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Options after the mortgage is paid off.

Hi ya
After frequently viewing this website I thought I’d join the Forum and stick on my 1st post as you all seem a knowledgeable bunch with good ideas.
I would be very interested in peoples opinion on my current financial situation so here goes.
I shall be paying off my mortgage completely this April woot woot. I have really pumped my money over the last 3 years into it and now there is finally light at the end of the tunnel. My house is a 3 bedroom detached worth around 160k (about the average price in Lincolnshire). I’m 40 now and although I do have a personal pension it’s worth err diddly squat. I’m self-employed and currently on around 70k a year with no credit cards or loans so basically debt free in April.
So come April do I start pumping large amounts of money into the pension?
Save for a deposit for a buy to let property and let someone else pay off that house over the next 15 years and that will generate a steady income afterwards?
Buy a larger property say around 350k and pray that in 20 years time I can downsize and free up lots of cash whilst putting money into savings?
Or other ideas I’ve not thought of? (highly likely).
Cheers
Mike
«13

Comments

  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Do you want to move house?

    Do you really want to be a landlord with the responsibility that entails?

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf
    I do have a personal pension it’s worth err diddly squat.

    Maybe see an IFA and get on with the pension saving? http://www.unbiased.co.uk/pensions
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    edited 27 January 2014 pm31 3:18PM
    Mike_Lincs wrote: »
    I shall be paying off my mortgage completely this April woot woot. I have really pumped my money over the last 3 years into it and now there is finally light at the end of the tunnel. My house is a 3 bedroom detached worth around 160k (about the average price in Lincolnshire). I’m 40 now and although I do have a personal pension it’s worth err diddly squat. I’m self-employed and currently on around 70k a year with no credit cards or loans so basically debt free in April.

    Why not stop pumping the mortgage immediately, and bung money into a pension this tax year? Saving 40% tax is surely likely to give you a better payoff than knocking off a last fragment of mortgage.

    If you're happy with your house, I'd keep it. If you think you'd get a lot of pleasure from a more expensive one for owner-occupation, I'd consider that. But it's a poor idea to bet your whole old-age on a single, indivisible, illiquid investment.

    As for buy-to-let, why not move yourself into a rented property and let out your own house for a while? After a bit of experience both as landlord and tenant, re-consider.
    Free the dunston one next time too.
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I have to say, given market performance over the last 3 years, you would have done better to invest. you do realize that 100 into a pension (for a HRTaxpayer like yourself) costs you only 60? You have been paying money to the taxman you needn't.


    Stop overpaying now, and whack some in your pension. Then continue pension contribs. If you can, pay in 28K per year and take yourself out of higher rate tax, do it. 35K into a pension (after basic rate rel) will cost you only 22.4K


    After a few years of this, then you can put anything you have extra into a S&S isa.
  • dunstonh
    dunstonh Posts: 118,562 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I’m 40 now and although I do have a personal pension it’s worth err diddly squat. I’m self-employed and currently on around 70k a year with no credit cards or loans so basically debt free in April.

    Self employed means you get a lower state pension. Whilst that changes with the new state pension, your past qualification is taken into account and it will still be reduced.
    So come April do I start pumping large amounts of money into the pension?

    Do you want to live on £8000 a year in retirement if you do nothing?
    Save for a deposit for a buy to let property and let someone else pay off that house over the next 15 years and that will generate a steady income afterwards?

    Its an option if you can get to around 6-8 properties and dont mind the hassle as well as the tax liability.
    Buy a larger property say around 350k and pray that in 20 years time I can downsize and free up lots of cash whilst putting money into savings?

    This rarely works as most people get accustomed to the size of the house and cant manage the downsize well. Plus by the time you factor in costs and stamp duty, it wipes out most, of the gain and gives less than expected.
    free up lots of cash whilst putting money into savings?

    Savings are rarely suitable for long term planning.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Mike_Lincs
    Mike_Lincs Posts: 11 Forumite
    edited 28 January 2014 am31 7:02AM
    Thanks allot for the advice, I think pumping some life back into the pension for a few years seems the sensible way to go and when that is looking healthy look to invest into Isa’s etc.
    I don’t regret paying off the mortgage early though instead of investing as I’ve saved tens of thousands of pounds in interest if I’d let it plod on for another 15 years and I can’t see how I could have got that return elsewhere especially with my limited knowledge about what to invest in.
    Fingers crossed I’m retired by 55 with a Ferrari Enzo in my garage ;)
  • Mike_Lincs wrote: »
    Thanks allot for the advice, I think pumping some life back into the pension for a few years seems the sensible way to go and when that is looking healthy look to invest into Isa’s etc.
    I don’t regret paying off the mortgage early though instead of investing as I’ve saved tens of thousands of pounds in interest if I’d let it plod on for another 15 years and I can’t see how I could have got that return elsewhere especially with my limited knowledge about what to invest in.
    Fingers crossed I’m retired by 55 with a Ferrari Enzo in my garage ;)

    I agree about the mortgage, as in a way it gives a bit of peace of mind. I'm trying to do both, over pay the mortgage and pump money into my pension, some will say it should all go into a pension, but I know once the mortgage is paid off it will be a big relief.
  • dunstonh
    dunstonh Posts: 118,562 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I don’t regret paying off the mortgage early though instead of investing as I’ve saved tens of thousands of pounds in interest if I’d let it plod on for another 15 years and I can’t see how I could have got that return elsewhere especially with my limited knowledge about what to invest in.

    Even the most bog standard insurance company managed funds have beaten mortgage interest rates and that is without 40% tax relief. Let alone with it.

    Ideally, you should have done both mortgage and pension. However, if you make up for it now it should be ok.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Yes it will be a big relief Tony and hopefully give me the financial freedom to open doors for future investments. My goal was to be debt free at 40 and I shall achieve this so fingers crossed its happy days, you won’t regret paying off your mortgage early.
  • kwmlondon
    kwmlondon Posts: 1,734 Forumite
    As great as a lot of advice is on this forum, you really ought to obtain the services of an independent financial adviser. I'm sure that if you ask around locally you'll find an IFA who will come with recommendations, they should definitely be your first port of call when considering such profound choices. You don't HAVE to take the advice of an IFA but from experience I can say how helpful it is having someone who works for you giving you advice. I always double-check but my financial adviser is worth his weight in gold.
  • bigadaj
    bigadaj Posts: 11,531 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper
    kwmlondon wrote: »
    As great as a lot of advice is on this forum, you really ought to obtain the services of an independent financial adviser. I'm sure that if you ask around locally you'll find an IFA who will come with recommendations, they should definitely be your first port of call when considering such profound choices. You don't HAVE to take the advice of an IFA but from experience I can say how helpful it is having someone who works for you giving you advice. I always double-check but my financial adviser is worth his weight in gold.

    He should be worth his weight in gold given what he charges!
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