Advice please- Pay off morgage early or pay into pension?

juliet_f

I'm looking for some thoughts, any comments welcome!

Both my husband and I are age 45. We have stakeholder pensions we've been paying into for a few years now. We also have a morgage of £55k. For the last two years we've been overpaying our morgage every month by £100, which means we can pay it off in 9 years rather than 12. Our question is should we freeze our pensions and put the money towards repaying the morgage? We've been told we could pay it off in 5 and a half years if we do this. I'm so tempted to do this...would love to be morgage free. Any thoughts?

opinions4u

What rate are you paying on the mortgage?

Are either of you higher rate taxpayers?

Do either of your employers contribute to pensions for you?

Thrugelmir

Lots that could be suggested. O4U's questions would help the direction of the answers.

juliet_f

The rate on our morgage is 3.30%, fixed for two years. Neither of us are higher rate tax payers and neither of us has employers contributions to the pensions.

opinions4u

juliet_f wrote: »

The rate on our morgage is 3.30%, fixed for two years. Neither of us are higher rate tax payers and neither of us has employers contributions to the pensions.

One more question. What's the SVR you'll go on to at the end of the fixed rate?

(If not sure, please name the lender)

juliet_f

I'm pretty sure it'll be 4.49% (our morgage is with Coventry).

dunstonh

You have three phases of life. One where someone pays for you as a child. One where you pay for yourself from income and another where you rely on money you have put aside in phase 2. So, if you stop paying towards your retirement provision, what do you plan to live on in retirement?

juliet_f

dunstonh wrote: »

You have three phases of life. One where someone pays for you as a child. One where you pay for yourself from income and another where you rely on money you have put aside in phase 2. So, if you stop paying towards your retirement provision, what do you plan to live on in retirement?

Thanks dunstonh.
As this would only be for 5.5 years we thought we could resume paying into our pensions when we have paid off our morgage. The volatility of the stock market has made us both feel that money in our pensions is not necessarily safe and so property seems like a good bet. Once we have paid off the morgage it also gives us the option of buying another property to rent out. We are wondering if this would be a good idea, and welcome any advice.

dunstonh

The volatility of the stock market has made us both feel that money in our pensions is not necessarily safe and so property seems like a good bet.

The volatility in the stockmarket is not as great as the media make out. For example, last October was the best month on the stockmarkets for 25 years. You didnt see that reported. There was a 20% stockmarket crash last august. Already recovered. The zig zagging is normal. It always does that. It always will.

Plus, it is great news for regular contributions when it is volatile. Every time it goes down in the short term is good news for long term regular investors. Your monthly contribution buys more investments and when they go up, it is those bought at the lowest point which make the most money.

If you wait until the markets go up and start investing then you end up buying the investments more expensively and make less. Indeed, you are probably ripe for timing for them to go back down again.

nce we have paid off the morgage it also gives us the option of buying another property to rent out.

Problem is that it tends to require multiple properties to work for retirement income. Anything around 5-6 because of the amount of tax you will have to pay plus the mortgage you take out to buy one will need repaying. Property can form part of the plan but the growth days of the credit boom are not going to be returning any-time soon.

Thrugelmir

dunstonh wrote: »

The volatility in the stockmarket is not as great as the media make out. For example, last October was the best month on the stockmarkets for 25 years. You didnt see that reported. There was a 20% stockmarket crash last august. Already recovered. The zig zagging is normal. It always does that. It always will.

There's strong sentiment that QE globally is helping keep asset prices high and that the best days of Corporate profitability are over for a while. Investors are currently chasing yields. So what matters is dividend cover to profit ratio.