Looking for some advice...

bigbeff

I'll be debt free apart from my mortgage. I'll have £500 extra income a month.... the question is what is my best way forward. I'm 41 so a few years until retirement yet.  

1) I am able to overpay 10% of ny mortgage. Currently fixed at 2.49% until July 2024, then who knows. Mortgage is not huge, about £48k left to pay.

2) I have a teachers pension. I have been working part-time for the last 5 yrs and private tutor. I have set up faster accruals on it, to try and cover the fact I went part time, but probably should put more into my pension. 

My question is, should I do 1 or 2 or a combination of both? 

Thank you in advance.

retiringtoosoon

no point overpaying mortgage until your fix ends
pension is the right answer

Albermarle

Add to pension, especially as TPS is a very good scheme.

33scott

Agree that overpaying know does not make sense, however July 2024 is not far away and nobody knows what your mortgage re-newal rate will be. As your pension will not be available to you till 57, maybe invest in a S&S ISA in case you need that capital to bring down your mortgage balance.

NannaH

Your mortgage could easily be 6% in less than a year,  save that £500 for a year and pay £6k off your mortgage next July.  

bigbeff

NannaH said:

Your mortgage could easily be 6% in less than a year,  save that £500 for a year and pay £6k off your mortgage next July.  

That is my fear! I think maybe I need to think about savings accounts first.

af1963

Paying down the mortgage now would be less efficient than sticking it in a fixed rate 1 year account  ( 6%+ available), then seeing what happens to your mortgage rate. 

Any given £1 can "earn" 2.49% now by paying off mortgage, increasing to whatever your mortgage rate rises to next July.

Or 6% in a savings account until next year as a temp measure.

Or ( harder to quantify) it can "earn" whatever your pension grows by.  Are you contributing to an invested pot, or "buying" extra years of service ?  Generally, long term, invested pensions have returned more than the mortgage rate (but no guarantees of this). If buying extra years, it would depend on the cost.

dunstonh

bigbeff said:

NannaH said:

Your mortgage could easily be 6% in less than a year,  save that £500 for a year and pay £6k off your mortgage next July.  

That is my fear! I think maybe I need to think about savings accounts first.

But its a tiny £48k mortgage.  So, the cost difference due to interest rate changes is not likely to be that great.    

NannaH

Tiny or not,  if the mortgage has say 10 years to run it will be another £200 a month.
Obviously OP needs to tinker with a mortgage calculator.
My mortgage is only £26k with 6 years to run but when my 1% fix ends in Sept 2025, I’d rather not pay 6% on the remaining £16k balance.   I’ll either pay it off or use a 0% cc deal ( if they even exist by then). 

Simon11

Without knowing your latest pension pots and future plans for retiring, it is hard to give an opinion. 

I am however in the camp that having a mortgage of under £50k is tiny and I would throw spare money at the pension proving you can keep living with an increase in living costs from next year. Even just considering 20% tax savings, you will be better off in the long run.

bigbeff

I don't really understand my teachers pension. I have currently got faster accruals set up... but I can also/alternately buy additional pension in £250 lumps... which will cost me about £2500 to increase my pension by £250. Its all a foreign language to me! Or I think I could buy additional voluntary contributions but I think they are separate.