I've been overpaying my mortgage since I started it and the minimum repayments are now fairly comfortable. As I get closer to 40 and as I note mortgage interest rates are not as high as they were, I'm wondering am I making a mistake not taking advantage of tax benefits on pension contributions.
Age: 38
Spouse’s/Partner's age: n/a
Annual gross income from employment or profession: €80000
Annual gross income of spouse: n/a
Monthly take-home pay €5250 (including income from rent-a-room)
Type of employment: private sector
In general are you:
(a) spending more than you earn, or
(b) saving?
Saving. I’m not too put out by not splurging for a few years.
Rough estimate of value of home €450000
Amount outstanding on your mortgage: €95000
What interest rate are you paying? 2.75% - variable, 22 years left
Other borrowings – car loans/personal loans etc None
Do you pay off your full credit card balance each month? Yes
Savings and investments: €20,000
Do you have a pension scheme? No (no employer contribution)
Do you own any investment or other property? No
Ages of children: none and no plans
Life insurance: Death in service and mortgage protection.
What specific question do you have or what issues are of concern to you?
I've read a lot of the posts on mortgage overpayment versus pensions. I’m very grateful for this website and the wealth of knowledge shared here. I’ve been drawn towards focusing on getting my mortgage well reduced/cleared. It is easy to do with a variable rate mortgage and I immediately see the difference. Pensions are that bit more complicated and somewhat riskier. I have a mortgage calculator on my phone and I can see if I’m on target to have it cleared in less than 3 years. Reducing the mortgage feels a bit like going on a diet that is working. I’ve kept a rainy day fund of 10K and pretty much everything else I’ve put into overpaying my mortgage. I spend a lot less this year on holidays, going out and clothes. I have no pension at all. My employer doesn’t offer any contribution towards one. I think my job is reasonably secure.
However, I’m now reviewing my situation. I’ve let an additional 10K build up. I’m now closer to 40 and interest rates are quite low. A lot of the justification for paying mortgage first seems to be from times when mortgage rates were higher. I’m wondering if pension should be given priority. Two extreme options are:
Age: 38
Spouse’s/Partner's age: n/a
Annual gross income from employment or profession: €80000
Annual gross income of spouse: n/a
Monthly take-home pay €5250 (including income from rent-a-room)
Type of employment: private sector
In general are you:
(a) spending more than you earn, or
(b) saving?
Saving. I’m not too put out by not splurging for a few years.
Rough estimate of value of home €450000
Amount outstanding on your mortgage: €95000
What interest rate are you paying? 2.75% - variable, 22 years left
Other borrowings – car loans/personal loans etc None
Do you pay off your full credit card balance each month? Yes
Savings and investments: €20,000
Do you have a pension scheme? No (no employer contribution)
Do you own any investment or other property? No
Ages of children: none and no plans
Life insurance: Death in service and mortgage protection.
What specific question do you have or what issues are of concern to you?
I've read a lot of the posts on mortgage overpayment versus pensions. I’m very grateful for this website and the wealth of knowledge shared here. I’ve been drawn towards focusing on getting my mortgage well reduced/cleared. It is easy to do with a variable rate mortgage and I immediately see the difference. Pensions are that bit more complicated and somewhat riskier. I have a mortgage calculator on my phone and I can see if I’m on target to have it cleared in less than 3 years. Reducing the mortgage feels a bit like going on a diet that is working. I’ve kept a rainy day fund of 10K and pretty much everything else I’ve put into overpaying my mortgage. I spend a lot less this year on holidays, going out and clothes. I have no pension at all. My employer doesn’t offer any contribution towards one. I think my job is reasonably secure.
However, I’m now reviewing my situation. I’ve let an additional 10K build up. I’m now closer to 40 and interest rates are quite low. A lot of the justification for paying mortgage first seems to be from times when mortgage rates were higher. I’m wondering if pension should be given priority. Two extreme options are:
- Put the 10K into the mortgage and continue overpaying and aim to have it cleared by before I’m 41. Then max out tax-free my pension contribution for previous year (backdated) and subsequent years. Having no mortgage this should be easy to do.
- Forget about clearing my mortgage. Immediately put the 10K into maxing out my pension contribution for last year (I think I can do this before the end of October) and this year. Consider switching to the 1.95% fixed rate mortgage with Avant.
