Mortgage ... or pension?

Being a newbie to all this money-saving, I've spent the past year over-paying my mortgage as much as I can. It's very slow-going as I can't afford much but it's also very satisfying to see the outstanding amount reducing.
However, as time has gone by and I've learned more about savings/interest/pensions etc, I've realised that it's wiser to go down the 'mortgage-neutral' route, so I've stopped overpaying the mortgage and have started pushing my spare cash either into savings on into my pension. Everything I've read suggests that it's far more productive to do this as the rate of the return on the pension far outweighs the interest on mortgages at the moment.
I would like some opinions on why people are paying off the mortgage rather than saving/paying into pensions just to see if I'm missing something. I understand that if you're some way off 55, then money in pensions isn't retrievable, but still ... is it an emotional thing (which I totally understand)?


  • SonOfSonOf Forumite
    2.6K Posts
    1,000 Posts Fourth Anniversary
    Financially, the pension will usually beat repaying the mortgage early in the majority of cases.
    I would like some opinions on why people are paying off the mortgage rather than saving/paying into pensions just to see if I'm missing something.

    Because sites like this, which are not authorised to give advice and do not carry out financial planning, focus mostly on the unregulated side of things. This site is focused on money saving. Not making the most of your money.

    So, repaying the mortgage earlier saves you money over not repaying it earlier. The fact it's not the best thing to do with most people is irrelevent to the objective of this site.

    That said, there is an emotional side to clearing your mortgage earlier and there will be scenarios where paying more off the mortgage is better (those overextended at risk if mortgage rates increase). However, someone with sound finances (especially if higher rate taxpayer) should be looking at the pension tax wrapper.
  • I've also cut back my mortgage overpayments and pile into a SIPP now when I can. I do however still do both to balance off the heart and head driven decisions; the security-blanket of reducing the large London-sized mortgage (heart) and the long term financial prudence and tax efficiency as a higher rate tax payer of a pension (head).
  • TropicallyTropically Forumite
    427 Posts
    Sixth Anniversary 100 Posts Name Dropper
    Well pension money is accessible in 25 years for me, whereas although home equity is not very liquid, I could get to it before then. I do both.
    Mortgage started at £318,000 in June 2016. Original MF - 2041 :eek:
    2nd Property Mortgage at £275,000. Mortgage free: 2049 :eek:
    Total OPs: £29529
  • julicornjulicorn Forumite
    2.2K Posts
    1,000 Posts Fourth Anniversary Name Dropper Photogenic
    We overpay as a way of increasing equity in our current home, so that we are able to move into our (hopefully) forever home much sooner. Because we're looking at 5-6 years, we decided against investing the money and to overpay the mortgage instead.
    Original mortgage: December 2017, £203,495
    MFW start: April 2018, £201,800
    Mortgage neutral: September 2022, mortgage redeemed: December 2022
    New house, new mortgage: December 2022, £276,007
    Current balance: £223,500
  • Trina90Trina90 Forumite
    539 Posts
    Sixth Anniversary 500 Posts
    For me, it's that we are fast approaching the time when we are thinking of starting a family. With our job (both of us have the same job) we are expected to do a lot of overtime, which is great whilst we're 'free'.. not so great when you have a family. So whilst we have the opportunity to do lots of overtime and have a lot of spare money on our hands, we think it makes sense to pay down the mortgage as much as we can. I wouldn't want to go back to the same job, because of the amount of overtime that I would be expected to do, so we need to get our mortgage down to one we can afford on just one wage. I am paying 11% into my pension too.
    Mortgage started 2015: £150,000 2016: £130,000 2017: £116,000 2018: £105,000 2019: £88,000 2020: £69,000 2021: £51,195
  • Magnus91Magnus91 Forumite
    66 Posts
    For me it's definitely the emotional response of seeing the mortgage decrease also coupled with the fact that my job isn't the most stable so I'd rather pay down the mortgage asap.

    I'm also only a first time buyer, so plan to move again to my forever home in the future, so need the increased equity.

    I'm paying the amount into my mortgage to get the maximum employer contributions and still about 40 years off retirement! I also don't want to invest money into stocks/shares due to the fact that I might need it to move within 5 years.
  • bownyboybownyboy Forumite
    375 Posts
    Part of the Furniture 100 Posts
    I overpaid for two years OP and then like you, as I started to read and learn more about personal finance I also decided to direct money into S&S ISAs and Personal Pensions.

    The reason being it gives me more peace of mind knowing I have easy access to money should life throw a curve ball, rather than it all being tied up in bricks and mortar.

    That was in 2013 and six years later we could pay off the mortgage if we wanted, but instead choose to let the money grow.
    early retirement wannabe
  • TrixysticksTrixysticks Forumite
    82 Posts
    Part of the Furniture Combo Breaker
    Ultimately, it’s best to do both but I agree with a lot of other posters that mortgage tugs at the heart over the head!

    Dave Ramsey suggests 15% to pension and anything else to mortgage so you do both simultaneously. I think this is great advice personally.
    April 2016 Mortgage- £160,000.00 :eek:
    October 2017 Mortgage- £138,322.06 :beer:
    October 2018 Mortgage- £131,898.31 :j
    October 2020 Mortgage- £103,084.00
    July 2022 Mortgage- £82000
  • varforvarfor Forumite
    45 Posts
    Sixth Anniversary 10 Posts Photogenic
    Emotionally / mentally I want the mortgage paid off as quickly as possible. I have settled for 50/50 split between S&S ISA and overpayments though.

    There’s no guarantee stocks will rise but I think it’s important to be contributing to retirement each year. As much as I’d like to overpay fully, 5-10 years of missed investment growth could be a big loss.

    One reason I overpay is because 25 years is a long time and who knows what my job situation, interest rates etc will be. We don’t even know what’s going to happen in October!

    The closer I get to mortgage neutral more free I feel!
    2019 MFW #118: 9474/4000 | 2020 MFW #112: 2500/2500 | 2021 MFW #21: 1890/1920 | 2022 MFW #NA: 2180/1920
  • BegseyBegsey Forumite
    129 Posts
    We'd like the mortgage paid off, but also want to be in the position to retire at 55.
    Mortgage due paid off at 52, I'd like to get that down to 50 (currently 45 1/2) to give us time to get more money behind us.
    Pensions are LGPS and RPS, I put the max into mines (15% to keep my protected status) and the OH puts money into hers as well. We invest it into the highest risk available because if we get to 55 and it isn't doing well, we can just work on.
    Now looking at other options for investing (too little too late?) as I don't think the pension and paying off the mortgage is enough. We've still got one child at secondary school and 2 at primary school though, so we've got the expense of their futures to consider as well.
This discussion has been closed.
Latest MSE News and Guides

Boost your Nectar points

Get up to £25 in bonus points

MSE News

Ask an Expert: Scams

Watch MSE Katie's answers to your questions

MSE Forum

Hot Diamonds 40% off code

Including already-reduced outlet stock

MSE Deals