To think I’m not crazy for not paying this off?

[Juppc]

I’ve been given 70k which is around a third of my mortgage debt. If I paid it down on the mortgage my repayments would immediately reduce by 200 a month and obviously I would have a much smaller mortgage so be paying less interest.

however, I am a single parent, late thirties, to one child and have no plans to ever meet anyone again. This 70k represents 2.5 years of security to me for all expenses. I am currently highly paid but no idea when that could change. If I spent the 70k I would have only 8k left in savings and I am only currently able to save 400 a month. I’d never have 70k again.

I think I am being sensible? Am I?!

If you paid off the £70k your mortgage debt would be immediately reduced and you’ve got to pay it off at some point (I presume that’s your plan).

after that you could pay the now spare £200 into a savings account so you are saving £600 a month to build a bigger cushion in case you had job loss etc or continue saving £400 and overpay your mortgage by £200 every month. You will be amazing how many years and interest saving this will take off your mortgage. Use an online calculator to show you how quickly that will reduce it

What's the interest rate on your mortgage? If you're still on a good (old) deal, you might find that you would be better to put the whole amount in some sort of savings with a decent rate of return, rather than using it to pay the mortgage.

For example, if your mortgage is on a 2.5% rate for another 18 months you'd be better off putting the £70k in a 18 month fixed term deposit account with Metro Bank for 3.5% interest rate.

In any event, I don't think I'd put all of it on the mortgage if you want more savings to hand. What "rainy day" savings would be useful to you to have? 6 months earnings? Keep enough to have that on hand, and the rest to put on the mortgage.

I was faced with a similar dilemma after my husband died. I put most of it into my mortgage but kept some as a cushion. The reality was, despite my best intentions, that cushion got spent – some worthy purchases but some was frittered (to be fair I was grieving and traumatised). If I had my time again I'd stick it all into the house (other than booking a holiday...)

I'd stick it into a high interest account rather than paying off the mortgage - there are good rates for savers at the moment. That way you make money off it AND can still pay your mortgage off in the future.

Turn the 70k into more than 70k should be your strategy. The mortgage is one thing but personally I’d spread it (40k into 2 ISAa, one now, one in April so you don’t pay tax on the interest), a tiny bit in a rainy day account. (Say 5-10k) and the rest on the mortgage if your account allows overpayment. If you can’t overpay the mortgage then I’d put the remainder into premium bonds (which you can access immediately if you suddenly needed to).

Where are you due to renew the mortgage? Look at an Offset mortgage

We put it in premium bonds after spending a bit of the garden. However our mortgage rate is very low.

I'd keep it in the bank to give me a feeling of security. Long run, yes may cost more but it'd be good to see it sitting there. Put in premium bonds and win a bit on top!

An offset mortgage is worth considering. Even with a small amount of savings it can really make a difference to how much to pay back, and knowing you have the access to your savings at any time is great security. I paid off my offset mortgage early because of this.

It all depends on the t&C of what currently available of course, but in your circumstances it seems like the best of both worlds.

doing the calculations of saved interest etc is wise, but that feeling of security and a large emergency fund is important too. The key is to not squander the money. Make sure you put it somewhere and don’t touch it. Don’t fall into the trap of starting to splurge on a holiday here or a nicer appliance there. Put it in something like a high interest savings account and pretend it doesn’t exist.

Tbh I'd stick a chunk in premium bonds then an ISA and have a think for a while. I think there is probably a happy medium here. Maybe half and half? £35k in savings is a good chunk and still allows you to make a significant saving on the mortgage, which you might appreciate when you are a bit older and can retire earlier because the mortgage is gone.

What’s the interest rate on your mortgage?

You'd be best taking advice from a professional

And bear in mind your own personal priorities. Mine is to be debt-free. Others prefer to focus on savings

If it’s low you shouldn’t pay it back because you can probably invest it and make better but if it was fixed high or a variable I think you should pay it down..
so it really depends …

You could bring your mortgage interest down by upping your monthly payments as you don't need to throw so much at your savings.

You should also get a decent annual return on the 70k so could use that to make a lump sum mortgage payment too (assuming it's within the overpayment limits allowed).

The only way I might use some capital is if you are close to an LTV bracket and it's worth paying off some to get a better rate when you renew

Look at the MSE overpayment calculator https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

You could easily have the best of both worlds with added security and reduce the term and interest paid on your mortgage.

Speak to an IFA if you’re a high earner you can get tax relief on pension contributions too.

£30k on the mortgage. £20k in to an ISA. £20k in to a high interest savings account (or 10k in to savings and 10k in to premium bonds) would be what I would do. Move more in to ISA next tax year unless something has come up in the meantime.

(Edited to add… but yes absolutely professional advice…)

YANBU as long as you are wise with it and don't fritter it away.

In your position, as you seem unsure about investments, you could take the risk-free route and put £50K into Premium Bonds, and £20K into an ISA.

Then, I'd use all of your premium bond winnings to overpay on the mortgage.

That's just a very simple way to use it without risking it.

I’d definitely be looking into a mortgage offset account. Reduces your interest charges, adding to greater repayment on the principal.

You are paying a ridiculous amount of interest to the bank right now. I'd put at least £50k towards your mortgage and get the principal down if you can do so without penalty. Put the rest in a high interest savings account.

You need professional advice because there are several factors to consider.

In your shoes I definitely wouldn’t pay it off the mortgage, making it illiquid. But depending on your interest rate and monthly expenditure, might decide to make some overpayment on your mortgage (which could be a lump or making regular overpayments).

The other thing is that just because you have cash doesn’t mean you have to spend it. Say you have an emergency fund and you need to make a big purchase. You can take out a credit card with a long 0% period and pay the minimum each month, knowing that you have the cash to pay the balance back but keeping it in the bank earning interest for you. Having the cash there gives you options. Just make sure you’re realistic about how you tend to behave around money!

You may only be able to pay 10% off your mortgage in any one year anyway. That is common with mortgages.

I would at least do that but also put some of the 70k in a high interest savings account

Which interest will be higher the one you are paying on your mortgage or the one you can have if you invest that money?
Whichever is the higher if the investment is secure that would be the more sensible approach.
You can opt for a middle solution half and half. In any case it is a big sum to not use it on your favour one way or another.

Look at offset mortgages so that it’s reducing the interest you pay but still accessible for a rainy day

I'd do both

30k pay off mortgage now but don't reduce your monthly repayment amount

Keep 40k cash as security split between Isa / savings account this year then move Al to USA next year