Should I start to overpay on mortgage? 11 May 2022 at 8:28AM in Mortgage-free wannabe 9 replies 276 views

CDB199

Have two mortgages, both recently started and am wondering if I should be overpaying on either or both?

I have a buy to let M with balance of roughly £150k. On repayment £733 where rental income is £1550 (minus £300 pcm expenses).

I have residential mortgage on main property balance £340k. On 24yr (5yr fixed) repayment £1400 pcm.

I can afford to overpay. Pay into private pension 500pcm & this could also be reduced to overpay both,  should it sound more sensible to pay off money borrowed first?

thoughts welcomed.

powerspowers

Pension over mortgage is a tricky one and you will get different answers! I go for a balance as have fairly good pension provision and like the surety of seeing the mortgage balance go down. 

Questions that might help you decide- do you have a good LTV, how secure is your employment, what if the tenant stops paying, do you have any life changes on the horizon, do you want to work for the next 25 years. You don’t need to answer here but things to consider that will give an idea of your attitude to risk and the future to help you decide. 

powerspowers

Also pension may be more tax efficient 

CDB199

Thanks - all fair points to consider.

I guess what you are saying (possibly) Is there is no hard mathematical answer? Just depends on circumstances & what one is working towards. 

CDB199

Reducing pension payments was only a suggestion. I think I could continue payment into pension to take max tax benefits here.

it’s more a question of is overpaying on mortgage advisable today? When Loan is fixed long term on low rates. I’m keen to reduce loan & see it starting to be paid off asap - but if numbers don’t fit, this may not be best answer for me.

Confused63

What % do you pay into your pension at the moment? I started to overpay my mortgage recently as I want to try to be mortgage free before retirement age so hopefully I dont need to have so much pension each month. 

Confused63

I do try to increase payments by 1% every few years as I get older, my thought being if I increase it show and my the smallest amount I hopefully notice it less when it comes out of my salary each month. The tax benefits of paying into a pension seem to make this a good choice.  

CDB199

Confused63 said:

I do try to increase payments by 1% every few years as I get older, my thought being if I increase it show and my the smallest amount I hopefully notice it less when it comes out of my salary each month. The tax benefits of paying into a pension seem to make this a good choice.  

Roughly 10% of my take home salary. With a further 9% taken at source in work based salary (for tax efficiency again as gets company top up).

so feel like I am contributing nicely for l/t retirement.  Just want to get mortgage free similarly 

Ramouth

We were planning to overpay our new mortgage but there are now savings accounts with higher rates than our mortgage so it makes more sense to save for the duration of our fix and then pay it off when we remortgage.  The tricky bit is not spending it!

savingholmes

CDB199 said:

Have two mortgages, both recently started and am wondering if I should be overpaying on either or both?

I have a buy to let M with balance of roughly £150k. On repayment £733 where rental income is £1550 (minus £300 pcm expenses).

I have residential mortgage on main property balance £340k. On 24yr (5yr fixed) repayment £1400 pcm.

I can afford to overpay. Pay into private pension 500pcm & this could also be reduced to overpay both,  should it sound more sensible to pay off money borrowed first?

thoughts welcomed.

I think you haven't given anywhere near enough info to answer the question. Regardless of what you post on here - if I were in your position I would work out - what free cash I have and how I'd like to use it to meet my long term financial goals.

So what's your income without the rental? How does that compare with your annual outgoings?
How long would you survive financially without the rental income or if there was a big bill on the property?
Do you have separate personal and business (landlord) emergency funds?
How big is your existing pension provision?
What age are you?
When are you hoping to retire?
Do the online pension calculator's reckon you are paying enough to your pension to meet your goals?
Are you due to get full state pension when you retire?
Are you planning to carry on being a landlord when you retire or do you expect to sell the property?

I am not a financial advisor - these questions should hopefully help you answer your own question. You could also post it on the pensions board.