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.

We had an Inheritence, it wasnt a huge amount. But we put down £10,000 towards the mortgage, bought a new car, holiday and saved the rest. I do think paying off the mortgage is important, because of the interest rates. If your husband is unhappy, then there nothing wrong with him changing jobs. Even if its lower paid, as long as he was still working and contributing to the bills.

This.

Similar situation here OP (not the husband bit only the inheritance. )

Ive invested some in the market in S&S ISA as I want to retire before I can draw my pension. Our fixed rate runs out Aug. Our adviser said to hold on until rates become clearer. If they are high we’ll probably pay off chunk of mortgage. If around 5% we’ll re-fix and invest the rest instead.

You sound v sensible btw.

I would add that the years between 40 and 50 go very quickly. You can go from being in the primer of your career with years of earning potential ahead to wanting to be confident that you have a good retirement plan in the blink of an eye. You may not want to retire at 50 but you're unlikely to still want to have to work at 67

I think a lot of us are in a similar situation - currently on a low interest mortgage rate but will see a step up when we remortgage in a year or two so it does make some sense to reduce the amount you need to remortgage by paying off some now (regular overpayments or lump sum - you need to check how much you can do without penalty).

Another thing you could look into when you remortgage is an offset mortgage where ISAs are included. Last time we had one only Barclays offered one and the ISAs had to be with them, but you can transfer from different ISA providers without penalty. This would allow you to have a bit of a nest egg (apologies if I overlooked this but I don't think you mentioned how much of a cushion you have but if you are thinking about changing jobs a few months salary in savings is always a good idea) while using this nest egg to reduce the amount you are charged interest on. And you could try the stocks and shares approach in the form of an ISA (again, I haven't checked that Barclays still offer this) so you get the benefit of both. Offset mortgages are not always as competitive as regular mortgages but they do offer the flexibility of not wrapping everything up into your mortgage so you can't 'release it' until you sell.

Just another option to think about?

No-one has mentioned pensions (as far as I can tell). See an IFA.

Personally I’d use MOST of the inheritance to pay off the mortgage but make sure you have that money assured in writing elsewhere so you’re not left out of pocket should you split - I’d also make it abundantly clear that you support DH’s change of role/job but you absolutely do not support him quitting work and becoming financially dependent on you

Paying off the mortgage when I was made redundant was a good choice for me

The company I worked for made the best decision foe me 👍

Meant I was not working all the hours God sent in overtime to keep up the payments

Come what may I know I have a roof over my head and it is a home and long term investment

Got to a certain age and got off the treadmill as it were and just do my hours and go home

Every situation is different but paying off the mortgage was my priority 👍

I paid off the mortgage with mine,as I’ve a good workplace pension and I know rent the house out and receive an income. Equally investments would have been a good idea and I’d still have paid the Morton but it would obviously have taken longer.I think 8n your position I’d invest with an aim of it adding to your pension. Think long term.

your husband’s dislike of his job is a separate issue….that you probably do have to deal with…

Then I’d keep the remainder as your rainy day/luxuries/stock market fund to do with as you wish - but do bear in mind we’re about to hit another recession and the markets may not be as you hoped for the next few years

Because we're not talking about what happens in the next 15 years but while the mortgage is costing 1% and they can get 3-5% on savings. The same money can earn far more in savings than it would save over the next year if paid off the mortgage.

Part of me thinks, go and see a financial advisor who knows all about everything financial.

My financial advisor - (he claims mortgages is his field) - but the advice which he gave was correct.

my stocks and shares isa isn’t worth what I put in it, my private pension isn’t worth what’s being invested, I know things go up which is pleasing, but when it goes under it hurts!!

He told me, his best advice was to overpay the mortgage if I could, have money in the bank for a new car etc, but life’s easier without a mortgage, I wish I had listened to him, because today, (30.12.22), we would have been mortgage free, and have a few thousand in the bank.

I chose to go the Isa route, there’s not quite enough money in that to pay off the mortgage at the moment, which I’d hoped there would have been.

I agree

Contrary to what a PP said, you absolutely can guarantee an income from investing in stocks and shares. What that income is may vary, but it doesn't ever vanish. You can invest in FTSE 100 companies which pay large dividends and you can opt to take those dividends in cash (the alternative is to re-invest them). Most pay out either 2 or 4 times a year on set dates which are announced a long way in advance so you can do some financial planning. Dividends are typically around 7%-8%, and even in Covid years was about 4%.

My only word of warning would be that a majority of the best-paying stocks tend to be in oil & gas, mining, tobacco and other areas where people might be uncomfortable investing.

@Blueisthecolour1 under your DH's plan, he benefits more from your inheritance than you do. Even if you have a strong relationship, I would consider that a little unreasonable.

I was in same boat as you only a few months ago. We were able to pay off all the mortgage. We did think about only paying some of it off but then with rates increasing and our fixed deal ending, it was a no brainer.

The interest alone you will be paying on your mortgage every month I doubt an investment would make anywhere near that every month.

I think you are swayed because you don't trust ur dh not to quit his job. That's the real issue here!

Op this is a huge debate.
It depends what's important to you?
I agree with posters saying do both .

How much will you get?

Open up stocks and shares ISA.
Get 20 in before April.
Stocks are low sonits a very good time to buy.

Have contingency savings for emergency, I keep mine in premiums bonds.

Have other savings for holiday, added too each month by you and DH, money for general shared savings, money for Xmas... start it off with a few hundred but add each month.

Open up junior ISA for the DC, one stocks and shares and one cash ISA so they can see the difference between investments.

Open up a sipp.for yourself...self invested personal pension and get a few grand in it.
Open up a sipp for DC...with a few hundred in.

Once all these things are opened its so much easier to contribute as time goes on.

Then....assess mortgage and what the potential rises will cost you.

We pay about 230 a month. When rates rise that will costs us about 560 a month.
I'm trying to over pay now.

@ScroogeMcDuckling

Because stocks are low.
You have looked at historical charts to see what happens after a dip? They will rise.

I’d pay off mortgage you could always top savings back up with money u pay in mortgage each month

I don't think you are being at all unreasonable to resist the idea that your DH should effectively coast off the back of your inheritance.

In an ideal world I would probably (because I am risk averse and a fence sitter) plump for a mixture of some mortgage overpayment and some investments.

But I also think investing it all is a reasonable approach if your mortgage payments are affordable.

you would both need to be on the same page and determined to do this. Which already sounds like they are not. It’s far to easy for lifestyle changes to eat up the money, the same way promotions, nursery fees ending somehow gets spent easily

The choice of how to invest is secondary really to addressing the fact your DH feels entitled to take it easy and essential cancel out the inheritance

The choice of how to invest is secondary really to addressing the fact your DH feels entitled to take it easy and essential cancel out the inheritance

Thank you, but I suspect they are going to go lower next year before (if we are lucky) they go up again.

You could do both.
Use the inheritance to reduce the mortgage debt AND your monthly mortgage payments.
The monthly sum you would have paid to mortgage lender, gets pumped into
a stocks and shares portfolio. (Obviously DH has to maintain his job)

You end up mortgage free with a nice nest egg for the future.

How much money are you invested? How many do you hope to raise? I'm not sure in the current climate 15 years is enough but it depends on the first two answers