Increase AVC or overpay mortgage.

K

Komori

Registered User
Messages
52
I have read the key post but just looking for some clarity.
I am overpaying my mortgage by €75pm, my plan was to increase this over time as I was going to be 65 when it finished and wanted it gone sooner.
Last year I started a modest AVC in my workplace pension. 5% me 5% employer 1% AVC.
Would I be better off taking the €75 overpayment and putting it in as an AVC?

Mortgage has 19 years left, currently 18 months into a 5 year fixed @2.75%.

Not megabucks I know, but any advice?
 
The advice here is often to get your mortgage down to a manageable level first. What's your mortgage balance as a percentage of the current value of the house? What's the monthly repayment as a percentage of take-home pay? How would you be affected by, say, a 2% rise in the mortgage rate or a 10% pay cut?
 
Persius said:
The advice here is often to get your mortgage down to a manageable level first. What's your mortgage balance as a percentage of the current value of the house? What's the monthly repayment as a percentage of take-home pay? How would you be affected by, say, a 2% rise in the mortgage rate or a 10% pay cut?
Click to expand...
About 45% LTV
Mortgage is 25% of my income, 12.5% of household income.

We could cope with rate adjustments or a pay cut. Pay cuts very unlikely. Who k owe what the rates will be like when the fixed term ends.
 
Your mortgage looks very manageable to me. If it were me, I would increase my AVCs. I would expect the pension pot to grow (over the long term) at more than the 2.75% interest that you would be saving by mortgage overpayments. And you get tax relief on the AVCs at 40% (I assume you're a higher-rate taxpayer).
You can always review at the end of the five year fixed period. At that point in time, assuming that you had the money, it might be worth making a one-off lump sum overpayment.
All this assumes that you have some cash set aside as an emergency fund. If not, then I would build up the emergency fund first.
 
The advice to get a mortgage down to a manageable level is misguided. The macroprudential rules mean mortgages are de facto manageable. It’s like advising someone to wear two seatbelts; it’s over the top.

AVCS should be the priority.
 
You must log in or register to reply here.
Back
Top