Saving or mortgage?

I'm going to take a tax free lump sum from my Pension pot. £42 k. I'm not very good with figures, so if you have any advice, I'd be really grateful.  Should I put this in my savings account at 5.8% interest, or clear some of my outstanding mortgage of 100,000. My mortgage rate will change in Nov to a tracker,  so it will probably remain around 5% + unless it goes down. Sorry if this is a silly question, but I'm a newbie and not sure what to do for the best. Thanks 😊 


  • eskbanker
    eskbanker Posts: 29,811
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    I'd look at this the other way round and consider whether it's actually worth taking a TFLS from your pension at all, if you don't have a clear reason for doing so, i.e. leaving the money in the pension might be better, depending on the totality of your financial circumstances and objectives?
  • I can't afford to pay my mortgage and am trying to downsize. Been on the market for 6 months and reduced the price. Trying to not get into debt. If my house sells I'll be mortgage free, but no idea how long.  Won't rent out the house. So this seems like a solution. Will use some of the TFLS to cover mortgage payments until house sold. I have over 550,000 equity so will be okay at retirement age.
  • Beddie
    Beddie Posts: 558
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    I'd keep enough in savings for emergencies, £10k? Or you might have enough savings already in which case ignore that. Then pay the rest off the mortgage if it's going to be 5%+

    On a side note, all houses will sell at the right price, so your asking price is too high. Speak to your agent and get it sold before house prices drop further.
  • xylophone
    xylophone Posts: 43,813
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    What is the current mortgage rate?

    Are you  (or are you likely to be) paying tax on your savings interest?

    Will there be any fee for paying a lump sum off the mortgage before your deal ends?
  • DigSunPap
    DigSunPap Posts: 375
    First Post Name Dropper
    I wouldn't say that it is a silly question at all. Given your 5.8% savings interest and a mortgage rate around 5%+, it makes more sense to put the £42,000 lump sum in the savings account, as it earns more interest than you'd save on the mortgage. However, I would confirm the new tracker rate on your mortgage in November and keep an emergency fund.
  • Andreg
    Andreg Posts: 183
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    edited 21 October 2023 at 9:27AM
    Would you prefer to stay in the house long term if possible?  If you don’t intend to stay there, cut the price and get it sold.  If you would like to stay there maybe you could use your pension to cover the mortgage but will you then have enough leftover personal pension and state pension to live on long term?

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