Mortgage versus pension

ian1246

Pension is generally better, however its worth considering whether you are going to want to move in the future.

I.e. Myself and wife own a 3 bed semi-detached house with about 50% LTV at the moment. We're planning on having kids next year (currently 30 & 27years old respectively), however we already know that we are going to want a larger house - ideally a 4 bed detached house with a good sized garden.

It therefore makes absolute sense to overpay the mortgage when able to do so, in order to build up our equity so that our budget for the future house will be larger/our LTV ratio will be better when we move.

That said, we're still putting a good amount away for pension (I've got a good public sector pension, whilst my wife is putting about 9% of her gross pay into her direct contribution pot - we re going to increase it to around 17% soon).

As with everything in life, its about achieving a balance. I would say, however, that once we get into our "forever" home - we'll probably split our mortgage overpayments into 3 1/3's - 1/3 going into fixed savers (to mature at the same time as mortgage renewals, allowing the option to overpay in the event mortgage interest rates go up above fixed saver rates, whilst achieving a higher savings account interest % return vs. mortgage interest i.e. 5 year fixed saver) 1/3 going into wife's pension pot & the other 1/3 to go into a Stocks & Shares ISA (available funds for emergency/when future kids grow up and want to go to university etc...).

Just my own 2 cents into the discussion :-)