£35k to £245k to £0...

pinkteapot

slowlyfading wrote: »

Ooh your house sounds fantastic :j :j good luck with the mini teapot plans too

That's the slightly bittersweet thing - those plans have been underway for a few years already. If it had worked out when planned then we wouldn't have been able to afford this house. A few extra years of two incomes and no childcare costs is what's done it. Still, life's good so can't complain. I'm hoping 2014 is a year for new house and some good news on the mini teapot front.

edinburgher

As you're planning on taking the mortgage until Mr Tea ( ) retires, have you considered maximising pension payments, AVCs etc. to use his pension commencement lump sum to pay the mortgage off, reducing your payments in the interim? Considering the size of your payments, I think it's safe to assume that you're both higher rate tax payers?

tootoo

Off to a great start!
Hope you hear the patter of mini teapots soon

pinkteapot

edinburgher wrote: »

As you're planning on taking the mortgage until Mr Tea ( ) retires, have you considered maximising pension payments, AVCs etc. to use his pension commencement lump sum to pay the mortgage off, reducing your payments in the interim? Considering the size of your payments, I think it's safe to assume that you're both higher rate tax payers?

Mr Tea is a higher rate tax payer but I'm not quite. He's currently paying 10% of his salary into his pension. He had a few years of contracting where he wasn't paying in to a pension so he's playing catch-up on contributions.

How would the above work? Presumably we'd have to have taken the mortgage over a longer term, finding a lender who'll lend past 65? The idea being that there's a balance remaining when you retire?

A bit more about us...

As I mentioned before, I ran up some debt after uni (not much, but enough to teach me the lesson!). I'd just graduated from the DFW board when I met Mr Tea. He'd always been good with money and had some savings, but for the next five years I earnt quite a bit more than him as I did my time in an evil finance job in London (I promise - I'm not one of the ones who broke the economy!).

I gave it up at the end of last year because it was absolutely soul-destroying; I had zero interest in what I was doing. Now I'm doing a job I'm passionate about, though earning about a quarter of what I did before. That move was a bit of a MFW fail, I know. Very roughly speaking (I've never worked it out accurately), Mr Tea and I have contributed roughly equally to our net wealth at this point.

I do feel guilty as I now earn quite a bit less than him so feel like I'm not pulling my weight! He's very sweet and says he prefers me being happy with my job. I'm still adjusting to being the lower earner though, as I've always been more of a spender than him. Financially we're a team - we've had completely joint finances since we got married (the only separate accounts we have are our ISAs), so we see it as "total in" and "total out" each month, but I still think about how much of each is down to me.

I set up my new OPs spreadsheet for the new mortgage last night. Shiny new sheet with the standard repayments in and no OPs entered yet. I hadn't thought before about the fact that this mortgage, as it stands, will run until 2042. :eek: Our loose target is going to be to pay it off in half the original time. Will this board still be around in 14 years?!

edinburgher

How would the above work? Presumably we'd have to have taken the mortgage over a longer term, finding a lender who'll lend past 65? The idea being that there's a balance remaining when you retire?

You wouldn't need a mortgage that went past retirement. Under the current rules, you can take 25% of your pension pot as a tax free lump sum (pension commencement lump sum). Sum people spend this on a round the world cruise, fun etc. but there's nothing to stop you treating it as a nest egg, knowing that you will want to use it to pay off the remaining mortgage amount on retirement.

What with employer contributions, the fact that pensions defer tax and the fact that the PCLS is tax free, it's one that might suit someone with a good sized pot at retirement.

As ever, do your own research and speak to a trusted IFA

pinkteapot

Thanks, but I'm still slightly confused... If our term only runs till retirement, we won't have a balance left on retirement to pay off?

edinburgher

pinkteapot wrote: »

Thanks, but I'm still slightly confused... If our term only runs till retirement, we won't have a balance left on retirement to pay off?

Of course you're right - the trick would be to calculate approximate value of 25% of pot and then match the mortgage payments to leave a similar amount remaining at retirement.

Probably won't match your current plans as you've already stretched term to planned retirement, ignore me.

Needs more :coffee:

pinkteapot

Ahhh I see. I might have been unclear. Our term is 28 years so with no OPs we'll clear it when Mr Tea is 65 and I'm 61. With OPs we aim to clear it at around age 50 instead. Then I need to start coming up with other plans for our spare cash.

If I could be bothered then we should really invest the OP money as we should be able to generate more than the 2.49% we'll be paying on the mortgage (to start with), but I don't have the time or inclination.

edinburgher

If I could be bothered then we should really invest the OP money as we should be able to generate more than the 2.49% we'll be paying on the mortgage (to start with), but I don't have the time or inclination.

I recommend reading this, it might suit

Some of the best investors do very little!

pinkteapot

Just noticed your sig - congrats on exceeding your OP target for the year.

Thanks for the link - I do like passive funds. We do have £5k in an S&S ISA in an active fund, but a global multi-asset one that I can pretty much ignore.

Psychologically I'd rather OP the mortgage, even though it's not necessarily the best option financially. Our mortgage broker suggested an offset mortgage but despite having worked in finance I can't get my head around them at all! Or, more to the point, how I'd account for it in our epic accounts Excel file that I run.