Pay off mortgage in full? Or invest?

happymum37

CliveOfIndia said:

My thoughts, for what it's worth .....

Firstly, are there any penalties if you were to repay your mortgage early?  Usually there will be if you're on a fixed rate, but not if you're on SVR.  If there are any penalties then you'd need to factor this into any decision.

That aside, personally I think I'd pay off the mortgage.  That way, you'll largely remove the nagging worry in most people's minds about "What on earth would we do if we lost our jobs?"  At least you'll always have a roof over your head.

Investing - what do you mean?  The only "safe" way to invest is to stick the money into an interest-paying account somewhere.  But of course, many times your investment will lose value in real terms due to inflation.  At least "investing" in your house will (hopefully!) mitigate that aspect to a large extent.

To make your money work harder and get better returns there are many options.  The "typical" things like investing in the stock market should give you a higher return, but of course it's a gamble, and there's the chance you could lose some or all of your investment.  And these types of investment really need to viewed as long-term investments (10 years as an absolute minimum).

Sticking some of it into your pension is another option - though again, that's obviously a long-term approach.

Anyhow, if it were me, and assuming there's no early-repayment penalty, I'd be tempted to pay off the mortgage.  Then the £550 you currently pay each month to your mortgage, stick that into savings, or pension, or premium bonds, or whatever floats your boat.  You should have quite a nice little nest-egg saved after 5 or 6 years.

Thank you so much.  That's where I'm thinking really.  We went through a period of struggling and managed to really save by keeping the worlds oldest cars and budgeting 100%.

I also have been working as much overtime as possible. 

We have a tracking mortgage I think it's called.  We pay 0.75% over the base rate but our fixed term has finished.  We have no early repayment charge.  

Thank you for your help . 

happymum37

I'm going to ring the bank and ask how to go about this . .. and ensure we set up a direct debit on the save day our mortgage used to come out and save that.

I would like a safety pot a bit bigger than the average advised on here as I do get nervous but that shouldn't take long. 

Thank you everyone. 

I will give it till after summer and then look at long term savings plans 

happymum37

Ps Clive of India 

Sorry I meant savings really not investments.  I wouldn't know where to start with investments.

I will look at getting a bigger cash pot built up with the mortgage money we would be spending per month and by putting it at first in my premium bonds and then once we have a safety net into isas. 

And will look at pensions as well 

Linton

A question of priorities I think.  Will the pensions provide you with an acceptable standard of living when you retire?  If they will then there is no harm in paying off your mortgage early.  If not perhaps the time and money would be better spent increasing your retirement income.

If you dont know whether you will have sufficient money in retirement it is important to find out.

happymum37

Just checked the app we have a product fee of 215 to pay off. gits.

Linton - as our mortgages stand no we don't have enough to retire and live off. I'm going to put some of our mortgage money per month into the pensions and get it up. We don't have enough to save anything until the mortgage is gone as we were over paying like mad every month. 
 We will save the rest it won't be flittered. 

xylophone

flittered. 

Flying off into the blue?

You will have £550 a month after paying off the mortgage.

If you open a First Direct current account, you would have access to their regular saver.

You might consider £300 a month into the regular saver ( interest 7%) and £250 a month into your husband's pension.

The  pension contribution would benefit from tax relief.

Pat38493

happymum37 said:

Pat38493 said:

I think more information might be needed to get good feedback e.g. why do you think your husband's workplace pension is rubbish, what are your salaries and is it still 20 years to retirement? (relevant as it could be beneficial to pay the money into the pension matched against earnings)?

Your mortgage interest rate looks pretty high if your mortgage is that small?  When you say "finish in 5y 6 months" do you mean the mortgage will be fully paid off with just the normal monthly payments, or do you mean that your current deal finishes in that time?  Is it an interest only or repayment mortgage etc?

More information would be needed to provide better ideas.

So I have to retire from the police at 60. Which is 20 years.  Hubby can go in 15 years but will work 20 so we retire at the same time. 

His aviva pension is 3%contribution I think from his employer and thanks to advice on here he now over pays
 He pays 10% now but up until a couple of years ago contributed only 2%.
So in 5 years 6 months the mortgage is paid in full.  We are 0.75% over the base rate and let the mortgage track.  We are not tied in and have no early repayment charge. 

I have rang a friend who is good on finances and he always tells us to pay it off but I'm a bit nervous as we built up savings to 41k to fund house improvements but got a lovely gift off my folks in that they paid for the work

You would be better off to pay off your mortgage than just keep the money in regular savings - you could always borrow against the house again later if you needed it for home improvements etc.

This is especially the case if you are going to put the money you would have used on the mortgage into a pension as there would be tax relief at the marginal tax rate on the money going into the pension.

If your husband is a higher rate taxpayer, there could be an argument that you would be better off to put the money into his pension as quickly as possible, as he would get 40% tax relief on it as a start plus investment returns which over the long term of next 20 years would probably outstrip your mortgage, but since your mortgage will be paid off either way in 5 years it probably doesn't make a lot of difference. 

All this is assuming you don't have other debts with higher interest rates that should be paid off first (sounds like not).  You are on track to be mortgage free either way a long time before retirement so I guess you are in a reasonable place.

(If you did decide to do that and keep the mortgage, you might want to look at a deal which gives you a better fixed rate for a few years)

ian1246

I don't think anyone has mentioned here - but if you pay off the mortgage and then use the £££ you were spending on your mortgage, by putting it into your husbands pension you ll automatically get a immediate 25% uplift from HMS Treasury giving you back the tax rebate paid on that amount. 

If however you just save it in a bank account you won't get that 25% - so it depends what you plan to do with the £££ your saving. If you plan to use the savings during retirement? Put it into your pension and be 25% better off.

happymum37

Pat38493 said:

happymum37 said:

Pat38493 said:

I think more information might be needed to get good feedback e.g. why do you think your husband's workplace pension is rubbish, what are your salaries and is it still 20 years to retirement? (relevant as it could be beneficial to pay the money into the pension matched against earnings)?

Your mortgage interest rate looks pretty high if your mortgage is that small?  When you say "finish in 5y 6 months" do you mean the mortgage will be fully paid off with just the normal monthly payments, or do you mean that your current deal finishes in that time?  Is it an interest only or repayment mortgage etc?

More information would be needed to provide better ideas.

So I have to retire from the police at 60. Which is 20 years.  Hubby can go in 15 years but will work 20 so we retire at the same time. 

His aviva pension is 3%contribution I think from his employer and thanks to advice on here he now over pays
 He pays 10% now but up until a couple of years ago contributed only 2%.
So in 5 years 6 months the mortgage is paid in full.  We are 0.75% over the base rate and let the mortgage track.  We are not tied in and have no early repayment charge. 

I have rang a friend who is good on finances and he always tells us to pay it off but I'm a bit nervous as we built up savings to 41k to fund house improvements but got a lovely gift off my folks in that they paid for the work

You would be better off to pay off your mortgage than just keep the money in regular savings - you could always borrow against the house again later if you needed it for home improvements etc.

This is especially the case if you are going to put the money you would have used on the mortgage into a pension as there would be tax relief at the marginal tax rate on the money going into the pension.

If your husband is a higher rate taxpayer, there could be an argument that you would be better off to put the money into his pension as quickly as possible, as he would get 40% tax relief on it as a start plus investment returns which over the long term of next 20 years would probably outstrip your mortgage, but since your mortgage will be paid off either way in 5 years it probably doesn't make a lot of difference. 

All this is assuming you don't have other debts with higher interest rates that should be paid off first (sounds like not).  You are on track to be mortgage free either way a long time before retirement so I guess you are in a reasonable place.

(If you did decide to do that and keep the mortgage, you might want to look at a deal which gives you a better fixed rate for a few years)

We are both lower rate tax payers. 

Erm everyone will hate me but all our savings money has been in premium bonds up until now  . I had some shares s few years back and that was about it. 

I think I'm pretty sold now on cleaning it off 

happymum37

xylophone said:

flittered. 

Flying off into the blue?

You will have £550 a month after paying off the mortgage.

If you open a First Direct current account, you would have access to their regular saver.

You might consider £300 a month into the regular saver ( interest 7%) and £250 a month into your husband's pension.

The  pension contribution would benefit from tax relief.

Thank you 😊

I think till after summer we will just put the 550 into premium bonds to get our savings up.  Then will re examine
 I over pay my police pension by 125 a month as I had an extended maternity break.  

I know this is an uneducated thing to say but I'm always worried if we over pay his pension and he died I won't get out what we put in.  So we have upped his pension but got nervous doing it more.  😬