To NOT want to pay off mortgage

[Blueisthecolour1]

I have come into some inheritance and have been thinking about the best way to use it wisely. DH says we should pay off a large chunk of the mortgage, which would then leave us with a remaining £61,000 to pay. For context, we've just turned 40, and have two children, 8 and 4 yrs. We both work professional jobs, we are just about able to cover all our expenses - food/bills/mortgage etc but with the mortgage up for renewal next Nov we will expect to see a big jump in our monthly payments due to interest rate rises (we're currently on a 1% interest rate which is great - for now.)

I think, given our ages that we should invest the money in stocks and shares, as we have (hopefully) time on our hands to see things mature, and by the time the kids need a bit of help (deposits for their houses) we can be in a good position to give them a helping hand. If we pay off a chunk of the mortgage, DH will then be tempted to quit his job, whilst I will likely continue to work at the same pace - he is fed up with his job and wants to do something else, even if it means lower pay. He says we can then get the mortgage done and dusted in eight years or so as a pose to 15 - BUT my argument is this only works as a strategy if you then continue to pull in incomes that enable you to actually live a bit. If he drops his earnings at that point in time, even with my salary we'd only just about be able to cover our bills and they'd be little left for doing anything - savings for the kids/holidays/doing things as a family. So we'd just be in the same boat, with no substantial savings and no disposable income to speak of.

If we pump it into stocks and shares, we are making it work for us and we'd pay off the mortgage in 15 years anyway - at which point we'll have some money to do as we see fit with - helping kids/holidays/dropping our hours at work a bit but with some savings left over to do things. Our ages also play a factor in my mind - stocks and shares are the "long game" and we're still young enough to be able to play it and hopefully see a good return in 10/15 years time.

AIBU to think investments over paying off large chunk of the mortgage? All the research I've done suggests that you should always pay off your mortgage as a priority but surely this approach only works if you both have a decent disposable income to play with for savings/living etc. At the age of 40 I don't really want to give up work anyway, I don't think it's good for my mental health to not work and I also think DH needs to be working, although i'd support him to change jobs if this is what he feels he needs to do.

“Pump it into stocks and shares” is vague. You can’t guarantee an income from this. Unless you go for a very low risk profile, you have to accept that you could lose money too. You need to seriously consider what risk level you’re comfortable with.

However, the bigger concern is that you think your husband will be tempted to simply quit his job if you pay off a chunk of the mortgage. That seems even riskier. Has he really thought through the implications?

You need an independent financial advisor.

FWIW I'd not pay off the mortgage if it meant he was giving up work...I'd also be considering ring-fencing any overpayment incase you split up in the future.

At 40, if you're fixed at a decent mortgage rate, yes I'd invest. Especially as you've not been maxing out ISA and pension accounts.

It sounds like your dh needs support to change jobs but him suggesting that your inheritance is used to service him working less while you keep working hard to pay the bills doesn’t seem quite fair. Your strategy seems sound as keeping a mortgage (which is eroded by inflation) can be a useful strategy over the longer term provided the money you do have is invested. But some people do simply love being mortgage free and that is valid too. Take some professional financial advice, it is worth interviewing several candidates and ensuring they have an ethos that fits your own aims.

Two completely different issues here:

1. Pay off the mortgage vs invest in stocks and shares.
2. Your husband is miserable and wants to cut back working and sees this money as a route to doing so.

You need to address issue two as it’s not going to go away if you invest the money, if he’s miserable he’s going to still want to cut back/change and knows the money is there. You will be arguing for years about it otherwise.

As to question 1, we are heading into a global recession so stock prices aren’t likely to be doing very well for quite a few years and you could see a big devaluation of your initial investment that could take years to recover I would pay off the mortgage and then use the monthly savings to invest. That way you benefit from pound cost averaging (if you pay in £100 this month on 100 shares and the value drops to £80 for 100 shares, the next month’s £100 buys 125 shares. You then have 225 shares when the market recovers. If you spent £200 all at once in month 1, you only have 200 shares when the market recovers. Obviously in a rising market this can go the other way, but a rising market is unlikely and it evens out the highs and lows over time.

No you can't guarantee an income from it but that is basically what everyone with a pension does. It's the best vehicle for long term growth and statistically doesn't fail over protracted periods (yet) as long as you're investing in whole market products and not stock picking.

Clearing mortgage debt only works as a strategy though if DH continues to pull his weight. I’m really not feeling ok about the notion of basically enabling him to drop his work commitments - whilst I end up with no savings left for life/kids/holidays etc and also continue to work. It just doesn’t work as a strategy. I think I’d want to divorce him in a year!! I don’t think he’s suggesting that he’s going to stop work altogether just change jobs, maybe he’ll have to take a pay cut to do this. But it’s gotta be fair on both of us.

You're very much not unreasonable not to want to use this money (your money) to facilitate your DH giving up work while you continue as normal.

The mortgage seems to be secondary to this issue. You want to use the money to increase your total wealth in the future. He seems to want to use it to replace income he would otherwise have earned.

@Whatevergetsyouthroughthenight

Good advice there Whatever, as you’re so right to separate the two issues out. He needs to sort his work shit out and take responsibility for that.

Hi OP, please do speak to your DH in depth about what his issues and goals are.

My best friend's DH was miserable, wanted to retrain. She supported him in that even though she was the main breadwinner for a few years.

He's now doing amazingly well at the new career and it's really (financially) paid off.

She thinks if she hadn't stepped up to support him then either he'd have had a breakdown or just got so miserable that they'd have split.

Your DH is the main issue here. Where to put the money is minor in comparison!

DH need to work out what job he can do that brings in a decent wage and is nicer than his current job.

After the job is sorted, then pay off a decent chunk of the mortgage.

If you want to invest, best to max out your ISA allowance each year. That will let you build an investment slowly and keep it safe from capital gains tax.

Normally I'd say mortgage take but with what your saying about how it will influence him it doesn't sound a good idea

PS - Divorce would cost much more than your inheritance, since you have young kids... Don't underestimate the financial impact that would have, it's HUGE.

Yeah. He wants a free pass. Five years of that and you'll go off him anyway.

Use a small fraction to reduce mortgage burden, and invest the rest in the market.

Nice compromise

Wouldn’t you have an early repayment charge on the mortgage to consider too?

Otherwise I would be tempted with what sounds like a large inheritance to split it between the two options. Wish I had one. You could check your overpayment limit and keep enough on hand to pay up to that for a couple of years and bung the rest in s&s.

At 0.1% interest rates, investing was attractive. With mortgages/savings at 4-5% risk free, they feel more attractive - especially in a recession.

I might:

• Drip money into an ISA - so you are investing gradually
• Put rest in savings for now and earn interest (its also there - rather than in the mtg - in case of job loss)
• Review when mtg comes up for renewal - see what rates and the lie of the land look like

I would always pay off the mortgage and frankly don’t trust investment via stocks and shares.

however I get your concerns. Also when paying extra off mortgage I’d always want to have a decent “rainy day fund” left for the unexpected. We have an offset mortgage -we only pay interest on the difference between our savings and debt. Which means we we move towards the difference being zero we have a pretty decent rainy day fund on hand if we should ever need it. Worth considering if you have a decent amount of savings.

If your DH wants to pay off a big chunk of the mortgage then it follows that your priority should be to pay off the rest as soon as possible. This is my DH’s approach-he earns a good wage now and therefore we are doing what we can to get it paid off in the next 4/5 years. He wants a more meaningful (= less well paying) job but we agree that both of us paying off the mortgage first is the key to that happening.

DH attitude seems driven by his own perspective, and it’s your inheritance. What about paying off effectively half of the mortgage, ensuring he knows that from a payment perspective he still needs to pay the remaining balance. Any job consideration he makes he should keep this point in focus. Extend the duration of the mortgage to lower the payments if the monthly is too much for him to manage from his usual earnings. Both your names should remain on the mortgage still for obvious reasons. Carries some risk but no more than what you have now in reality. Put the rest of your inheritance into S&s or whatever else you would like to do. Genuinely would find it difficult for any partner to argue this, your inheritance, from a sad loss and no one else should be looking to make plans to benefit from directly other than consequently.

Paying down a mortgage with a 1% interest rate is insanity.

Investing some is likely to be a good idea.
Also put some in fixed rate savings to finish just before your mortgage is due to renew, then you can reassess.

Keep some in instant access for emergencies or any immediate spending, eg new car, home improvement, holiday.

Perhaps use a small amount for DH career change if he has a sensible plan, rather than him loafing about.

YANBU

Assuming DH is same age, you are both too young to stop working unless to retrain. If the situation changes dramatically through ill health, you can always liquidise the investments.

Given that your DH may well use being mortgage free as a way of giving up work, this is what I’d do.
Imagine your house is worth £300k and the outstanding mortgage is £100k. Pay this off, but have 1/3 of the value of the house ringfenced legally so that he would not be able to touch it we’re you to separate in the future. Then set up a joint savings plan whereby you both pay in the equivalent of your current mortgage payments. Be very clear with him that you expect him to continue to bring in an income similar to his current income.
(but first I’d also spend a bit of the inheritance on a lovely holiday!)

Depends. Which stocks and shares?

I’d be looking short term at ring fencing the money until you both have a clear way forward, inheritance can make you question a relationship in ways you wouldn’t think possible before. If the questions of what to do with the money has caused tension then the final decision could easily cause resentment.

Can you afford the increased payments when your fix is up next year? If you’re only paying 1% now it will likely be a big monthly rise.

If not, then pay a chunk off your mortgage and DH continues to work, although change jobs if he wants.