Planning for the future

lollypopswater

Hi

I'd welcome some advice on current situation - I'm trying to come up with a good solid plan for the future prompted by the fact we are taking on a much bigger (very scary) mortgage this week.

Some details below:

Married couple
Income of around 100k per annum
30k in savings - 10k to be spent on new house
Car loan with settlement figure of 4600
New house value of 300k with 166k mortgage
Not great pension provision 6/7k projected for me and around 8k projected for hubby (33 & 34 currently)
Will have somewhere between 1800 and 2000 spare per mth when we move

My thoughts were to pay off car loan out of savings, build savings/emergency fund back up to 20k
Then make 500 mortgage overpayment each mth, 250 extra into each pension fund leaving 800/1000 for savings/holidays/home improvements etc

Oh also at some point we'd like to start a family but sadly that doesn't seem to be in my control right now so would like a good maternity leave plus future post leave cushion.

All thoughts welcome!

lollypopswater

Well I'm hoping that the lack of opinions means I'm on to a fairly sensible plan

kidmugsy

lollypopswater wrote: »

Well I'm hoping that the lack of opinions means I'm on to a fairly sensible plan

Have you got the right insurances? I suspect that many people buy daft insurance (extended warranties, pet insurance, and the like) but underinsure versus, say, early death, or against an illness stopping one of their salaries. Maybe until you have children a mortgage protection policy would do much of what you need - but would it do all?

pip895

Looks quite sensible to me not that I am any sort of expert. If either/both of you are paying higher rate tax then look at pensions. Otherwise keep plenty of cash available you may need it once you start a family.

lollypopswater

kidmugsy wrote: »

Have you got the right insurances? I suspect that many people buy daft insurance (extended warranties, pet insurance, and the like) but underinsure versus, say, early death, or against an illness stopping one of their salaries. Maybe until you have children a mortgage protection policy would do much of what you need - but would it do all?

Thanks kidmugsy insurance is one to think about. We have mortgage life insurance, death in service benefit, disability cover through work, I also I have critical illness and accident insurance through work (which I will need to increase with new mortgage I think). No mppi though so will have a look at that thanks.

lollypopswater

pip895 wrote: »

Looks quite sensible to me not that I am any sort of expert. If either/both of you are paying higher rate tax then look at pensions. Otherwise keep plenty of cash available you may need it once you start a family.

Thanks think we are both tipping into higher rate so good point re pensions!

kidmugsy

lollypopswater wrote: »

Thanks think we are both tipping into higher rate so good point re pensions!

You should indeed consider both contributing to pensions such that you avoid higher rate income tax. Another wheeze would be to recognise that money might be tighter later when you will still prefer that your husband contribute enough to avoid higher rate income tax. You could therefore save up against that day by using Cash ISAs now.

With mortgage overpayments the great question is whether they have a borrow-back facility for overpayments? Our last mortgage did have that, and very convenient it was. If they do have that you might find overpaying more profitable than filling Cash ISAs. It would depend on your interest rates.

atush

Well your first two ideas are good, pay off car loan and build up cash savings.


But alongside any overpayment (or even instead of), I'd put more each into pension, then put the balance into S&S isas. If something comes up that uses some of your emergency funds (such as car, holiday etc) you could suspend paying into he S&S isa all/some until the cash fund builds back up then into it again.


You don't say what your rate is, so investing money with a mtg at low rates while you can seems ideal. Should rates bump up in future, money invested and having grown could be put against the mtg.


One basic reason to overpay is if your LTV is high, and yours at 55% isn't.