To remortgage or not to remortgage...

Lord_Elpus_2

Hello

I was after some advice, please, not financial advice I should add, but practical 'what would you do' sort of advice and hope that this is the right place to post.

I am 45 and have no pension to speak of. My plan has always been to pay off my mortgage as quick as I can and then save save save for my retirement. I have a One Account mortgage at the moment and it is coming down at the rate of £800 per month on average. It should be gone by the time I am 52 or so.

It has occurred to me that a better plan might be to remortgage to one of these new fixed rates that are available at 2.99%. That would reduce my monthly mortgage payment to £242 and enable me to save £1000 per month into an equity income fund (yes, I have been reading the Daily Mail ).

I suppose I would be taking advantage of the low rates to save now rather than later so that my savings would have longer to work for me. Does sound like a good plan to you?

Any thoughts would be welcome!

Regards to all,

Peter

Jimbo1976

Lord Elpus

Are you employed or self employed as your proposed pension would have some tax relief. So it may be that in net terms you could have more than £1,000pm going into the pension.

It might be an idea to compromise slightly and to continue to keep overpaying your mortgage but not to the extent you are now and to put the balance into a pension fund.

With regards to a pension, keep a close eye on any fees and charges associated with the pension. Actively managed funds (where they employ managers to make investment decisions) are more expensive than passively managed funds (where they just track an index like the FTSE 100).

Whilst we don't know what the future holds, the economy isn't in great shape now so if you do start a pension the price of the units will be lower now than when you start your pension after repaying your mortgage (the units are the things you buy in a pension and go up and down with share prices) assuming the economy is in better shape then.

Lord_Elpus_2

Thanks for that, Jimbo.

I am employed but I should clarify that I have no intention of putting the money into a pension. I was simply going to pay direct into, for example, a UK equity Income Fund.

JimmyTheWig

Why not put it into a pension fund, OP? You get tax relief on your contributions.

Lord_Elpus_2

I don't trust them, Jimmy, pure and simple. Annuity rates are terrible too. More importantly, we also want to have access to all of our capital.

Thrugelmir

Lord_Elpus wrote: »

Annuity rates are terrible too.

What yield do you expect from an equity fund?

bigadaj

What rte of tax do you pay, if 40% then paying into a pension should be worthwhile. If not pay into a shares ISA, there is little difference in I vestment between a pension and an ISA, you get tax relief on the way I. With a. Pension and on the way out with an ISA. Spreading risk is always good so assuming you have a cash pot for emergencies then pay some offteh mortgage and put the rest into an ISA or pension depending on your tax rate.