Mortgage V Pension dilemmas

klew356

I will have a read now thank you

SouthLondonUser

torrence wrote: »

Your mortgage debt reduces in real terms with inflation. So unless you are paying a high interest rate, a £100,000 mortgage in 22 years will be less in real terms in 22 years than it is today.

True, but this is only relevant if you can find investments which return more, after tax and costs, than the interest rate charged by the mortgage lender.


For short time horizons (eg a couple of years) the answer is that you can't find safe, inflation-beating investments (shares are too volatile to be recommended over short periods).


For long time horizons, you should have a decent chance of getting more from a reasonably and decently diversified portfolio than the interest on the mortgage.



However, there are also risks one needs to be aware of. Over a 20-year period most (but not all) portfolios should achieve that. Over a 5-year horizon, way fewer. Etc.


For a light-hearted take on this: https://alexcartoon.s3.amazonaws.com/7064_14.09.17_colour_web_sd.jpg

SuperHung

Thanks for the useful insight here. What if the investment returns is less than the monthly mortgage interest? In my cases, a rather large pension/investment fund would be needed to generate 500 pounds a month!

SouthLondonUser

What is your LTV and what is the interest on your mortgage? Is it low enough or would overpaying a certain amount bring down the LTV and therefore the interest that you could be charged?


How stable is your job? Don't forget that you won't be able to access the funds in your pension for quite a long while. Having a big pension pot won't help if, touch wood, you should be made redundant and struggle paying the mortgage

klew356

SouthLondonUser wrote: »

What is your LTV and what is the interest on your mortgage? Is it low enough or would overpaying a certain amount bring down the LTV and therefore the interest that you could be charged?


How stable is your job? Don't forget that you won't be able to access the funds in your pension for quite a long while. Having a big pension pot won't help if, touch wood, you should be made redundant and struggle paying the mortgage

90% and 2.06%
quite stable - i hope!