Monthly OP or annual?

Hi,

We are looking to make overpayments on our 16 year mortgage and our interest rate is fixed at 1.99% until September 2021.

Realistically we can currently afford OPs of £100 pm. I've been looking through some of the threads, and it seems that it would work out better for us if we put £100 away in our savings account and pay a lump sum every now and then rather than make a monthly overpayment. Is this right?

If that's the case, fair enough, but I'd probably find it easier to make monthly OPs rather than watch it grow in a savings account, as I'd probably be more reluctant to part with it!

Currently we owe £115K, so we won't be able to reduce the term by much, but anything is better than nothing.

Grateful for any advice
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Replies

  • Gin_and_MilkGin_and_Milk Forumite
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    Just wondering if anyone has any advice regarding my query?
  • AnotherJoeAnotherJoe Forumite
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    Odds are it will work out better if you put it in your pension.
  • Gin_and_MilkGin_and_Milk Forumite
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    AnotherJoe wrote: »
    Odds are it will work out better if you put it in your pension.

    I'm in the LGPS, so I can't pay the extra into that, although I am considering paying into the AVC scheme with the Pru.

    My retirement age is currently 67, and the mortgage is due to be paid off when I'm 60, but as my husband is 13 years older than me, it would be nice to retire earlier so I can spend some time with him. If we can pay the mortgage off earlier that would be even better, although I think going at 55 would be too big a hit. I'm 44, so have quite a few years contributions in me yet, but even so 55 is a pipe dream.

    Thanks for your reply btw.
  • edinburgheredinburgher Forumite
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    I'm in the LGPS, so I can't pay the extra into that, although I am considering paying into the AVC scheme with the Pru.

    My retirement age is currently 67, and the mortgage is due to be paid off when I'm 60, but as my husband is 13 years older than me, it would be nice to retire earlier so I can spend some time with him. If we can pay the mortgage off earlier that would be even better, although I think going at 55 would be too big a hit. I'm 44, so have quite a few years contributions in me yet, but even so 55 is a pipe dream.

    Thanks for your reply btw.

    You can also buy added pension in increments, if that would be of interest? It's worth noting, however, that it's only for you. If you died, nothing extra would go to your husband.

    The fees are relatively high for LGPS. A SIPP would offer lower fees and a bit more flexibility about when you retire. AVCs can be transferred into a SIPP nearer to retirey, but that exposes you to higher fees for decades and fewer fund choices
  • Gin_and_MilkGin_and_Milk Forumite
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    Thanks, I haven't really considered SIPPS because I'm not very confident with things like that!
    I have just opened a Vanguard 80:20 fund and I'll be paying a £100 per month into that. I also have a small number of shares in one company to hopefully give me a lump sum at some point. Obviously I understand there are risks involved, but somehow losing money on a SIPP makes me feel more nervous than losing it on the shares and fund. Don't get me wrong, if I lose the money on the shares and the fund I'll be really cheesed off, but I won't be panicking.

    Maybe it would be worth my while to read up on SIPPS then?
  • edinburgheredinburgher Forumite
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    Thanks, I haven't really considered SIPPS because I'm not very confident with things like that!
    I have just opened a Vanguard 80:20 fund and I'll be paying a £100 per month into that. I also have a small number of shares in one company to hopefully give me a lump sum at some point. Obviously I understand there are risks involved, but somehow losing money on a SIPP makes me feel more nervous than losing it on the shares and fund. Don't get me wrong, if I lose the money on the shares and the fund I'll be really cheesed off, but I won't be panicking.

    Maybe it would be worth my while to read up on SIPPS then?

    A SIPP is just a pension wrapper, like an ISA is a tax free wrapper for non-pension investments. It doesn't do anything of itself other than make it so the tax man recognises that this is a pension. You will, however, get tax relief, aka free money as tax is deferred on pensions. You can invest in Vanguard 80:20 in a SIPP.

    You'll typically have a platform charge and a fund charge, just as you currently will for the 80:20 you've already invested in.
  • pramsay13pramsay13 Forumite
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    To answer your original query if you can get savings better than 1.99% better putting the money in there, otherwise overpay your mortgage.
    Check that you are allowed to overpay by that much first.
  • AnotherJoeAnotherJoe Forumite
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    Thanks, I haven't really considered SIPPS because I'm not very confident with things like that!
    I have just opened a Vanguard 80:20 fund and I'll be paying a £100 per month into that. I also have a small number of shares in one company to hopefully give me a lump sum at some point. Obviously I understand there are risks involved, but somehow losing money on a SIPP makes me feel more nervous than losing it on the shares and fund. Don't get me wrong, if I lose the money on the shares and the fund I'll be really cheesed off, but I won't be panicking.

    Maybe it would be worth my while to read up on SIPPS then?

    Your Vanguard 80 in the SIPP is exactly the same as if it was in your share and fund account. Except you don't get money added to the SIPP. I hope, btw, you mean an ISA where you are buying it ? There's no reason at all, on your numbers not to be putting it in an ISA.
    If you accumulated the V80 in a SIPP the general idea is,you'll use that to pay off the mortgage (perhaps partly, same as now ). Yes it's slightly more risky than paying the £100 a month off as cash but over the longer term is almost certain to overhaul saving 1.99% plus with the added 25% tax relief that only adds to the chances it will beat 1.99%
  • edited 30 April 2019 at 6:06PM
    Gin_and_MilkGin_and_Milk Forumite
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    edited 30 April 2019 at 6:06PM
    AnotherJoe wrote: »
    Your Vanguard 80 in the SIPP is exactly the same as if it was in your share and fund account. Except you don't get money added to the SIPP. I hope, btw, you mean an ISA where you are buying it ? There's no reason at all, on your numbers not to be putting it in an ISA.
    If you accumulated the V80 in a SIPP the general idea is,you'll use that to pay off the mortgage (perhaps partly, same as now ). Yes it's slightly more risky than paying the £100 a month off as cash but over the longer term is almost certain to overhaul saving 1.99% plus with the added 25% tax relief that only adds to the chances it will beat 1.99%


    Thanks for that. No, my Vanguard 80 isn't in an ISA, but that's because my shares are in an ISA account with HL. I bought some at the start of the new financial year, but don't want to buy Vanguard through HL because of the fees. I was going to change my Vanguard account to an ISA in the next financial year.

    Where would this leave me SIPP wise do you think?
  • SocajamSocajam Forumite
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    I am for overpaying the pension if you have a life happens fund and an emergency fund.
    I overpaid on my mortgage and it was amazing how quickly the total decreased.
    I have now been mortgage free since 2015 and it's an amazing feeling.
    I can travel, eat out and do things that the mortgage stopped me from doing.
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