pension v overpaying mortgage

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onceaday

Guest
Age:
34
Spouse’s/Partner's age:
35

Annual gross income from employment or profession:
E35,000
Annual gross income spouse:
E30,000

Type of employment:
Both private sector employees

Expenditure pattern:
We are both generally 'savers'

Rough estimate of value of home
E305,000
Mortgage on home
E280,000 - we've been paying our mortgage for 10 months now.
Mortgage provider:
IIB
Type of mortgage: Tracker, interest only, fixed rate
Tracker
Interest rate
Discount tracker of 4.69% - will raise in May.

Other borrowings – car loans/personal loans etc
None

Do you pay off your full credit card balance each month?
Yes

Savings and investments:
E15,000 savings. E8,000 to go on house renovations soon, the rest will be put towards a future wedding.

Do you have a pension scheme?
Yes, I pay E265pm into personal pension
Her company pay E375pm into a pension.

Do you own any investment or other property?
No.

Ages of children:
None.

Life insurance:
Yes.

What specific question do you have or what issues are of concern to you?
I go through our finances and realise that we have spare cash every month. For now I would feel confortable funneling about E200 of it into either

a) our pension funds
b) overpaying our mortgage each month.

I'm fairly sure we would be better off overpaying our mortgage but would really like if someone here could confirm this for me or give me any other advice?

Thanks.
 

Gus2008

Registered User
Messages
75
I'd be inclined to go with the mortgage option. The sooner you have it cleared, the sooner you can start putting more money into your pension funds but clearing mortgage is generally accepted as the priority.
 

bamboozle

Registered User
Messages
536
Maybe consider splitting the money 70:30 towards mortgage & pension, would be nice to chip away at one and add onto the other!
 

picaresque

Registered User
Messages
25
Sorry if this is highjacking but myself and himself are in roughly the same position. Earnings slightly higher and mortgage slightly less on similar valued house. I pay 5% of salary (43k) into pension which work equal. He has none. We overpay mortgage by e300 a month.

I know I don't need this question answered but he really should have a pension shouldn't he? Overpaying the mortgage should come after having a pension I think but would appreciate some advice.

After our wedding later this year we will be in a position to either start him a pension or over pay by more. We both differ on which is the right thing to do.
 

yob

Registered User
Messages
118
as i see it your both on marginal tax (20%)so i'd be inclined to clear mortgage,i think pensions are questionable if your not getting the higher tax relief,and thats why i think the government should be doubleing the tax relief for people in this position,if they want young people to take out private pensions,these are the ones that need the tax break more than most.
 

Buddha

Registered User
Messages
33
I would definitely put every spare shilling into the mortgage now. If you develop the self discipline to cut out frivilous spending (which you seem to have anyway) then do that, save a small fortune on interest and then concentrate on the pension down the road.

If you are not a money waster and have your house paid for a modest pension may be adequate anyway.
 

Brendan Burgess

Founder
Messages
44,678
The key point in both of these case studies is that you have fairly high mortgages in relation to your salaries and in relation to the value of the houses.

While you are both comfortable now, your financial comfort will be knocked way out of kilter by the arrival of children. Given that you are both planning to get married soon, that must be on the cards.

It is very likely that the government will change the pension rules so that those who pay tax at 20% will get more relief. You should definitely defer any pension contributions to then, apart from the contributions which are matched by your employer.

So, get the mortgage down as low as possible now. Consider it a form of savings for having kids. When they come along, you will have much lower repayments on your mortgage and much more equity in your home which would allow you take payment holidays or move to interest only.

Brendan
 
O

onceaday

Guest
The key point in both of these case studies is that you have fairly high mortgages in relation to your salaries and in relation to the value of the houses.

While you are both comfortable now, your financial comfort will be knocked way out of kilter by the arrival of children. Given that you are both planning to get married soon, that must be on the cards.

It is very likely that the government will change the pension rules so that those who pay tax at 20% will get more relief. You should definitely defer any pension contributions to then, apart from the contributions which are matched by your employer.

So, get the mortgage down as low as possible now. Consider it a form of savings for having kids. When they come along, you will have much lower repayments on your mortgage and much more equity in your home which would allow you take payment holidays or move to interest only.

Brendan


To Brendan and all, many thanks for the replies. There will be no kids for us however so I feel safe in that respect..
 
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