Overpay, or save, or add to pension ?

dawdler_2

I'm 52 years old and my £115,000 First Direct mortgage is fixed at 1.9% for the next 4 years, at which point I aim to pay it off in full. Which makes better sense?

1) overpay the mortgage with the aim of reducing it to zero at the 4 year point to avoid fees - either with lump sums, or regular monthly overpayments

2) Put an equivalent amount into a cash or other ISA every year and take it out in 4 years time to pay off the mortgage, whilst paying the minimum mortgage payment

3) Max out my personal pension provision (I am a director of a limited company) and take a cash lump sum at age 55?

Hopingforthesimplelife

If you are fixed at 1.9% for the next 4 years, then not option 1.

DietIrnBru

I'm assuming that given you state you're in a position to reduce the mortgage to zero in four years time - that you have a monthly equivalent available to achieve that - if that's through overpayments then it would be more productive to just open a regular saver for the amount given current interest rates - and save up a series of lump sums over the next four years. There's a number of regular savers well in excess of 5% at the moment.

Your pension situation seems a bit vague - you state you're the director of a limited company - tbh that could be the director of a lucrative company or small fry. So if you are a higher rate tax payer - the tax relief of up to 40% can be helpful - especially if it yields a tax free lump sum greater than your oustanding balance.