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Is it wise to pay off the mortgage?

(6 Posts)
ChampagneTastes Sat 07-Nov-15 17:11:43

My DH and I have been left some money as an inheritance. It is a large enough sum to pay off our current mortgage. We are currently, as a family, in a state of flux. My DH has just started contracting; we are starting IVF and, although I'm working full time at the moment, I will be either going part time or self-employed myself.

In about eighteen months to two years we are likely to want to move to a bigger property which may require a small mortgage to make up the shortfall between the value of our current house and the value of the new one.

We will also have a good chunk of savings by that time but not enough to make up the short-fall.

My question is this: we want to pay off the mortgage but if we do, what are the chances of being able to get another one later on? How problematic will our work situations make it and how do mortgage providers view people who have paid off their mortgages? Would it be wiser to just pay off some of the mortgage now?

We are currently in a three year fixed rate (about one year through it) at a rate of about 2.6%

TC13 Sat 07-Nov-15 17:52:21

Hiya!

I'm a full time property investor/ financial adviser and mummy lol.

TBH lenders are really becoming a nightmare when it comes to resi mortgages. It's all based on affordability rather than salary multiples now. your hubby contracting and you going self emp will defo make it harder to get a mortgage when you need it. Lenders will prob want to see a few years accounts from you and possibly hubby too. I would be inclined to hold fire on paying off mortgage and invest the money short term in a decent investment vehicle or savings account until you've done the big move. As if you do pay off mtg even though you will be mortgage free you might not be able to borrow much. You will however probably have a better chance of transferring/porting existing mortgage with current lender to new property and top up the lending.

Hope IVF goes wellsmile

Madbengalmum Sat 07-Nov-15 17:55:30

If you find that short term decent investment vehicle let me know!

Thissameearth Sun 08-Nov-15 17:27:55

My partner and I are both lawyers. he is self employed, I have a very secure job. It is incredibly difficult to get a mortgage with even 1 person self employed, unless you have three years accounts. So I suspect that a move in 18 months is not realistic if your DG has just gone self employed. And certainly not if you both go self employed. Have you spoken to a mortgage adviser about this recently self employed issue? To maximise your chances you could seek to move now with your full time salary with the inheritance otherwise move in say 3-4 years? But obv the more income, the greater deposit you have etc will improve your prospects. I don't mean to be negative - just want to let you know self employment is a spanner in the works so you can plan around it.

On your question, I wouldn't have thought it will be material to a mortgage provider whether you have paid off your mortgage or have a lump sum. either is good! Given that you would save interest on your mortgage I would always think best to pay this off (assuming no other higher interest debt) and then you can quickly save loads with what would have paid in mortgage. But in your case, with self employment and poss reduced hours etc you may decide it's better to have a liquid amount of cash just now.

specialsubject Sun 08-Nov-15 21:08:28

just a reminder that if you keep this much money it must be split between banking licences (not brands), max £150k in each licence for JOINT accounts.

you'll get 2% at best on it in a savings account, inflation is that or more so don't let it hang around too long.

ChampagneTastes Mon 09-Nov-15 17:40:37

This is really helpful, thanks. Please keep the advice coming!

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