Mortgage or Pension

platypus

platypus

platypus

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We've got roughly 2 years left on our current deal, which is pretty good. We're going to have to re-mortgage sooner rather than later, and I'm just wondering if it would make sense for us to suspend our pension payments and plough that into our mortgage, thus reducing the LTV as much as possible before we have to re-mortgage. We're currently at 68% LTV, 65 or even 60% would be a great target.

I know people who consider their property their pension, and I suppose to a certain extent we do, but having both is obviously nice, and I also know that suspending your pension can drastically reduce its final value.

I'm sure others have been in this situation and I'm just wondering what decisions you took?
 
IMO pensions are not worth a carrot (personal ones that is)

Overpay your mortgage and save thousands

Dont forget to check the "small print". We can only overpay £500 each month (best mortgage at the time) without penalty and just wish it was more sometimes. You dont want to get stung by charges.
 
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If your home is your pension, then what will happen to said home when you start drawing pension? Downsize? However, I do know a few people who rented out a 2nd home then when the mortgage is paid off on both houses, the 2nd one becomes their pension.
 
Mortgage, even if your house price doesn't rise much, reducing your interest expenditure is a win in itself. Pensions earn you pretty much nada at the moment, unless you have an uber one where your work pays in double your rate and such.
 
platypus said:
We've got roughly 2 years left on our current deal, which is pretty good. We're going to have to re-mortgage sooner rather than later, and I'm just wondering if it would make sense for us to suspend our pension payments and plough that into our mortgage, thus reducing the LTV as much as possible before we have to re-mortgage. We're currently at 68% LTV, 65 or even 60% would be a great target.

I know people who consider their property their pension, and I suppose to a certain extent we do, but having both is obviously nice, and I also know that suspending your pension can drastically reduce its final value.

I'm sure others have been in this situation and I'm just wondering what decisions you took?
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Sod saving at the minute, use the money to pay off your main appreciating asset and save thousands in interest when the rates rise in a few years, which they will.
 
Get your LTV to below 60% and take stock once you have achieved it.

BOE base rate is going nowhere for a few years but mortgage rates are set to rise anyway due to the cost of borrowing money (for the bank). Savings rates on the other hand will remain poor.

If you have the inclination you could also look to go onto an interest only mortgage (once you have achieved 60% LTV) and then invest the excess funds into stocks and shares ISA accounts, where if you play your cards right will give you a higher return than the interest on your mortgage.
 
Is your pension a personal one?
I have a company pension, which I pay into as its free money from the company. However if its a personal pension you're paying into I'd stop and plough the money into the mortgage.
We are going do the same thing for my wifes pension by putting the money into a second property.
 
Monserrat said:
If your home is your pension, then what will happen to said home when you start drawing pension? Downsize? However, I do know a few people who rented out a 2nd home then when the mortgage is paid off on both houses, the 2nd one becomes their pension.
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No idea what will happen at retirement age, but our main goal is to get as much equity in our house so we can get a better mortgage so we can afford the business loans required to buy an opticians practice in ~5-10 years time.

PapaLazaru said:
Get your LTV to below 60% and take stock once you have achieved it.

BOE base rate is going nowhere for a few years but mortgage rates are set to rise anyway due to the cost of borrowing money (for the bank). Savings rates on the other hand will remain poor.

If you have the inclination you could also look to go onto an interest only mortgage (once you have achieved 60% LTV) and then invest the excess funds into stocks and shares ISA accounts, where if you play your cards right will give you a higher return than the interest on your mortgage.
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Sounds like a good plan, and given our objective (above) an Interest only mortgage might actually help with allowing us to put more into the loans.

panthro said:
Is your pension a personal one?
I have a company pension, which I pay into as its free money from the company. However if its a personal pension you're paying into I'd stop and plough the money into the mortgage.
We are going do the same thing for my wifes pension by putting the money into a second property.
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Both are personal, so no matched contributions or anything like that.

Cheers all, I think you've all confirmed what I was leaning towards :p.
 
Mortgage rates = Ave about 3.5-4.5

Pensions = Even poor schemes returning 10% at the moment (mine returned 20% last year) and tax releif on contributions.

Easy maths.
 
its easy - mortgage.

Pensions are worth absolutely nothing.
My gfs family lost most of their pension in the crash, their house is pretty much their backup option and its turned out to be a decent investment that will get them through the rest of their lives comfortably.
 
BDEE said:
Mortgage rates = Ave about 3.5-4.5

Pensions = Even poor schemes returning 10% at the moment (mine returned 20% last year) and tax releif on contributions.

Easy maths.
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Are you saying pension then? If your pension is returning 10% then you are doing unbelievably well but I'm guessing most people are getting almost nothing, if not losing money.

I'm actually seriously considering liquidating my pension and putting the cash against my mortgage when it comes off fixed next year.

For me, 1/4 of my repayments are actually reducing my overall capital balance so as it stands for every £1k extra I repay I'm saving £3k interest. Of course not everyone is on the same rate but certainly make you think.

If you can overpay then absolutely do it.
 
iamtheoneneo said:
Pensions are worth absolutely nothing.
My gfs family lost most of their pension in the crash, their house is pretty much their backup option and its turned out to be a decent investment that will get them through the rest of their lives comfortably.
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Total and utter rubbish, it depends on a series of variables which change from person to person, clearly your GF's family had some bad advice / greed and they had funds in areas which proved to be too exposed, they have now suffered.
 
Firestar_3x said:
Total and utter rubbish, it depends on a series of variables which change from person to person, clearly your GF's family had some bad advice / greed and they had funds in areas which proved to be too exposed, they have now suffered.
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totally agree.

@OP - your not going to drastically benefit from having a 68% LTV to a 60% LTV in terms of re-mortaging. It ain't going to save a huge amount on the rates on offer.

Personally keep both going. You are benefiting from at least 20% tax relief on your pension at the moment.
 
boxman2000 said:
I'm actually seriously considering liquidating my pension and putting the cash against my mortgage when it comes off fixed next year.
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I'm pretty sure that's not possible in this country and your pension only becomes accessible at retirement age. Its certainly the case for my mine anyway.

OP pay off the mortgage, its exactly what I did and I've been mortgage free since the age 26 (35 now).

I also didn't start my personal pension until the age of 27 although I was paying 6% into a company pension until I left at 25.

I now pay 10% into my personal one and as I've got it invested in 'low risk' areas its not doing too badly currently.
 
BDEE said:
Mortgage rates = Ave about 3.5-4.5

Pensions = Even poor schemes returning 10% at the moment (mine returned 20% last year) and tax releif on contributions.

Easy maths.
Click to expand...

boxman2000 said:
Are you saying pension then? If your pension is returning 10% then you are doing unbelievably well but I'm guessing most people are getting almost nothing, if not losing money.
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Indeed, I think 10% return is pretty high, given that the average pension return for 2011 was 4.3%.

I'm actually seriously considering liquidating my pension and putting the cash against my mortgage when it comes off fixed next year.

For me, 1/4 of my repayments are actually reducing my overall capital balance so as it stands for every £1k extra I repay I'm saving £3k interest. Of course not everyone is on the same rate but certainly make you think.

If you can overpay then absolutely do it.
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We can overpay, and we have done so over the last year, as much as we can in fact, but I'm trying to look at the LTV of 60% as that magical figure. Perhaps if we can get that number and then resume pension payments it might be a nice situation.

However, I have no idea at all about how things will work if we take on loans to buy a Practice.
 
Firestar_3x said:
Total and utter rubbish, it depends on a series of variables which change from person to person, clearly your GF's family had some bad advice / greed and they had funds in areas which proved to be too exposed, they have now suffered.
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its not though is it, its been consistently shown that value for money does not come in the form of pensions and if anything its going to get worse throughout the future (people living longer, expenses increasing , less to save etc) even last year from june to december payout rates dropped by 10%, a trend that is continuing throughout this year whilst the BofE happily churn out more money.
 
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