Invest more or pay off mortgage?

Powapa

Hi all, after some advice to be thrown my way if possible please! 

I currently have a mortgage of £134K fixed at 1.84% for 4 years (11 years left altogether), interest is around £205 a month give or take.
I also have 65K in savings some of this invested in a S&S ISA. 

I’ve never made an overpayment but have been thinking recently of the freedom mortgage free would bring. Would you concentrate on paying the mortgage off as soon as possible or keep investing and saving? 

RacingDriver

I personally would keep investing, and not overpay the mortgage, due to mortgage rates being relatively low at the moment.  However you circumstances may vary and if being mortgage free would bring you freedom then that is not a bad thing either.

MX5huggy

Keep investing/saving but in a Pension. What additional pension options do you have from work? or use a SIPP. 

Via Salary Sacrifice (not all employers offer it) I can put £100 in my pension (which should grow by 4 to 7% over the long term) or bring home £68 to pay off the mortgage.

My mortgage is a similar size to yours but I’m on a 10 year fix at 2.79% (7 years to go then 10 left). Like you if at the end of the fix interest rates have gone ballistic I have savings to pay off a good chunk and could swap to paying it off faster if required. 

Some people would swap their mortgage to interest only and borrow more so they could invest more in ISA or pensions. 

El_Torro

How old will you be in 11 years time when your mortgage is paid off? Do you plan to retire within the next 11 years? Your investments should grow a lot faster than the interest on your mortgage so financially speaking you should be a lot better off if you don't overpay and invest what you can.

Of course this assumes your job is secure (or you can easily get alternative employment). 

solidpro

I've been mortgage free. Felt great. Then I realised that saving 1.89% aged 40 with a stable income was a silly decision. 

So I took out another mortgage and invested it. I've doubled it in the last 4 years through property speculation and S&S ISA. Would have saved what - about 10% of what it's made at the most?

Could have lost some too. But got to be in it to win it and the stakes felt and feel low in the short term (10 years)

Powapa

El_Torro said:

How old will you be in 11 years time when your mortgage is paid off? Do you plan to retire within the next 11 years? Your investments should grow a lot faster than the interest on your mortgage so financially speaking you should be a lot better off if you don't overpay and invest what you can.

Of course this assumes your job is secure (or you can easily get alternative employment). 

Hi El Torro, thanks for the feedback I’ll be 37 at the end of my mortgage term so still plenty of years to go until retirement.

Powapa

MX5huggy said:

Keep investing/saving but in a Pension. What additional pension options do you have from work? or use a SIPP. 

Via Salary Sacrifice (not all employers offer it) I can put £100 in my pension (which should grow by 4 to 7% over the long term) or bring home £68 to pay off the mortgage.

My mortgage is a similar size to yours but I’m on a 10 year fix at 2.79% (7 years to go then 10 left). Like you if at the end of the fix interest rates have gone ballistic I have savings to pay off a good chunk and could swap to paying it off faster if required. 

Some people would swap their mortgage to interest only and borrow more so they could invest more in ISA or pensions. 

Thanks MX5, yes I currently pay into a workplace pension but haven’t looked into a SIPP yet. Looks like the way to go it to keep investing and saving, thank you for the feedback.

MaxiRobriguez

You're 37 with a mortgage under control.

Push more into your pension to benefit from the upfront tax advantage and the long term compounding. If your workplace scheme is a salary sacrifice scheme then just pay more into that, no need to bother with a SIPP.

I'm 33 with a similar size mortgage - not only not overpaying mortgage but I'm also using equity in the house as cashflow (got an offset mortgage) in order to allow more monthly pay to go into pension and S+S ISA. If the situation changes and interest rates go up rapidly then you can stop the pension payments if necessary (should be able to amend every month) and push towards overpayment.

Albermarle

liammjenkinss said:

MX5huggy said:

Keep investing/saving but in a Pension. What additional pension options do you have from work? or use a SIPP. 

Via Salary Sacrifice (not all employers offer it) I can put £100 in my pension (which should grow by 4 to 7% over the long term) or bring home £68 to pay off the mortgage.

My mortgage is a similar size to yours but I’m on a 10 year fix at 2.79% (7 years to go then 10 left). Like you if at the end of the fix interest rates have gone ballistic I have savings to pay off a good chunk and could swap to paying it off faster if required. 

Some people would swap their mortgage to interest only and borrow more so they could invest more in ISA or pensions. 

Thanks MX5, yes I currently pay into a workplace pension but haven’t looked into a SIPP yet. Looks like the way to go it to keep investing and saving, thank you for the feedback.

As mentioned above it would be useful to find out ( if you do not already know ) how your pension contributions are made ( it varies from employer to employer ) as this can help to decide how best to make additional contributions .
Contributing to a pension is tax efficient and especially so if you are a 40% taxpayer.
You should also monitor how your pension money is invested . At your age it should ideally be in higher risk/higher potential growth funds. 

MoJoeGo

This is, thematically, a fairly common thread question. The answer often boils down to sentiment (or 'head v heart'). A lot of the replies so far focus on the practical point that you could expect to make more investing than paying down the mortgage.

The alternative point though is really how you 'feel' about debt, and the possible psychological benefit of knowing that your home is really all yours... every brick... and no bank can take it away from you. If those points are important to you, then it can quite easily override the value of any percentage gain you could make through investing (assuming market conditions remain favourable - let's not forget there is a risk in all of this).

I'm in the 'debt is bad' camp myself - largely due to some pretty poor financial management in my distant youth. So having my own home outweighs any investment opportunity cost. 

Now if you'll excuse me, I'm going to count all of my bricks again 

Albermarle

MoJoeGo said:

This is, thematically, a fairly common thread question. The answer often boils down to sentiment (or 'head v heart'). A lot of the replies so far focus on the practical point that you could expect to make more investing than paying down the mortgage.

The alternative point though is really how you 'feel' about debt, and the possible psychological benefit of knowing that your home is really all yours... every brick... and no bank can take it away from you. If those points are important to you, then it can quite easily override the value of any percentage gain you could make through investing (assuming market conditions remain favourable - let's not forget there is a risk in all of this).

I'm in the 'debt is bad' camp myself - largely due to some pretty poor financial management in my distant youth. So having my own home outweighs any investment opportunity cost. 

Now if you'll excuse me, I'm going to count all of my bricks again 

You could also add 'perception of future job security ' - if this was a bit uncertain then it swings things more in favour of paying off the mortgage .