No mortgage, now what?

Zola.

atush wrote: »

I cant believe you cant do the maths and see that it was foolish? Ie [aying 40% tax on income to pay off a mtg at say 2%

Foolish

I don't dispute the paying higher tax thing at all, hence I said he should be doing salary sacrifice into a pension.

Paying off the house at 38 is nice work though.

Cheers

Alexland

Zola. wrote: »

Can you explain this? Not sure I follow

When pension contributions occur via salary sacrifice the worker saves Employee NI and the company saves Employer NI. It's a win/win. So someone who makes higher voluntary pension contributions is less cost to employ than someone on the same salary who only makes enough to get matched contributions. When I go to work in the morning its about lunchtime before I stop making pension contributions and start earning something to take home.

https://www.gov.uk/national-insurance-rates-letters

https://www.moneyadviceservice.org.uk/en/articles/salary-sacrifice-schemes#how-salary-sacrifice-works

Alex

bostonerimus

enthusiasticsaver wrote: »

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

It's true that not everyone does A or O level maths, but my parents both left school at 15 and seemed to understand relative interest rates and the benefits of long term saving. The skills to make simple financial decisions are not difficult to acquire, but people are often intimidated and seldom encouraged to make sensible financial decisions in a culture reliant on consumption.

I think of it like this; max out your tax advantaged saving and investing opportunities first and if you can then put something towards the mortgage do it and think of it as part of your fixed income allocation getting you the mortgage rate. That's not a firm rule as some circumstances might favour extra mortgage payments eg a high mortgage rate or someone with a particular desire to be mortgage free going into retirement for cash flow reasons.

bigstevex

Glad I randomly read this topic in savings thread. We’re a bit younger (34) 1 child so far

We have approx income of 90k 60/30k split via a mix of income and we were going to push for paying the mortgage off we’ve just taken out but now I’m thinking otherwise...

Alexland

bigstevex wrote: »

We have approx income of 90k 60/30k split via a mix of income and we were going to push for paying the mortgage off we’ve just taken out but now I’m thinking otherwise...

The feedback above was based on the OPs circumstances. If you are in the early days of a mortgage with a high LTV, interest rate and monthly payments then overpayments can be very beneficial. However yes there is an opportunity for the 60k earner to make enough pension contributions to avoid higher rate tax and child benefit claw back. The 30k earner should still make enough pension contributions to get max employer matching.

If you are in anyway uncomfortable about the size of the mortgage then overpaying and holding a suitable emergency pot are the priorities.

Alex

aj23_2

FatherAbraham wrote: »

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.

The amount of people taking at 55 is reducing, because things are getting more expensive and people are living longer. It will probably be increased to 60 like it was increased from 50.

butterflymum

For some people it is not all about the money, but rather the satisfaction and peace of mind. Those together can be worth a fortune. Well done!

redpete

enthusiasticsaver wrote: »

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.

Therefore the use of people on these forums pointing it out, better to learn from others' mistakes than our own.

andy001

The peace of mind it may give OP by paying off the mortgage may far outweigh the Financial benefits! My 2 cents!

DFWATTS

Hey bigstevex, it's good to know I'm not the only retard! Haha.


In truth, posting this has been extremely educational for me and made me think about my finances in a completely different way.

Knowing my luck though I'll put all this money into my pension and get run over by a bus on my 55th birthday....