Mortgage or Pension

Unicorn79

Hi there,

I am in shared ownership which is part rent, part by.  I have only paid into a pension for 18 months.

My dilemma is do I focus on increasing share of my SO house, or pay into my pension.  I cannot do both, the rent part of the SO house is supported by Universal Credit so this currently allows me to pay into the pension.  If I take on a bigger mortgage, I will be paying towards owning my own home, although my pension will suffer.

I do not know how to manage this.  I am a single parent and only work part time as have dependants.

Advice appreciated!

Albermarle

It is a common question on this forum. However you will get much better answers if you supply more detail about your mortgage ( how much , what interest rate  ?tc) and your pension ( what sort, how much do you pay in now ? etc)

Unicorn79

Thank you Albermarle.

This is difficult to explain, so I just kept it simple!  So the share I have now was bought with a cash deposit of £65K which I received when I sold the house I owned (and was mortgaged on before).  The remaining SO share is rent - which is supplemented by UC. 

I plan to move to a smaller SO house and purchase a larger share - so this inheritance could go towards this, I then have the option of topping up by getting a small mortgage, or just sticking with a smaller 'cash' share and keeping the rest as rent where I can obtain help from UC still as well as paying into my pension.  My pension currently is £10k as I've focused on paying into this in the last 18 months.

El_Torro

Your age is a factor. Being 25 years old with a £10k pension is more or less OK, having a £10k pension at 55 is a lot less OK. 

I think the fact that you are on Universal Credit which helps towards your rent complicates things. After all if you were to own more of the property I assume your Universal Credit income would decrease. 

Are you planning to be in a position in the future to own 100% of your property? Do you plan to switch to full time employment at some time? This might be a long way off depending on your circumstances (e.g. the age of your kids). 

I don't know much about how benefits work but it sounds like it makes more sense to keep your ownership percentage as it is and trying to minimise the size of your mortgage (i.e. pay off what you can of the mortgage). Generally speaking it's a good idea to pay enough into your pension so that you maximise your employer's contribution at the very least. This may or may not be feasible for you.

Bear in mind that what I'm saying is based on the limited information you have given us. I also have little idea as to how Universal Credit works. It's worth crunching the numbers and taking your circumstances and future plans into account.

Unicorn79

Thank you El_Torro.

That is a comprehensive answer   I am mid 40's so the pension is very small.

I would love to earn 100% of the property, although I do not know if this will ever be possible.  I do intent on earning a higher income in the future and am working on that now, but worry about the pressure of having a mortgage on my own, also in relation to health (I am ok healthwise, but it is a balancing act re: my conditions so I have to be careful).

I have approached a financial advisor before, but feel the advice more limiting when I have some equity and a small income, but not enough to split between various pots, nor enough income to invest on a medium scale.

Luckly I work in mental health so there will always be work and I am quite specialised in what I offer so there is scope workwise