No mortgage, now what?

Zola.

Cant believe we are caning a guy for paying off his mortgage at aged 38 haha. I tip my hat to you sir. good work.

At 38 time is still on your side if you invest heavily now in index funds in you ISA and work pension. If your work offers salary sacrifice make use of that to avoid tax etc.

Alexland

Zola. wrote: »

Cant believe we are caning a guy for paying off his mortgage at aged 38 haha.

Seriously it's so damn wasteful. Mortgages and investments are supposed to run in parallel not be sequential. The OP would have ideally thought ahead and taken a long term view on financial planning.

As above I made mostly but not entirely the same mistake. Our final overpayment was a £35k lump sum in a year with particularly good bonuses and when I think how much tax we paid and how much growth we missed out on I have regrets.

Our feedback is harsh but I hope the OP sees it is in their best interests as its not too late to fix this tax year.

Alex

Peelerfart

This is the money saving forum, I get that.

We don't know what the OP's circumstances are, entirely, and if they want to spend their money on keeping a roof over their young families heads then they, IMHO, were right to do just that.

there are more tax efficient methods, but isn't that what the original question was?

Yes,the feedback is harsh, but as parents they, again in my opinion got their priorities right.

And yeah, I came from the MFW Board :-)

Zola.

Alexland wrote: »

Seriously it's so damn wasteful. Mortgages and investments are supposed to run in parallel not be sequential. The OP would have ideally thought ahead and taken a long term view on financial planning.

As above I made mostly but not entirely the same mistake. Our final overpayment was a £35k lump sum in a year with particularly good bonuses and when I think how much tax we paid and how much growth we missed out on I have regrets.

Our feedback is harsh but I hope the OP sees it is in their best interests as its not too late to fix this tax year.

Alex

You'll probably be horrified at one of my many finance projections on my google sheets folder.....one where I look where our mortgage balance and investments cross over i.e. where we can pay the balance in full. A decision will be made then... projected in 7 years!

I will probably let it grow on though.. who knows

A paid off home gives you many options with future work etc. a massive chain off the neck.

Alexland

Zola. wrote: »

A paid off home gives you many options with future work etc. a massive chain off the neck.

Wouldn't having ISAs to the value of the mortgage generating dividends that could roughly cover the mortgage payments be in any way reassuring? Sure there is a bit of risk of dividends falling or interest rates increasing but your 30s seems too early to be completely eliminating your advantageous super low cost gearing.

I am not quite there with the S&S ISAs yet but our inaccessible DC pensions could pay our mortgage off several times over.

Alex

DFWATTS

All,

ALL feedback is gratefully received, and it goes to show how naive some people can be when it comes to finance! There was me thinking I’m a legend, but am actually I’m a massive tw....

In all seriousness, I love the comments, and I thank you all for your input.

Criticism may not be agreeable, but it is necessary. It fulfills the same function as pain in the human body. It calls attention to an unhealthy state of things.”
– Winston Churchill

enthusiasticsaver

I would not berate yourself for doing a sensible thing and whilst overpaying into your pension would have been more tax efficient repaying your mortgage early is securing your home which is also important. Both you and your wife though should be paying more into your pension. You do need to guard against the lifetime allowance though but if you are only putting in 15% of salary (albeit a large salary) you should have scope for putting more away. Up to £40k each and I would look to increase your current contributions. I would also do stocks and shares isas for each of you in multi asset funds. Maybe look at some sort of children's saving vehicle to cover university, help with house deposits.

I must say though I think it is admirable that you have paid your mortgage off before 40 and don't let any of the posters on her detract from that. Well done.

enthusiasticsaver

Alexland wrote: »

Seriously it's so damn wasteful. Mortgages and investments are supposed to run in parallel not be sequential. The OP would have ideally thought ahead and taken a long term view on financial planning.

As above I made mostly but not entirely the same mistake. Our final overpayment was a £35k lump sum in a year with particularly good bonuses and when I think how much tax we paid and how much growth we missed out on I have regrets.

Our feedback is harsh but I hope the OP sees it is in their best interests as its not too late to fix this tax year.

Alex

Seriously though who of us have the education to think of this in our 30s? We also focused on paying off our mortgage early and overpaying my husbands pension as he was the higher earner so I guess we did take the tax efficient route by putting 30% of his salary away including employer contribution. We almost entirely ignored mine though until I was in my late 40s. Not so bad though as I was a basic rate tax payer being part time. I never educated myself about pensions until quite late in my working career and I know I am not alone. They are so complicated and young working parents don't have the time to delve into it.

veryintrigued

FatherAbraham wrote: »

You only have 17 years until pensions accessibility at 55.

Doubtful if it'll be 55 post 2028?

Alexland

enthusiasticsaver wrote: »

Seriously though who of us have the education to think of this in our 30s?

I agree there are probably few people who have fully considered this early enough to be of use as we don't teach kids the key concepts of financial planning in schools. It's not an easy problem to understand as it is multi dimensional involving debt, investment performance, financial products, risk assessment and several areas of tax rules.

Wouldn't it be great if someone sent out explanation letters at key life events such as when your income first goes into higher rate tax?

Still, if everyone did it the tax rates might have to go up!

Alex