Mortgage vs. Pension - What’s Better To Overpay?

[@willsrpi]

Cannot overstate how powerful the tax relief on pension contributions is, especially for higher earners and those hitting marginal tax rates.

[@jayritchie2785]

For people with student loans and employers which offer salary sacrifice this can make a real difference.

[@rod85y]

In 30 years, taxes on pensions could be anything

[@CM-so1cf]

@@rod85yis it going to be more than income tax now?

[@wriches]

@@CM-so1cf no, but you are highly likely to be able to get more than an additional 45% return on your money in 30 years. especially now that the govt is tightening up where pensions can be invested. for high earners, you'll be better off paying the 45% now, putting it into the S&P 500 and then forgetting about it.

[@JimboJimbo-i4i]

I’m always paying the mortgage off, the mental freedom of that is worth it

[@JevansUK]

Mid 2019 I bought a house with 65 ltv 30 year mortgage 5 year fixed 1.85%. Had both of us working. Paid for the mortgage off when the fixed rate expired and have put 100k in my sipp in the last 5 years

[@altshift6072]

Wife and I are overpaying our mortgage and the rate is 2.79% until 2028. After thatwe estimate we will have 2 1/2 years left to pay it all. We don’t care about the low interest and the possibility of making more by investing. We do them all, overpay, invest and subscribed to a work place pension. We hope it works 😅

[@boyasaka]

Great plan

[@snubbii9276]

Am overpaying mostly on the mortgage and some on pensions plus added ISA savings. My Aims: to pay off mortgage in half the remaining term. Reach my pensoin pot goal - wont retire early but can slow down Have a litlle iSA pot to minimise pension drawdowns or cover any large expenses. Have a nice rainy day fund. I will still be able to be mortgage free before retirement but a four pronged approach seems better than all eggs on one basket but accept i could go all in on the pension

[@samf1500]

When mortgage interest rates were low, putting money into a stocks and shares ISA was the way to go as the gains easily offset mortgage interest. You could also withdraw tax free at any time if mortgage rates went up. Overpaying the mortgage is better than putting into a pension in my opinion, workplace pension funds are often low risk so you don't see big gains. Also can't withdraw a pension until you are 57, so if mortgage rates go up you can't overpay with money tied up in a pension

[@robsmith1184]

You can move funds from workplace pensions into a SIPP even while you're still working there I've done it several times back when I was an employee. I'd still opt for putting money into the pension for tax relief but I'd also make sure that I can afford higher interest rates should they go up. As per usual the answer for which is best is "It depends"

[@mrmeldrew693]

I'm opting for AVCs currently. Pay no tax, or 40% over £50,000 seems a no-brainer to me.

[@boyasaka]

Same here The extra a pay into work place pension reduced my gross pay down from 60k a year to 40k a year Keeping me well under the 52k threshold

[@boyasaka]

My vision has always been pay off your mortgage in full as soon as possible So no matter what the world chucks at you ,be it I'll health ,loss of job ,etc etc You WILL ALWAYS have a roof over your head ,plus the interest saving long term by paying your mortgage off can be ten and tens of thousands of pounds saved in interest I bought my house aged 25 , Worked 2 jobs flat out ,lived like a pheasant for 5 years and by aged 30 had paid my mortgage off I've since lived 20 years mortgage and rent free and ploughed my money into pensions and investments and had plenty of holidays all around the world

[@kinggeoffrey3801]

Great strategy. I'm soon to be mortgage free, and like you have done two jobs in the main to get this far down the line. Most people won't be willing to go the extra mile, though.

[@Ben-zn3ei]

Why did you feel the need to live like a pheasant? Don’t they mostly live in farmlands and grasslands and eat insects? Seems a bit extreme

[@boyasaka]

@ a pheasant is a general term / slag for a poor person A poor person doesn’t waste money , they don’t go out for meals or order takeaways , they don’t buy clothes they don’t need Ok I’ll rephrase it For 5 years I worked by butt off and never bought anything that I didn’t really need ,

[@meemaw5625]

You mean a peasant bud. Not a pheasant 🤣

[@boyasaka]

@@meemaw5625 🤣 yes I have no wings lol

[@jabuga]

I'm glad I paid off my mortgage fully at 35. To the reader of this comment; not everything is about minmaxxing your financial life. Take your own personal circumstances into account here as it's more fluid than following everything by the playbook. I understand that if I took my money and invested it I would likely have more, but I bought a cheap house and I'm only on £30k salary and I managed to pay off my mortgage on my own in five years.

[@rosshendry7298]

That's a really awesome comment and great to achieve something in those timescales. I'm aiming 10 year mark.

[@nax1807]

well done on that incredible achievement, 5yrs mortgage free is almost uneard of today. while it's important to moneymaxx your finances, i agree you have to accept some compromise. optimising money in place place likely comes at a cost elsewhere.

[@JayLou-v9p]

Blimey well done do you live in the north?

[@jabuga]

@@JayLou-v9p Thanks bro, Scotland, but I was a bit lucky too, a side hustle alongside a job got me my deposit, and I sold a flat during the covid hype and bought a cheaper house after

[@jabuga]

@ Cheers bro, it hasn't set in yet because i only paid my mortgage off last week!

[@gswiftgs23]

No brainer mortgage paid off asap

[@Gtbg641]

I’ve just paid off mortgage but to be honest in recent times mortgage payments are least of worries. At least they are fixed rates and you know what’s what. Now we are in a world of high energy bills, council tax bills and water bills. These combined dwarfed my mortgage payments … they seem to go much higher each year and I will still have to pay them until I die.

[@PaulB-q3d]

You must have had a lovely mortgage! My Mortgage is 1145, energy 75, water 22 and council tax 100....

[@OGFury]

Those amounts are pretty low too

[@boyasaka]

They are low No mortgage here 38 a month water 140 a month gas and electric 150 a month council tax 40 broadband 20 mobile phone And about 250 a month food

[@To_dare_is_too_dear]

​@@PaulB-q3dand you have lovely bills! Energy £165 Water £83 Council tax £182