Overpay mortgage or pension

Rikaroo

I'm all for pensions with the 20% rebate, plus another 20% if you're in the higher tax band (I'm not but the wife is)
Regarding the property and the daft amount of costs lost to downsizing, couldn't you use equity release or some such scheme? I understand you'd not have the house to pass on once you're pushing up daisies but you could pass on your SIPP pension instead.

Malthusian

Regarding the property and the daft amount of costs lost to downsizing, couldn't you use equity release or some such scheme?

The costs of equity release are even dafter than downsizing.

Stamp duty could be abolished and interest rates on equity release could be slashed in half, and both would still be a more expensive way to access money in retirement than withdrawing from a pension fund, which is free.

Cash-Cows

There's always a danger of being asset rich and cash poor if too much reliance on property for retirement plans.

shiny76

I'd overpay the mortgage. Who's to say I'll still be around for retirement!

badmemory

Surely this is largely age dependant. If you are under 40 then toss a coin but I would go for the pension. If you are over 50 then I would go for the mortgage especially if there is any chance of redundancy. It is amazing how much difference having paid off your mortgage makes to your attitude to an impending redundancy. The threat in 1998 caused a few OMG what will I do (I was over 50 so it didn't look good, ageism was alive and well) in 2003 after the mortgage was gone "bring it on" was more the description. It didn't actually happen to them until 2016 by which time I had been retired 4 years.


So even rethinking & with the advantage of hindsight I still believe I did the right thing.

bownyboy

When we took a mortgage out in 2009 we stared overpaying in 2011 for 3 years. Initially it was great seeing the end date massively reduce every time an over payment was made.

However, as I began to educate myself more on personal fiance, I realised that (for us) paying off a low interest mortgage was not the best move.

So, we instead paid more into pensions and Stocks & Shares ISAs as our objective is to FI/RE.

The reason being, once you've paid off the mortgage the money is gone. You can't access it again (unless you remortgage).

We'd rather take the money we were overpaying and invest in Vanguard Funds which over time we know out perform the 2.19% of the mortgage.

4 years later we could pay off the mortgage if we wanted, but I much prefer having cash / investments to hand that we can utilise for whatever we want.

Fireflyaway

I'd vote mortgage. You are safeguarding your home and with no mortgage payment will have more to save. Have you used the mortgage overpayment calculator? It shows how much interest you can save by paying more On the mortgage.

kinger101

Fireflyaway wrote: »

I'd vote mortgage. You are safeguarding your home and with no mortgage payment will have more to save. Have you used the mortgage overpayment calculator? It shows how much interest you can save by paying more On the mortgage.

Not great advice. It's possible even with with regular savings accounts to get a higher interest rates than the one being paid on a mortgage. As a starting point, one would deposit money in one of these then make a lump-sum payment every year.

But OP's original question related to pension v mortgage. We can't time the market, but historically, stocks and shares have outperformed cash over the long term. And even for basic-rate taxpayers, there are tax advantages too (possible NI reduction, 25% tax-free)

3-6 months income in cash for rainy day, then rest into pension would be my advice.

Marvel1

Me personally the mortgage, that way the sooner paid the better it's mine and one less thing to worry about it in case of job loss.

dawyldthing

I know I said it before but I second the one above. I’m 8 weeks pregnant. In the next month or 2 I’ll lose most of my wage as I won’t be able to do the main part of my job. My outgoings now is less than £300 a month thanks to knuckling down and paying the mortgage. I’d be panicking now if I hadn’t and had another £300 a month plus to find