Pay off mortgage early or Pension?

**SuperZ** · 30 December 2009, 11:30

Depends where you think the stock market and other investments is headed. For many years now pensions have been a waste, but like anything, past (rubbish)performance is not necessarily a guide to future performance and we could be headed towards good returns in the future given how bad the last 10 or so years have been.

Personally I prefer to have no debts (so pay mortgage off sooner) and also prefer to invest my own money in a manner that I can access some of if I want to. So ISA, SIPPS I prefer. Not a big fan of pensions that I feel give limited options.

**FarmerPalmer** · 30 December 2009, 12:18

Pay into mortgage 60% assuming 40% tax af amount.
Pay into pension 100% of amount.

Pensions do have investment risk, may go up as well as down.
Property proces can also go up and down ... as can interest rates.
Access to your pension is regulated by the government of the day.
e.g. I've been paying in so that I can retire at 50, only to be now told by Gordon that I can't access my pension until I'm 55, so maybe I should pay into my mortgage and downsize when I reach 50.

You takes your chance basically.

**lje** · 30 December 2009, 12:31

I put a lot of effort into paying off my mortgage early. That paid huge dividends earlier this ear when (for around 6 weeks) neither Mr LJE or I had any income - we were able to work out how long we could afford to live if we didn't get any more money in and it was quite a comfort.

Having said that, when we paid the mortgage off the interest rates were still reasonably high and so it made more sense. Now-a-days with interest rates so low I'm not sure I would be as keen. However, we now have a lot more free income (because we have no mortgage to pay) which we can save or invest as we choose - further increasing our ability to face up to any future financial problems.

Also, even when paying the mortgage off at a higher rate we both still put a good chunk of our money into pensions. I think it's a case of doing multiple things. I don't know if pension investments or houses are going to go up or down before I retire - but I've invested in both and so should get the good with the bad. Overall hopefully it'll be OK.

**milanbenes** · 30 December 2009, 15:46

my two pence,

i am leaning towards the concensus that inflation is coming

in which case, if ever there was a time to get a mortgage and if you
believe inflation is coming then now is the time to get a mortgage

Wilmsloooooooooooooooooooooooooooow happy new year, and remember, goal for 2010 - a woman

let's us know if you need any tips on the mating game

Milan.

**IR35 Avoider** · 30 December 2009, 15:51

I would put company money into pension if it was otherwise going to be taxed as salary, as a consequence of IR35. This is regardless of whether the salary was going to be taxed at higher or basic rate, since even at basic rate there's in the region of 40% tax relief once you take the NI savings into account. (I assume that salary will always be paid in preference to pension up to the level of the personal allowance, and any trade-offs occur above that level.)

If you believe you are definitely not IR35-caught (though I don't think I would ever be completely sure) so the trade off is between company pension contributions and mortgage paid off from money passed as dividends, then I'd take dividends up to the higher-rate threshold and pay off the mortgage. Profits above that threshold I'd either leave in the company (for a rainy day) or pay into pension if I wanted to keep company accounts empty.

Any savings and investments already held and not in an ISA I would use to reduce mortgage, as long as I was sure I would not need access to the money in the foreseeable future.

**milanbenes** · 30 December 2009, 17:28

Mate,

Wilmslooooooooooooooooooooooooow is a permy.

Do try to keep up at the back.

Milan.

**Fred Bloggs** · 30 December 2009, 17:33

We are very debt averse so we did pay off the mortgage first and have no other debts. Whether it was a good thing or not I don't know. We sold our 2nd house a long while ago for what we paid for it, that WAS a bad move.

**minestrone** · 30 December 2009, 17:55

To have your house paid off is total security.

My plan is to have the house paid off in the next few years but I am always paying into a pension.

It's a mix really. Get the house you want paid off and enough in your pension to keep you in incontinence pants when you do want to retire. The state pension is not going to keep you warm when the gas runs out in 30 years.

I'm off to Vietnam to live at the age of 60.

**shaunbhoy** · 30 December 2009, 18:46

Originally posted by milanbenes View Post

let's us know if you need any tips on the mating game

Milan.

That would be like asking for advice on rewiring your house from Edward Scissorhands!!!

Pay off mortgage early or Pension?