Pension or OP Mortgage

Triumph13

copperclock wrote: »

If directing money at a pension instead of OPing a mortgage is a good idea, how come people almost always do the latter?

Because people are generally hard-wired towards short term thinking. Paying off the mortgage gives you an instant benefit in terms of interest payments going down. That's better at pressing your buttons than watching a pension fund increase that you know you can't/won't touch for decades. The fear of 'what if I can't pay the mortgage' is also much more immediate than 'what if I don't have enough money in retirement?'


The one that interests me is that loads of people will recommend buying investments rather than paying down the mortgage, even without tax advantages, but very few seem to recommend that those who already have a paid off house borrow money against it to invest in the same way! Mathematically identical but good old loss aversion makes them seem very different.

dunstonh

If directing money at a pension instead of OPing a mortgage is a good idea, how come people almost always do the latter?

When it comes to financial matters, most people are not aware of all the options or the consequences, advantages or disadvantages. You also get sites like this that also promote early repayment of mortgage without considering alternatives.

but very few seem to recommend that those who already have a paid off house borrow money against it to invest in the same way! Mathematically identical but good old loss aversion makes them seem very different.

Regulator and ombudsman would have a field day. Whilst it has no problem with people with long term affordable cheap debt not being repaid above and beyond the contract in favour of investments, it has a very different stance to intentional gearing.