What to consider before paying off the mortgage?

Wheelem1

Your age is a key factor… your young and pushing money into a pension is very long term view. The reward seems a long way off.  I worked for Bank had staff mortgage, I could not believe the people who I worked with who were obsessed with paying mortgage off before retirement.  These people were in the mid fifties with an age 60 retirement, they had a 1% mortgage and yet we’re pushing an extra £500 or whatever a month to pay it off. They were paying 40% tax. So we’re earning a gross £833 to pay £500 after tax off their mortgage.  Putting that £833 into a pension AVC or into main pension, made so much more sense.  It was even worse than this , as we had salary sacrifice, so could pay the contributions NI free, and get a 5% boost from the bank, as they paid no NI on our pension contribution. 

If your OH is only just over the 20% bracket. I would say most prudent think would be to increase her pension contributions, and bring her tax back into 20% bracket. Then if you need to, top up your reduced monthly income from your savings if needed.  

Following that review your other options around paying off mortgage or keeping savings. 

Hopingforthesimplelife

Does the recent hike in mortgage interest rates change the equation in favour of paying off the mortgage? 

Recognise pension is certainly the most efficient way, but paying mortgages of 4-5% going forward as opposed to 1-2% over the last decade potentially changes the discussion?

Albermarle

Hopingforthesimplelife said:

Does the recent hike in mortgage interest rates change the equation in favour of paying off the mortgage? 

Recognise pension is certainly the most efficient way, but paying mortgages of 4-5% going forward as opposed to 1-2% over the last decade potentially changes the discussion?

Yes of course it does, but I think many mortgages are fixed at lower rates for quite some years.

Albermarle

I could not believe the people who I worked with who were obsessed with paying mortgage off before retirement. 

There is a forum on MSE with many similar contributors.

Mortgage-free wannabe — MoneySavingExpert Forum