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.

Yes. I will be patient til April i suspect unless something big happens like the Ukraine war ending.

Vanguard US is my prime vehicle most of the time. It’s a low cost choice, in the best market that will exit recession first.

SMT is a good investment and buy and hold is always the best default route if you just want long term good returns. But as you can see, i get greedy sometimes!! I suspect you will benefit from a currency drop in GBpUSD over the next year, not to mention the exit of recession when it happens - so just be patient now.

@Bard6817 what is the vanguard US option? i only have life strategy funds

what is SMT?

Life strategy is their mixture of equities and bonds i believe, in the trust that bonds will mitigate the equity risk. I’ve despised Bonds since the early 2000’s, when i bought Jupiter bonds and they did nothing for me, partly why i prefer cash and equities/funds. So not a huge fan of life strategy. I do understand the sales pitch for them, but the past year has shown that it’s potentially a broken model, the bonds and equities approach. Lots online about this. I’m not sure it’s completely broken, it’s just been a very bad 12 months for both, which is what it was designed not to do.

If you have a look at the fact sheet for the life strategy it will tell you the mixture of bonds/equities, and depending on how far from retirement you are, it has a higher percentage of equities as well as the proportion that is US based which i suspect will be very high, usually above 50%.

The S&P 500 tracker that i use is Vanguard, US Eq Idx Acc, ISIN: GB005B571Q71. But if you go to trustnet dot com you can see and compare all of Vanguards choices and performances. Not all funds are available on all platforms though, my Partner is a big fan of Aberdeen funds, which i can’t get on interactive investor, she is Hargreaves Lansdown.

Another fund to have a look at is Fundsmith Equity - largest fund in the uk, not a great time to buy now (had a torrid 12 months) but 18 out of past 20 years it’s delivered 18% per annum. So i always keep an eye on that one, and i will definately go back in when i think it’s time to get out of cash.

Scottish Mortgage. SMT is it’s shorthand code for dealing platforms.

@Bard6817

Thank you for your detailed replies .
I'm still new to investing and sadly came to it too late and it's this cash out side I don't understand.

I'm definitely not cashing out sm now because that would consolidate my losses however... I wish I had done when it went up by several thousand.

My main investment is vanguard us stock market.
Assuming you're onto the simple path to wealth etc!

The other thing I don't understand is assests when they are labelled a and b etc?
Also when invested through somewhere like Hargreaves and landsown how do we know they are paying us dividends?

Bard I have two life strategy and yes my 100% equity is doing far better than the next one down Which is 80% equity and 20% bond.

I have most of my money in steady stuff like vanguard and then what incall my gamble fund's eg sm and fundsmith.

Don’t worry - i came to it late too. Wish i’d known so much more in my 20’s. They dont teach any of this in school and it’s a long learning curve.

When You are invested in funds - they are usually designated as Inc or Acc…. Inc is essentially the dividend approach whereas Acc is an accumulation approach. Under the acc approach, any dividends stay in the pot and are reinvested for you, which is why they show as a higher value than the inc type.

Equity share classes are usually as much about voting rights as they are anything else. I tend to not pay too much attention to that - but i’m probably missing soemthing!!!

In terms of how to check any actual shares or funds, when they do pay out dividends to you, they pay out on a schedule based on an ex-dividend date and payment date. If you google ex-div and the fund or share name, you should get a table of the dates that they hold. ex-div is ‘you get the dividend if you hold the share on this date’ and payout date is what it states, the date you get the payment if you held the shares on the ex div date.

Then, check transactions on your investment account to verify that you received the dividend payment on that date.

Very similar to me.

@Bard6817 thank you!! I'm suspicious of them not paying in! I'm set to accumulate for now..💐

Seems kind of like you are wanting to force him to stay in a job that he hates.

This would be considered controlling if done by a man to his wife.

My advice would be to work backwards. Look at Money Helper which is a pension calculator. Do the following:

Work out when you would like to retire and how much you need a month.

Look at how you will invest your workplace pension (is it linked to a set annuity?).

Work out if you will need to top up your pension earnings to live comfortably by using savings to buy a lifetime annuity or similar.

The other thing to remember is if he retires early or gets a lower paid job that means a drastically reduced pension pot. Do you have savings to make up for that?

Ultimately unless you have a lot of extra savings (upwards of £500k), or a final salary pension or other regular return investments your husband is very unlikely to be able to give up work before the age of 55 as an absolute minimum.

Lots of aspects to consider here. Why, with two professional earners, can you just about manage to pay the bills now, and how are you going to cope if it's just you as the major (or possibly only?) earner if your husband leaves / changes his job / loafs about / decides he wants to play golf / sail around the world?
My mortgage interest rate went up from 1.69% in January this year to 4.59% in December. (small mortgage, not typical; total flexibility; no penalties). Your mortgage must be much larger though, if you are just managing on 1% with two salaries. When it goes up, this only reinforces the concern about how to manage to pay the bills.

You'd be wise to separate your inheritance from entanglement with your husband and his career choices. Treat it as yours. Otherwise you are going to end up contributing both your inherited sum AND the major (or possibly only?) regular, reliable earnings? Double burden, double unfairness. This may alter the relationship, the balance and the esteem between you.

Investing in stocks and shares in your name would achieve the separation but you'd still need to take advice and decisions re how to invest, whether self-managed or managed and level of risk you'd want to take. I had a shares ISA tracker for about 20 years. Took small dividends. It didn't do anything great or terrible. You could have a look at the FTSE to see how much the general index has grown over the past 20 years to give you an idea, though it's the past and not the future. Investing or indeed any financial or life decision, is as much about knowing yourself and becoming savvy about risks and potential benefits and having an exit strategy or backup plan as anything else.

An alternative to the stock market would be to put the money for the time being into savings accounts and a cash ISA in your own name before rushing into any commitments until your husband has sorted out his own career and clarified what commitments he is going to make and carry out. Don't launch blindly into impulsive generosity but think through the consequences. Know what you would and wouldn't be happy with and what you'd be taking on and how you'd cope or be affected in all areas of your life.

That's what I thought. Don't know why everyone's jumped to the 'lazy guy who doesn't want to work' angle, esp when OP says he does want to work just in a different job that he likes but pays less. The latter might well be a laudable goal on many other threads, but here it's dismissed like everyone has to be miserable at work until retirement even when a windfall gives other options. If OP wanted the inheritance to facilitate a career downshift for her, would anyone think she was lazy?

@Bard6817 thank you very much for all that detail. I only have 100% & 80% ones but something to look at.

I think you're conflating your mortgage/investments problem with your DH problem of him wanting to pay off the mortgage and then put his feet up.

What would you do if DH wasnt in the picture?

Do not pay the mortgage off! Best to go to a financial advisor and they will tell you where and how to invest it. That money could double in 5 years time and if you do decide to pay off your mortgage, get it in writing that the money is YOURS so if you ever do divorce your DH cannot take you for the house. X

It's extremely unlikely to double in 5 years.

I ran some quick calulations for you.

If you had £100k invested for 15 years 100% in stocks such as the S&P500 then after 15 years the lowest value of your stash would have been £72k and the largest would have been £753k - this was running simulations with a start date of the 1st Jan each year from 1871 to 2007 (to allow a 15 year term).

So no guarantees but the median result was £264k and most results were higher than this.

How much interest do you think you would save by paying it off? Weigh that up against the risk / reward of investing.

As you say, time is on your side and I know rich people who have mortgages because the borrowing is cheap and they get better returns investing.

Most people are not financially literate - that is why most people should pay off their debts; are you like most people?

If investing in a low cost index tracker such as S&P500 then it’s most likely to double in 7 to 8 years.

Either way I'd speak someone about protecting your inheritance so that dh doesn't have a claim on it should you separate in future (I'd say that even if he was totally on board with his current job).

Why would you do this?? Do you really dislike and resent your dh?

@Greatly I agree with @mewkins

I've seen a lot of marriages break down. OP would be wise to consider that this is a possibility, however good her marriage is at the moment.

I could be wrong, but it sounds as if the DH is looking to see how this will benefit him, not the OP and not the whole family. Therefore I would advise OP to make sure she is protecting her interests.

Money can make people act like total cunts unfortunately

I mean I'm pretty sure the definition of median means 50% were higher and 50% were lower...