Should I extend mortgage term if due large payout in 10 yrs

Hoenir

chile_paul2 said:

Hoenir said:

Extending the term doesn't make it "cheaper".  Ultimately will cost you far more in terms of the amount of interst you'll pay. Also may leave you exposed to higher interest rate levels in the future. 

However - if the OP's plan is to pay off from a tax free pension lump sum and by reducing their mortgage payment currently they can increase payments into their pension then, dependant on their current marginal tax rate, it might be far more tax efficient and sensible to do what they suggest. Especially if increasing payments into their pension now would allow them to maximise employer contributions as well.

As they are considering extending their mortgage term I'd say that's extremely unlikely. Nothing in the OP to suggest that. Would require a significant pension pot to do so with only 25% available for the lump sum. 

chile_paul2

Hoenir said:

chile_paul2 said:

Hoenir said:

Extending the term doesn't make it "cheaper".  Ultimately will cost you far more in terms of the amount of interst you'll pay. Also may leave you exposed to higher interest rate levels in the future. 

However - if the OP's plan is to pay off from a tax free pension lump sum and by reducing their mortgage payment currently they can increase payments into their pension then, dependant on their current marginal tax rate, it might be far more tax efficient and sensible to do what they suggest. Especially if increasing payments into their pension now would allow them to maximise employer contributions as well.

As they are considering extending their mortgage term I'd say that's extremely unlikely. Nothing in the OP to suggest that. Would require a significant pension pot to do so with only 25% available for the lump sum. 

Well that's up to the OP to determine obviously - I'm just saying that if they were in that position it may well be the financially sensible decision to make even though it goes against the prevailing advice to pay off your mortgage as soon as possible.

I'm not sure why you think it's extremely unlikely though - it's precisely the position that I'm in and weighing up my options, albeit with slightly different numbers involved. 

It would require a significant pension pot to do so, you are correct, over £400,000 in order to get £100k as TFLS. I'm not sure how else they could be getting a £100k that suddenly becomes available upon retirement that they describe in their post unless you can think of an alternative that I haven't considered?