Mortgage ... or pension?

enthusiasticsaver

Overpaying into the mortgage will definitely reduce the interest paid and eventually monthly outgoings when it is gone. Paying into a pension or investment vehicle will usually reap rewards but no guarantees. Paying into savings will still probably earn less than you are paying on your mortgage.

The biggest contributing factor to our early retirement was low outgoings (no mortgage). As it is we did overpay into our pension as well as invest in stocks and shares isas but obviously pension income is less than a salary so paying a chunk out every month on a mortgage repayment if we still had one would severely affect our early retirement plans.

I prefer to deal with definites not possibilities. An overpayment of £100 a month into our mortgage repaid it several years earlier and saved us interest. The same amount in a stocks and shares isa or pension overpayment would probably have increased our pension savings but this is not guaranteed to deliver when you want it.

Skinnylatte

I pay regularly into my pension. But any extra cash goes into mortgage overpayments. I get that it makes more sense to pay into the pension and get the tax breaks, but I really want to pay my mortgage off, and it motivates me more!

Novice_investor101

I pay the max into my pension get the max employer contribution, I also invest monthly into a LISA & S/s ISA & overpay my mortgage.

A lot more goes into the ISAs than the mortgage overpayment, but it is a static payment which should really eat away at the capital owed as my contractual amount decreases & the payment stays the same. 19 years left on the mortgage & I should have it cleared in 14, but as my ISAs grow I may decide in future to chuck more at the mortgage.

Any spare cash left at the end of the month currently gets added to my emergency fund or saved & used to by more units in funds. I have recently toyed with the idea of making lump sum over payments to my mortgage too.

Whiterose23

enthusiasticsaver wrote: »

Overpaying into the mortgage will definitely reduce the interest paid and eventually monthly outgoings when it is gone. Paying into a pension or investment vehicle will usually reap rewards but no guarantees. Paying into savings will still probably earn less than you are paying on your mortgage.

The biggest contributing factor to our early retirement was low outgoings (no mortgage). As it is we did overpay into our pension as well as invest in stocks and shares isas but obviously pension income is less than a salary so paying a chunk out every month on a mortgage repayment if we still had one would severely affect our early retirement plans.

I prefer to deal with definites not possibilities. An overpayment of £100 a month into our mortgage repaid it several years earlier and saved us interest. The same amount in a stocks and shares isa or pension overpayment would probably have increased our pension savings but this is not guaranteed to deliver when you want it.

I guess it depends how close you are to 55 ... I understand that if you're in your 30s then paying off the mortgage may be more of an instant result.

Brodiebobs

Will follow with interest.

We always OP'd our residential mortgage, which enabled us to retain the property as a BTL and move into our 'forever home' which needed extensive renovations.

The BTL is IO and we left that alone due to the tax breaks and neither of us had pensions until they became compulsory.

However after reading up on it more we now try to split it equally, so pay around 10% of salary between us into our respective workplace pensions, monthly regular saver maximum amount as the rate is more than we would save on OP'ing residential mortgage and the total will be OP'd when it matures, and a token £100 OP on each mortgage monthly.

Also have a S&S Isa which we contribute £100pm to which is currently classified as the FIRE pot.

We are young-ish though and at current rate of OP's will be mortgage free on both properties by 45. However having kids young means we have a teenager and an almost teenager so it will get expensive in the next few years!

sarahevie1

Will follow with interest, it's no longer applicable for me as I don't have a mortgage (nor do I intend to move) but it's an interesting debate.

My reasons for being MF came after the initial mortgage illustration borrow £143,000 pay back £306 000. This was based on a 30 year term but still :eek:After that I wanted to move from my small terrace home. Later, as a single parent, I wanted less outgoings. I can honestly say being mortgage free has been life changing for me.

At 34, I still feel youngish, but I do worry about pensions and investments. I am a novice in this area but have been actively paying what I can into a personal pension, stated in March this year and now have £6107 in it. I also have a few years of a teacher pension.

I also have a LISA and a regular saver. There's not a lot in any pot, but I aim to increase this over time. I think my next go to will be a S&S isa but I only got the regular saver and LISA this month, so it's literally all new to me. I don't regret mortgage freedom and doubt I would do it differently but I can see the benefits of other investments, so I'm trying to get my house in order with those too.

enthusiasticsaver

Whiterose23 wrote: »

I guess it depends how close you are to 55 ... I understand that if you're in your 30s then paying off the mortgage may be more of an instant result.

It is more where you are in the investment cycle as to whether your pension savings are accessible. If the market is low we have the option of not withdrawing from our investments/DC pensions due to lower outgoings with no mortgage. That means our DB pensions and cash covers our annual income without needing to sell out at a loss.

Whiterose23

sarahevie1 wrote: »

Will follow with interest, it's no longer applicable for me as I don't have a mortgage (nor do I intend to move) but it's an interesting debate.

My reasons for being MF came after the initial mortgage illustration borrow £143,000 pay back £306 000. This was based on a 30 year term but still :eek:After that I wanted to move from my small terrace home. Later, as a single parent, I wanted less outgoings. I can honestly say being mortgage free has been life changing for me.

At 34, I still feel youngish, but I do worry about pensions and investments. I am a novice in this area but have been actively paying what I can into a personal pension, stated in March this year and now have £6107 in it. I also have a few years of a teacher pension.

I also have a LISA and a regular saver. There's not a lot in any pot, but I aim to increase this over time. I think my next go to will be a S&S isa but I only got the regular saver and LISA this month, so it's literally all new to me. I don't regret mortgage freedom and doubt I would do it differently but I can see the benefits of other investments, so I'm trying to get my house in order with those too.

I think age is a big factor. At 34 old age is still a long way off so paying the mortgage off would have been my priority as well. For myself, a single parent of 53, I only have limited funds to use so feel that the pension is the best bet as I can access it if I have to in a couple of years. My intention is to leave it untouched and try, by 60, to become 'mortgage neutral' if I can, but it will be difficult.

Skinnylatte

Now I'm in such a dilema reading this! I'm 50 and trying to over pay my mortgage, but as a 40% payer, I really should be paying this into my pension instead shouldn't I?
The maths make sense in my head but my heart is still saying to pay off the mortgage first :mad:

Zero_Sum

Skinnylatte wrote: »

Now I'm in such a dilema reading this! I'm 50 and trying to over pay my mortgage, but as a 40% payer, I really should be paying this into my pension instead shouldn't I?
The maths make sense in my head but my heart is still saying to pay off the mortgage first :mad:

A lot of people opt for mortgage as there is a big psycological element to it.
But in many cases, there are usually better options than overpaying now that rates are low. Long term it doesnt always make sense to pay off mortgage early.