AIBU to want to pay off as much of mortgage as possible?

[SoMuchPain]

We're in a situation where we have 2 years left on our mortgage (it's a 5 year fix). We were discussing yesterday what to do wish a small inheritance (5k) I suggested we pay off our mortgage (or a very small part of our mortgage).

DH undecided - if we can save a little more perhaps considering buying another property but I think while we have a low rate let's pay off as in 2 years time with Brexit looming who knows what will happen with interest rates? We have no other debts.

AIBU? What do you think will happen to interest rates because of brexit?

Do you watch Martin Lewis' money management programme? Low mortgage rates at the moment mean it's not worthwhile paying it off if you don't have savings. 5k isn't a lot of money. It's not going to make even a dent in your term. Far better to use it as a rainy day fund.

Also with all of the economic uncertainty you should expect mortgages to stay static or even reduce. Bank of england policy will be low base rate for the next 2 years at least.

I think we'll get to 0 base rate maybe even negative rates.

This all depends on there being any good savings rates out there at present though

We have savings paying up to 5% and quite a bit at 2-3% plus extras like free cinema tickets and cashback. All the info is on moneysavingexpert.
Our mortgage rate is 0.6% so paying it off makes no sense currently.

Stick it on the mortgage.

OP stick it on the mortgage.

We're fortunate that we can over pay on our mortgage without penalty and draw it back down. The rate is 2.5% and is far better than any savings rate I can find - the DC accounts are only getting 0.75%

Nationwide have a 5% one year savings account but can only pay in £500 max per month so after 6 months we may as well put the £500 against the mortgage too!

3.4% for £5,000 is only £170 though - depressing isn't it.

You are more likely to lose your job in this environment than mortgage payments to go up. 5k would cover at least 5-6 months repayments if you lost your job. That's why you should save it.

Have you got any home improvements that could add value to the house? I stopped overpaying the mortgage to do up the house and the return from the investment is far greater than the savings on a very low interest mortgage.

We've recently done up the house and have substantial equity in the house our LTV would be low. Will look into high interest accounts thank you everyone

Our mortgage works so that if you make any overpayments then you can bank those in the future if your circumstances change and you need to take a break. If yours is structured like that then worth doing.

Normally I'm all for paying down the mortgage asap.

In your case I'd either do best of both worlds - pay off half, save half. Or keep it all in savings and reduce the mortgage by £5k when you remortgage in a couple of years, if you get a much less favourable rate than you are now.

Not that I'm a financial expert, but I would've thought a time of low rates was exactly the time to pay your mortgage off. So you're not owing more when they go up.

Do you have a rainy day fund OP? I do agree that if you don't/don't have much, topping that up should probably take priority.

If you pay it off your mortgage then you won;t be able to get it back (unless you have a mortgage that allows it) without incurring fees etc. I'd be more included to bank it until you know what you can remortgage at in 3 years.

Saving for a BTL mortgage is a big undertaking apart from the issue (as someone menitoend above) about whether you have the time to properly manage a BTL property and how much deposit you'd need to put down, there's also the issue of whether you have enough put by to manage if you have gaps in tenancies.

My Sis and her DH chose not to sell their house when they bought once and get a BTL mortgage on it instead. I think it lasted about 6 months before they were sick of dealing with tenants and finding tenants etc. A months gap in tenancy would wipe out their profits for 6 months.

To be fair - it really also depends on what your husband wants to do with HIS inheritance.

ElisavetaFartsonira as they are on a fixed rate mortgage they will know what the rate will be when they fix again. If they save the cash they can chose to pay it off the mortgage before they take out their new fixed rate.

I am with elis sp. Surely now is the time to get the debt down whilst its so cheap? Dp used to pay rates if 17%. Get it down as much as possible in car of rate rise. I would pay £3 off and keep 2 back for rainy day or dc education

Why does it have to be all or nothing? Why not half and half?

Kew what do you you mean, the rate now could be very different to the rate when they come to pay back.... Remortgage

Id normally say mortgage
But it depends on the size of the safety net....

Thanks everyone. Yes I said that to DH it's your inheritance but ultimately we are a team and a family and he wants to put it to use for all of us. A 50/50 would be a nice compromise

5k I would probably save as a rainy day fund. However I am a big advocate of overpaying your mortgage, we did so with every pay rise and wiped 7 years off our 25 year term, mainly due to the very low rates of recent times. It is a nice place to be.

Beyond I think OP has already acknowledged that its his inheritance but that they normally take financial decisions jointly.

Interest on both mortgages and savings are calculated daily, and is tax free for most people. You would have to have tens of thousands of pounds worth of savings to worry about the effect of tax on savings.

Providing that you are disciplined enough to not spend/waste the savings, it is currently probably best to save the extra money rather than repay your mortgage if interest rates on the savings are the same or more as the mortgage. You can always look at the situation again when remortgaging, and decide whether to reduce the balance then, but you won't have lost anything in the meantime by waiting to decide and putting the money in savings instead.

Mortgage rates are so low that it is often possible to get more interest by saving than the amount charged by the mortgage. The savings are also available for other things, eg new car, or to replace income in the event of a job loss. If the money is put towards the mortgage, it can't usually be got back in the future, although some mortgage products do allow this.

It would only be definitely better to overpay the mortgage if you can do this without penalty, have a high interest rate, or are likely to spend money on nothing worthwhile because it is available to you.

If you don't have much in the way of savings, I would bank it.

Paying extra to your mortgage is a great idea - even £50 a month can shave a couple of years off and a couple of k in interest.

But once that money's gone it's gone...having a lower mortgage balance won't help you if you lose your job or interest rates go up to 10%.

I would bank it, look at your budget and see how much you can afford to pay extra each month instead....even £20 extra is worth it in the long run.

To be fair - it really also depends on what your husband wants to do with HIS inheritance

Depends on the family set up. All money here is shared. I get an annual bonus of around £8k and we decide jointly what to do with it...I have no extra say just because it's 'mine'.

It's the same with dh's bonuses (smaller, a couple of times a year). Or the time 'he' won £2k on a scratch card...would be the same with any inheritance either of us had.