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.

personally i would reduce debt, invest some & use some for spends. And hero DH working!

I don’t think the issue is how to use the money, the real issue is that your DH appears to see it as a stepping stone to him giving up work. Most people don’t like work but we just get on with it as it generally improves our standard of living!

I thought under UK law any money inherited while married is treated as a joint matrimonial asset in the event of divorce. I don't think OP can ring fence it has 'hers', to be honest.

You can argue to keep it if it is relatively recent and if there are enough assets to house each of the parties without taking it into account. It's not guaranteed though

And it would have had to have been kept separate. This is my understanding, I'm not a lawyer

@shreddies I think you're right.

Leaving aside the DH issue (which I agree with PP is distinct but important) and just looking at the financial aspects, I would want to understand the following before making any long term decisions.

1. 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.)

This really jumped out to me if you are only just about able to cover essential expenses now with a 1% interest rate, what is your plan for November onwards? As well as the very likely jump in your mortgage payments, I would assume that all of these bills will continue to rise much faster than wages, as will other essentials such as council tax. Have you worked out a reasonable worst case budget for November onwards? I would do this before anything else because you can't plan for the long term unless your current finances are under control. If your income isn't enough to meet your expenses from November then looking at paying some of the mortgage off to reduce the payments when you remortgage might be an option to consider.

2 How are your pensions looking? I would probably be looking at putting a good chunk of any spare money into pensions rather than (just) ISAs when lookng at long term inviesting . This is both because you need to ensure that you have secured your own financial future and becaue the tax benefits are likely to make it a much more attractive option, especially if you are higher rate tax payers and/or can salary sacrifice into your pension. If you end up with more than you need in your pension you can always take some of the tax free sum to gift a deposit to your children.

@thing47 but how much do you have to invest in order to get a decent income!

sorry that should be a ?

It also depends on which jurisdiction the OP is in. She hasn't said. Assume she is in the UK but e.g. Scotland has a different regime to England.

@Mia85 yes true. This is wrt England.

The point is though that it is worth looking into.

Mortgage rates are higher than they have been for a long time, so when the fixed rate ends you are right to look at possibly paying down the mortgage.

Stocks and Shares - can be very risky. Particularly so right now. So the informal advice i’m giving friends and family who come to me for investment advice is be patient and drip feed into Isa’s or Sipps. Usually Vanguard S&P500 trackers. I wouldn’t touch Uk or EU companies with a barge pole right now.

The DH wishing to put his feet up…. Erm…. He needs to think FIRE community and understand what it takes to retire early or go down a job level or two. Usually about a million £, but if you are in 40’s, it’s probably double that, and have no outstanding debt. Potentially he would be entering the decumulation stage of wealth and with 40’odd years of living left, that’s a long time broke, presumably without a full state pension entitlement just yet either.

I hit 55 in 80 weeks, and gain access to my Sipp at that point, so am in a similar boat right now. Have 190k mortgage o/standing, fixed at 1% til about a month before 55, but have a long history of investment experience. Right now, i’m 90% in cash, or cash funds which pay overnight interest. I’m not sure when the markets will stabilise, we are still only at the entry of recession, mortgage rates going up still, shares still creeping down, ukraine war which could escalate at any time, and lots of other little factors. I won’t be looking to buy any equities or funds til april i suspect…. What i will do though is make a decision about the mortgage debt much closer to the time when perhaps i will know more. Timing the market is haaaard.

Be wary of IFA’s, but make sure they are ‘Independant’ and not restricted to their companies portfolio of funds.

If you do go down the investments route, keep a nest egg/rainy day in cash or easy access for yourselves, because if things go bad, unless you wish to sell at a loss, potentially your investments may be locked in for 5-10years. It used to be a 5 year strap line that people were warned about, these days it’s more 10.

SIPPs might also be an option, for me i can be a bit of a spender, so it protected most of my savings from me spending it. But you do get the tax rebate quickly, but you may need to drip feed in.

Finally - this point in the cycle is one of those rare points where doing nothing actually a good thing. So use that time to create a virtual portfolio of what you might think of investing in. See how you do. Trustnet has many funds you can monitor and compare. Keep an eye out for costs.

@Bard6817

What do you mean 90% cash? Do you mean you cashed in invenemnts and if so didn't you consolidate the losses?

I would always pay off mortgage or debt. We did and thank God. DH got made redundant 5 times in 8 years,it was horrendous. One of his friends said only invest in stocks and shares, what you can afford to loose, because they go down as well as up.

Why do you want him to continue in a job that's making him unhappy?

I have the majority of my assets within a Sipp.

About 14 months ago, i sold the vast majority of funds i was in, i believed they had peaked in value and were likely to go down - so i moved 90% of the value into Cash (GBP). Various things happened and if i’d stayed invested they would be worth about 75% of what they were worth at their peak.

Right now i’m playing a little with currency, the long term trend of GBPUSD is down, i made a few bob when the rate went to 1.05 and bought back in at 1.23 and i expect it to go back down to 1.15 in the next year possibly much less…. So basically, my pot is running at maximum that it’s ever has been, despite us having had some serious drops which i avoided. My provider ii is paying about 2% on cash now too (that lands in March - bi annual payment) but i also use a fidelity cash fund which pays me about .02% overnight, every weekday i think.

Timing the market isn’t easy. But i tend to take the view that if i move things around and miss the perfect peak, so be it, as long as i miss the big drops and after Covid, it was obvious to me that a big drop was coming so i sold, locked in the profits and started to figure out where i was going next.

Maybe he's the type of person who takes his misery with him?

It's glorified betting. People are mainly lucky rather than clever.

This.
I would be very very cautious and take your time in making a decision.
He's being very selfish in thinking he can quit work at the age of 40.

I would probably use some towards reducing mortgage but not all of it, and definitely not if that would result in my dh then reducing his working to a level that would impact things monthly. I would consider overpaying mortgage by drip feeding it in rather than lump sum, or a bit of a lump sum around the time of the remortgage being due and then overpay regularly after that, so keeping it in your account in case you did want to use for other things - your remaining mortgage is low, you are already set to pay it off within 15 years and appear to have good jobs, you are already in a good position on your mortgage when compared to many others (by comparison, we are same age, good jobs but have £275k and 26 years remaining on our mortgage and we didn’t over stretch!)

@Bard6817

So would you buy in again?

I made a very good profit on Scottish mortgage last year and I'm gutted that I didn't cash on that profit but I wasn't sure where to put it?

I'm moslty vanguard us.

@Greatly ?

What's glorified betting?

Buying into world class successful companies around the world on a broad basis ?

I agree. It’s gambling.

But, i’d also say, there isn’t anything from stopping you from betting on every horse in the S&P500, and enjoying the benefit from them all winning something at some point in time. There is no finish post, where the race ends, unless it’s bankruptcy for 1 of thr 2000+ companies in said Vanguard tracker.

Chances are your pension pot is gambled in a very similar fashion, unless you are a public servant or have state pension, in which case your money disappears into a black hole, where it only exists as a number on a page that you trust will be there when you need it.

the only difference i see is that i have a smidgen bit more control over mine.

Stocks and shares can be highly volatile and has been last few years DH lost 5k with covid it's only just coming back up. Personally if it was me I would split it in 3, pay a chunk of the mortgage so the payments next year weren't so painful, put some in stocks and the third into a fixed rate account 2-4 years have high interest at the moment

I'd buy shares in your position.

I think that's the better long term financial strategy and I wouldn't want DH to be tempted to quit his job.

In your 40s you have time on your side and you can take some risks.