pay off mortgage quicker instead of paying into a pension?

[edthedead]

Seems like a reasonable idea... Or not???

[SplatSpeed]

Thats what i did!

didn't trust Gordon with my hard earned!

[northandy]

Theres no right or wrong answer. It depends.

Im overpaying my mortgage, but also pay a decent chunk into a pension, i wouldnt like to think all my cash was tied up in a house come retirement, but likewise i wouldnt want everything in a pension pot.

Remember your pension contributions are tax free which if your a higher rate tax payer is a decent additional amount.

[davepoth]

But of course the reduction in mortgage payments over the term of the mortgage may well overtop that. You need to "do the math"(s).

[Zigster]

Cash ISA or stocks and shares?

If cash ISA then you know the interest rate. If that is higher than your mortgage interest rate then you should pay into your ISA before overpaying your mortgage. Stocks and shares is trickier - you expect a higher return than on cash, but there are no guarantees.

My mortgage rate is base + 0.84% (currently 1.34%); I can get 3% or so on a cash ISA. So I'm definitely better off filling a cash ISA first.

[Zigster]

Oops - missed a chunk off the start of my post which said something along the lines of, "Have you considered paying into an ISA rather than paying off your mortgage quicker. Similar tax benefits to a pension (tax relief on the outcome rather than on the contributions) but more flexibility in case circumstances change.

[edthedead]

Humm... maybe pay it into an ISA while the interest rates on the mortgage are low, then if they go up cash in the ISA to pay a lump off the mortgage... but what to do about a pension?? I think I need to do some sums!!

[BoRED S2upid]

Depends how quickly. The mortgage provider will give you some alarming sums on how much your mortgage plus interest will cost over the term which could be 30 years if you can pay it off in say 15 then you will be saving a whole heap of interest. When it's paid off what then? Would you be paying in the equivalent into a pension or other investments say 600 per month or would the extra money be spent on other things?

[edthedead]

Once the mortgage is gone then the money would go into a pension or someother sort of investment for retirement.

[vescaegg]

This astounded me the other day;

http://www.moneysavingexpert.com/mortgages/mortgag...

My fixed term deal runs out in March and when I re-negotiate im going after a mortgage with a minimum charge for overpayment! Bearing in mind im only just a beginner and have a 30 year term for various complex reasons (needed repayments to be as low as possible for first couple of years); just £350 extra a month wipes 15 years off mine, and £500 a month extra (doable for me) brings it down to just an 11 year mortgage (and saves £85,000 in interest)!

Overpayment charges are obviously a big bearing but there are some out there with minimal charges.

[davepoth]

Even a couple of pounds over the regular monthly mortgage repayment makes a surprisingly large difference over 25 years.

[Burnham]

vescaegg said:

This astounded me the other day;

http://www.moneysavingexpert.com/mortgages/mortgag...

My fixed term deal runs out in March and when I re-negotiate im going after a mortgage with a minimum charge for overpayment! Bearing in mind im only just a beginner and have a 30 year term for various complex reasons (needed repayments to be as low as possible for first couple of years); just £350 extra a month wipes 15 years off mine, and £500 a month extra (doable for me) brings it down to just an 11 year mortgage (and saves £85,000 in interest)!

Overpayment charges are obviously a big bearing but there are some out there with minimal charges.

Thats a cracking link, thanks for posting it.

[BoRED S2upid]

vescaegg said:

Overpayment charges are obviously a big bearing but there are some out there with minimal charges.

There are some without any charges.

[vescaegg]

BoRED S2upid said:

vescaegg said:

Overpayment charges are obviously a big bearing but there are some out there with minimal charges.

There are some without any charges.

Yes just discovered that but also discovered mine allows up to 10% of the outstanding balance each year. Although this will obviously reduce each year, its more at the moment then I can probably pay anyway so I should be safe from their hilarious penalty charges which are applied should you cross the 10%.

[bigandclever]

Burnham said:

vescaegg said:

This astounded me the other day;

http://www.moneysavingexpert.com/mortgages/mortgag...

My fixed term deal runs out in March and when I re-negotiate im going after a mortgage with a minimum charge for overpayment! Bearing in mind im only just a beginner and have a 30 year term for various complex reasons (needed repayments to be as low as possible for first couple of years); just £350 extra a month wipes 15 years off mine, and £500 a month extra (doable for me) brings it down to just an 11 year mortgage (and saves £85,000 in interest)!

Overpayment charges are obviously a big bearing but there are some out there with minimal charges.

Thats a cracking link, thanks for posting it.

There's a really good spreadsheet here for downloading and filling in... http://forums.moneysavingexpert.com/showthread.php...

[The Leaper]

On two separate mortgages in the past I always increased my repayments when interet rates rose and maintained them at the then repaymewnt amount when interest rates fell. Both were straightforward 25 years repayment mortgages. The first was cleared in 13 years the second in only 8!

The spreadsheets available really do show how much can be saved by making acclerated repayments.

Personally I'd always do all I could to reduce mortgage payments so as to minimise the total amount of interest paid, and clear debt as fast as possible, then use the savings to invest for my advantage.

R.

[Jinky67]

vescaegg said:

This astounded me the other day;

http://www.moneysavingexpert.com/mortgages/mortgag...

My fixed term deal runs out in March and when I re-negotiate im going after a mortgage with a minimum charge for overpayment! Bearing in mind im only just a beginner and have a 30 year term for various complex reasons (needed repayments to be as low as possible for first couple of years); just £350 extra a month wipes 15 years off mine, and £500 a month extra (doable for me) brings it down to just an 11 year mortgage (and saves £85,000 in interest)!

Overpayment charges are obviously a big bearing but there are some out there with minimal charges.

That is actually scary how much a little extra a month can go towards paying off a mortgage.

If I put the amount of money I currently send to my savings account every month into the mortgage, i'd be mortgage free in 9 years instead of 22!!

But....I wouldn't have the liquid cash. It's made me consider that paying off mortgage is more efficient than saving money though.

[Deva Link]

Jinky67 said:

That is actually scary how much a little extra a month can go towards paying off a mortgage.

If I put the amount of money I currently send to my savings account every month into the mortgage, i'd be mortgage free in 9 years instead of 22!!

But....I wouldn't have the liquid cash. It's made me consider that paying off mortgage is more efficient than saving money though.

An offset mortgage might work well for you.

[Welshbeef]

So pension or Mortgage.

Well if your company pays Ito it too then it's well worth doing. Likewise you normally get 4-6times your annual salary for death in service so you'd not need life insurance while your employed which is what £400 per year?

You should think about this though instead of changing your car every three years run it for 6 years and put the saved depreciation into your mortgage..... Un Pistonheads maybe but debt free and good pension are key.

For anyone without a pension and not independently wealthy they are going to face poverty in their retirement that's a long 30 years of Lidi reduced to clear shopping bus pass only not overseas holidays etc.


Balanced portfolio.

Or if your mortgage is say five years away you could mac the mortgage to clear it then mac out the pension until you retire.

[squeezebm]

Welshbeef said:

So pension or Mortgage.

Well if your company pays Ito it too then it's well worth doing. Likewise you normally get 4-6times your annual salary for death in service so you'd not need life insurance while your employed which is what £400 per year?

You should think about this though instead of changing your car every three years run it for 6 years and put the saved depreciation into your mortgage..... Un Pistonheads maybe but debt free and good pension are key.

For anyone without a pension and not independently wealthy they are going to face poverty in their retirement that's a long 30 years of Lidi reduced to clear shopping bus pass only not overseas holidays etc.


Balanced portfolio.

Or if your mortgage is say five years away you could mac the mortgage to clear it then mac out the pension until you retire.

More wine sir