compared to the regular payments began to rise significantly. As a result I am saving myself thousands in the long run without really noticing it in the monthly payments i make.

I Divert All Work Bonuses Into Over Payments

In addition to making regular over payments out of my monthly salary I also divert any financial windfalls into my mortgage account. Most of my work bonuses I have received in the last two years have been used to make one off mortgage over payments. In addition the odd tax refund, ebay sale of junk and any other little windfalls i have received have all gone toward reducing the capital of my mortgage.

I Make Small Sacrifices Everyday

Since embarking on this journey to reduce my mortgage I have paid much more attention to the small amounts of money I used to fritter away on needless expenditure. Below is a list of some of the simple things I have done that save me money on monthly basis. You’ve already guessed it, all of these savings become mortgage over payments.

• Walk or get the bus instead of the odd taxi
• Avoid eating out too much (restrict myself to a couple of times each month)
• Try to take a packed lunch to work instead of buying from cafes (this is a big saver)
• I question all purchases. Do i really need to buy that watch when i have one that works fine?
• I’ve sold huge amounts of junk on ebay, stuff i would never have used again and made a healthy profit doing so

I Make Extra Income Online

This has been another important factor for me in the last year or so. I have a few websites and blogs (including this one) that i have set up over the last couple of years and continue to maintain. This year I have realized the potential of a few of them to make money for me. There are numerous ways to make money online, i have concluded that no way is the right way. I tend to make my money by providing useful content to users on subjects that i am interest in.

I took a couple of online internet marketing courses that helped me learn the basics of internet marketing and now I am being rewarded by seeing my online income steadily grow month on month. I use all of this extra income I am earning to go towards over payments on my mortgage.

I Am Becoming Obsessive About Overpaying My Mortgage

Making mortgage over payments can be likened to a snowball rolling down the hill. The more over payments you make (and sooner you make them) the bigger their impact is. The more you overpay the more you save and the easier it is to see the impact of your over payments each month when that mortgage statement comes through the post. To me this snowball effect is a great motivator to keep over paying more.

Once i saw how £100 per month could save me over £20,000 I started a continually search to find more ways of finding an extra £50 or £100 to put towards overpayments each month. Overpaying your mortgage is definitly one of those things where the more you put in the more you get.