Larger annual pension or smaller and larger lump sum?

mgdavid

ThinkingOutLoud wrote: »

Guess that is three of us at least in favour of Briexit then?

make that 4 - on both counts

grumpyoldgal

jamesd wrote: »

£300 a month on the mortgage is £3,600 a year. The higher pension is £4,170 a year. Taking the higher lump sum to repay the mortgage starts out by making you worse off by the £570 a year difference between those two. For as long as the mortgage lasts. Then you're the full £4,170 a year better off by not repaying the mortgage.

Taking a bigger lump sum to pay off the mortgage and make yourself worse off doesn't look like a good move.

Using the base lump sum to do it also doesn't look like a good move but that does depend on what you would do with the money instead. The £3,600 a year in mortgage payments is 7.5% of the £48,000 owed on the mortgage. You should be able to make more than that with peer to peer lending. Even the lowest risk end like Zopa and RateSetter would pay around 3-6%. Before tax. So in addition to the basic £570 a year better off if you were to invest much of the smaller lump sum you could expect say £1,800-£2,500 net income on top.

What you might consider doing to increase your non-mortgage spending ability is to look into extending your mortgage term. That could reduce your monthly expenses and increase what you have now, deferring some of the cost until later, ideally when you have the extra income from your state pension coming in.

Hi Jamesd

thank you - sorry the information I provided was misleading - the mortgage is 600 per month - so my half is 300! I was suggesting that it would make me 300 better off per month, which is my share.

thank you