Settle Outright or Overpay?

Hi Everyone. We have approx 38K left on our mortgage with approx 12yrs to go. We have recently come into some money that will allow us to pay that off and still have a large sum to save/invest. Sounds daft but would you pay it off outright or overpay because the monthly repayment is relatively low anyway(£290).
Any advice?

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  • savingholmes
    savingholmes Posts: 26,853
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    What would you do with the £290 a month if you were mortgage free?

    How are your pensions doing? Would it be worth investing some in those and getting the extra tax relief - depending on how far away you are from your desired retirement date?

    You could ask your question on the pensions board too.
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  • Hi and many thanks for the response. We were going to continue with the payment into a savings account as if we were still paying the mortgage. We are 12 years away from retirement and had not considered the pension option. Already have one with Aviva worth 80k approx, and a local government one where i pay 5% of salary. Thank you.
  • jackieblack
    jackieblack Posts: 10,292
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    I’d say it depends on the interest rate you’re paying and how that compares to available savings interest rates.

    I have only a small mortgage left, currently on a low fixed rate which lasts for another year.  I am currently getting a higher rate of interest on a few savings accounts I have. Depending on what’s going on with interest rates when the fixed rate ends, I may or may not pay off the mortgage this time next year.
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  • savingholmes
    savingholmes Posts: 26,853
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    Hi and many thanks for the response. We were going to continue with the payment into a savings account as if we were still paying the mortgage. We are 12 years away from retirement and had not considered the pension option. Already have one with Aviva worth 80k approx, and a local government one where i pay 5% of salary. Thank you.
    You said we. Have you got enough pension if one of you were to die. It often halves and state pension disappears related to the person who died ...

    How much is your gov pension due to pay out. Is it enough?

    £80k pension pot doesn't go far.

    On local gov pension you may be able to pay into avcs and get tax free lump sum (and tax relief upfront). 

    I'd look into pensions more.
    Achieve FIRE/Mortgage Neutrality by mid 2030
    1) MFW Nov 21 £201,999 with 237 payments to go - now £184,341 Equity 26.26% (lower post move compensated by EF)
    2) Mortgage neutral by June 2030 AVC £7,613/£127,466 AVC target 5.97%
    3) FI Age 60 annual income target £12,500/30,000 41.66%
    Achievements: CC free since April 22. 1 year EF from Jan 24 & dedicated pot for home improvements
  • Presuming you have no other debt (if you do, pay that off first), I'd be looking into a balance of increasing your pension contributions and paying off the mortgage in a lump sum, or overtime, but it will depend on your current interest rate (and if you are on a fixed, when does the fix end).

    You have a great opportunity to pay off the house, and increase your pension contributions. As savinghomes says, there is the tax relief bonus too, so there is plenty of opportunity to see that 80k grow.
  • Thanks so much for the advice everyone!!
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