Mortgage free or staying put for the equity???

louby40

Am I better staying in my current house or downsizing becoming mortgage free and adding more money into my pension.

Background
Teacher, aged 50. Plan to retire at 60 with a pension of £9k and lump sum of £30k pension will then increase by another £9k + state pension when I'm 67
Current mortgage of £90k and have 16 years left on my mortgage. House is worth approx £200k. So to have no mortgage when I retire I will have to start over paying it soon. It's a 4 bedroom townhouse will be too big when my youngest leaves home.

I could downsize to a tearrace house nearer to my parents for approx £100-120k and become mortgage free and then pay more into my pension.

I have no savings just an emergency fund. Two teenage sons one which is no longer dependent on me and a second who is looking to join the RAF in the next 2-3 yrs.

I'm totally confused as to what would be the best option.

staffie1

Would be interested in any responses to this too.

Gin_and_Milk

I think downsizing sounds like a good option, as a pension of 9K won't go very far even if it will increase at 67.
If you feel as though the house is, or will be, too big for you the only option is to downsize, so it seems a no brainer to me.

With regards to your current situation, what does your emergency fund cover? Does it cover you for roughly 6 months living costs, and any unexpected costs? You can't plan for every eventuality, but even though your job as a teacher is probably very secure, you should have at least enough money put aside to cover 6 months living costs. With regards to savings, I appreciate you will get a 30K lump sum, but not to have any savings at all for ten years is a long time. Instead of overpaying, it might be an idea to build up some savings first. The longer you remain in your current property, the more equity you will build anyway, but it's always a good idea to have some liquid assets in reserve should you need it.

louby40

I have £3k of savings which isn't a lot. I've been here for 3 years since I split with my ex, my parents helped me out financially at the time as I was in a large 5 bed house and my ex left me to pay a hefty mortgage and bills so I've spent quite a bit of time paying them back after I sold.

I've also had to sort my kitchen out as it needed a major overhaul, plus I have other bits of renovation/cosmetic work that needs sorting before I even think of selling.

I think I definitely need to sell and add to my pension to fill the 7 year gap, adding to my pension will be tax free plus I will save so much interest.

I'm going to a pension meeting in December so will see how I can add to my pension via AVC's.

Gin_and_Milk

It sounds as though you've had a bit of a crap time these past few years.
Given your circumstances, I definitely wouldn't overpay your mortgage. I think you should focus on getting your house ready to sell, and if you can avoid dipping into your savings that's even better.
I remember a colleague of mine downsizing a few years ago as she simply didn't need a three bedroom semi anymore and one of the things which took her by surprise was the amount of furniture etc, she couldn't take with her. You could start decluttering and maybe sell some items too? I know it's not the most exciting thing in the world, but even the odd tenner here and there adds up and it will make it easier for you to avoid dipping into your savings. Keep any work which needs doing to a minimum, if something can get away with a lick of paint - leave it at that. Remember house buyers don't like to see a cluttered house either, just keep what you think you will need, even if it does take a while for your house to sell. Leave the overpayments, you're building equity not just by paying it off, but you're also increasing the value too by doing some repairs.
I also work for local government and went to a similar meeting about AVCs. These were with the Pru. As I don't retire for another 23 years (!) I decided to go with getting a bigger lump sum rather than bolster my pension. I intend to start putting £50 a month into it after Christmas, if all goes to plan I should have a lump sum of around £22500 when I retire.
Good luck with your house - your options might not be great, but at least you have some.