No mortgage, now what?

DFWATTS

All,


We are in a very fortunate position in that me and my wife are 38 years old and are about to finish paying off our mortgage. We've got a decent dual income of around 135k, and with both kids now finished at nursery it means we have a bit of disposable income to play with.



My question is: what would you do to ensure we make the most of this situation? Right now we have some premium bonds, a couple of CIPs for the kids, and that's about it. The rest of the money is just stagnating in low interest savings accounts (the type your bank gives you with your main account).


Thoughts? Property? Stocks and shares? Pension (which I'm already overpaying into - 10% of salary + 5% employer cont.)


Cheers.
D

DiggerUK

I suspect your payments have been reducing for some time, so I don't imagine there is a major increase in available readies. Great move to be mortgage free.
Your children won't be getting younger, or cheaper. So you will need to figure out a plan Stan. Regular savers will give you a bit extra, but most cash savings will be losing against inflation. For safety, and who knows what you might [STRIKE]not[/STRIKE] get, go with PB's for now till you have a plan.

For now, why not treat yourself. Home, car, holiday.....you seem wise enough not to need a lecture against reckless behaviour. Best of fortune..._

OldMusicGuy

15% of salary into pension is not what I would call overpaying. You should seriously look at upping that IMO. What is you and your wife's current pension situations? What are your future plans? Do you want to retire early or continue working for a long time?

FatherAbraham

DFWATTS wrote: »

All,


We are in a very fortunate position in that me and my wife are 38 years old and are about to finish paying off our mortgage. We've got a decent dual income of around 135k, and with both kids now finished at nursery it means we have a bit of disposable income to play with.



My question is: what would you do to ensure we make the most of this situation? Right now we have some premium bonds, a couple of CIPs for the kids, and that's about it. The rest of the money is just stagnating in low interest savings accounts (the type your bank gives you with your main account).


Thoughts? Property? Stocks and shares? Pension (which I'm already overpaying into - 10% of salary + 5% employer cont.)


Cheers.
D

You only have 17 years until pensions accessibility at 55, and you're paying loads of higher-rate tax, and losing child benefit because of high income.

That's crazy.

You should be looking at paying £40,000 a year each into your pensions.

Alexland

It's not that fortunate a position as by paying off your mortgage so early you have missed many years in which you could have been more tax efficient, received child benefit, used more annual ISA + pension allowances and enjoyed higher growth on those investments than the interest on your debt.

We could have completed our mortgage aged mid 30s if we hadn't made such high pension and S&S ISA contributions but it would have been a mistake and we would have been poorer now.

I actually regret overpaying our mortgage so far. We should have stopped overpaying once we owned 60% to 70%. I am going to repay the remaining 20% slowly until I retire early in 20 years time. A bit like an investment trust the loan acts as a bit of gearing on our overall investments to give a slight performance boost.

To be honest in your position I would be phoning the mortgage company asking for some overpayment back to at least see if you can make the most of your allowances this tax year.

Alex

xylophone

Consider increasing your pension contributions.

Do your children have JISAs?

https://www.gov.uk/junior-individual-savings-accounts

xylophone

See also

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/reduce-high-income-child-benefit-charge/

AnotherJoe

Another vote for - "your pension contributions are nowhere near large enough" and "put the max away for a few years to make sure you get the 40% while its going (and maybe CB as well)"



And whilst you cant undo what you've done, maybe it will bring someone else to their senses who thinks overpaying their mortgage is the be all and end all just because that's what so many website preach including this one with its own dedicated forum.



You should also look at investing in funds via ISAs to give you a bridge between any early retirement you may take, and the time you can take your money out of your pension as that will be 55 earliest and more likely a year or two later.

kidmugsy

With hindsight, paying off a mortgage during a great stock market boom looks rather foolish. Hindsight is a wonderful thing.

But even foresight would have urged you to go easy on the mortgage payments and instead reduce your tax bills by contributing more to pensions.

Stock markets go up and down. Tax avoided is saved forever.

Alexland

Being a MFW is a great motivation when the LTV, interest rate and repayments are high but once you get into the 'home run' and the risk of repossession is almost non existent someone should send you a letter saying 'is it really worth it? Do you really have no better uses for your money?'

Without knowing the individual incomes it's hard to comment but I suggest considering putting enough into the pensions this year to get down to basic rate tax and then making a slightly backdated claim for child benefit. Also worth putting £4k each into S&S Lifetime ISAs for age 60+ and up to £16k each into S&S ISAs depending on your remaining allowance.

Alex

atush

Pay more into pensions, and save into S&S isas.

You were foolish paying off your mtg while paying 40% tax.