Pay Student Loan or Mortgage overpayment?

samcuddy123

hello I’m writing as I have a little conundrum I need clearing up

I have started a new job around 43K, and I have 24K of student debt, and a mortgage of around £125K. Student finance is plan 2. And mortgage is fixed at 2.24 for about 4 years.
I have some extra monthly cash now and begrudge the fact how much interest in going to pay on both of these loans. I need to know what the best route is with monthly overpayments of about £150. 

I know the mortgage won’t be fixed forever. So do I pay the interest down now while the interest is now? Or do I try and wipe out the student loan debt early?
I appreciate it is a complex question. 

Thank you very much! 

samcuddy123

samcuddy123 said:

hello I’m writing as I have a little conundrum I need clearing up

I have started a new job around 43K, and I have 24K of student debt, and a mortgage of around £125K. Student finance is plan 2. And mortgage is fixed at 2.24 for about 4 years.
I have some extra monthly cash now and begrudge the fact how much interest in going to pay on both of these loans. I need to know what the best route is with monthly overpayments of about £150. 

I know the mortgage won’t be fixed forever. So do I pay the interest down now while the interest is now? Or do I try and wipe out the student loan debt early?
I appreciate it is a complex question. 

Thank you very much! 

To add to this. I could obviously add that amount monthly to savings but that won’t hold the same benefit. 

Or add more to my pension pot through workplace each month. Too many options and I can’t calculate which is best. 

born_again

Why would anyone pay extra towards a student loan that after so long gets written off... >Plan 2 loans are written off 30 years after the April you were first due to repay.<

Mortgage all the way 👍As no way will that be written off.

samcuddy123

born_again said:

Why would anyone pay extra towards a student loan that after so long gets written off... >Plan 2 loans are written off 30 years after the April you were first due to repay.<

Mortgage all the way 👍As no way will that be written off.

I agree with that in most instances. But due to my wage and having 24K student loan. I will pay it off in around 25 years or so with an interest paid 10-15K depending on interest rates and pay rises etc 

YBR

First, do you have enough savings that you could access if a sudden need arose? Opinions vary, but 3-6 months income is common for an emergency fund.
Once that is in place, you could split the disposable income several ways. I would choose to Pension and mortgage personally. It would depend whether there is a limit on mortgage over-payments and what your Pension provision is.

AmityNeon

Your life isn't a hypothetical of theoretical finance. You don't know what may happen in the future, but what's certain is that student debt will never threaten your livelihood. It's effectively just a graduate tax of 9% on earnings above a threshold, for 30 years at most.

samcuddy123

YBR said:

First, do you have enough savings that you could access if a sudden need arose? Opinions vary, but 3-6 months income is common for an emergency fund.
Once that is in place, you could split the disposable income several ways. I would choose to Pension and mortgage personally. It would depend whether there is a limit on mortgage over-payments and what your Pension provision is.

Yeah I have several months for an EF. I’m maxing put my ‘matched’ salary sacrifice pension with work. I’m trying to calculate it , seems it saves me a bit more money interest wise paying more off the mortgage but it takes longer to get to that point. I’m thinking maybe pay off the student loan then then make overpayments to the mortgage after that is done. I feel like that has the best cost/debt pay off ration. But I’m not sure if I’m missing something. 

AnnieB2018

Are you likely to start family in the next 5/10 years? If so, you may have reduced income and/or huge childcare bill for a few years, during which the size of your mortgage payment will be your number 1 priority (pension is still ages away, and the student loan maybe not payable due to reduced income).
If you are looking for the best long term investment then it’s your pension.

AmityNeon

samcuddy123 said:

YBR said:

First, do you have enough savings that you could access if a sudden need arose? Opinions vary, but 3-6 months income is common for an emergency fund.
Once that is in place, you could split the disposable income several ways. I would choose to Pension and mortgage personally. It would depend whether there is a limit on mortgage over-payments and what your Pension provision is.

Yeah I have several months for an EF. I’m maxing put my ‘matched’ salary sacrifice pension with work. I’m trying to calculate it , seems it saves me a bit more money interest wise paying more off the mortgage but it takes longer to get to that point. I’m thinking maybe pay off the student loan then then make overpayments to the mortgage after that is done. I feel like that has the best cost/debt pay off ration. But I’m not sure if I’m missing something. 

If you really want help with theoretical finance you'll need to provide specific numbers for every viable option, your age, and what your future plans are. If you think you've already figured it out, then you can pay off the student loan.

Perksy5

Don't pay off your student loan, keep the money for your mortgage overpayment every time or even split that between mortgage and pension. Just don't put it on the student loan its such a waste.

kaMelo

samcuddy123 said:

YBR said:

First, do you have enough savings that you could access if a sudden need arose? Opinions vary, but 3-6 months income is common for an emergency fund.
Once that is in place, you could split the disposable income several ways. I would choose to Pension and mortgage personally. It would depend whether there is a limit on mortgage over-payments and what your Pension provision is.

Yeah I have several months for an EF. I’m maxing put my ‘matched’ salary sacrifice pension with work. I’m trying to calculate it , seems it saves me a bit more money interest wise paying more off the mortgage but it takes longer to get to that point. I’m thinking maybe pay off the student loan then then make overpayments to the mortgage after that is done. I feel like that has the best cost/debt pay off ration. But I’m not sure if I’m missing something. 

You're missing the fact that life doesn't always follow the path we have planned. A serious illness or job loss in the future could change everything, I think @AmityNeon sums it up perfectly when they said "student debt will never threaten your livelihood" unlike every other form of borrowing.

Think of it this way, if in a decade or two you manage to pay your student loan off completely, don't sweat the fact you've paid a little more in interest by only paying the minimum required. Be happy that life hasn't thrown you a curveball and you're in the middle of a long and successful career.