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?!

Wanting to keep (at least some of it) as an emergency fund isn't unreasonable.

But putting at least some in the mortgage (to reduce your term, not reduce the repayments as you suggest) can often be sensible.

It may be worth looking into a "Lifetime ISA" if you plan is for that fund to only be for true emergencies - you can open one until your 40th birthday, and pay in to it until your 50th birthday at the rate of up to £4k/year. Anything you pay in, the government add 25% to, but there's a 25% penalty if you take it out before you reach 60 (so if you pay in £1k, and take it back out before you reach 60, you pay 25% of £1,250, so only get £937.50 of your money back) so you should not put any money there you may need for anything that isn't a major emergency.

If it was me I'd probably do a 3-way split between mortgage / pension / emergency fund (and put most but not all of the emergency fund in a lifetime ISA)

Not crazy at all. Having a savings cushion is not to be sniffed at. In your shoes I’d do the following:
£20k straight into either a cash or isa stocks and shares isa (or half and half as you please). Still relatively easy access with the best ones on the market around 4.5% interest.
£30k off the mortgage - assuming you’re still on a favourable rate take it off the capital rather than reducing your payments as it’ll help when you come to the end of your current mortgage term and save you more in interest long term.
£10k into a fixed term savings product - 1 year perhaps and then dump it into the isa in the next tax year.
£10k easy access savings and likewise with the isa.

The above means you’re taking some off the mortgage (good thing longer term) whilst keeping enough in easy access and relatively easy access but decent yield savings for both growth and security. If it’s in fixed products that should remove some of the near inevitable temptation to dip into it.

Ignore anybody saying to pay off your mortgage if they don't know your mortgage rate! Is it 3% or 6% for example? If it's the former get it locked away in a high interest savings account, an ISA preferably so you don't have to pay tax on the interest. You could also look at world tracker funds on a platform like Vanguard. If you have a very high mortgage rate like 6%+ I would consider paying off the maximum it will allow without penalties, eg 10 or 20% usually.

I think it is very sensible to have a year's worth of expenses in savings.

I’d keep the money. Cash is king

Completely depends on your interest rate. I inherited 1:3 of my outstanding mortgage but invested it where it has returned 8% over three years which makes more sense than repaying my 1.8% fixed rate.

I would overpay by the 10% you can this year and put the balance in a high interest account. Preferably one which could be offset against your mortgage. Then reassess the situation next year.

I would have done the same as you . I wouldn’t have given up £75K to save £200 a month as that seems manageable . I would have maybe paid a chunk towards the mortgage but not all of it.

However , I don’t have a mortgage and I don’t know how it works - could that £200 go up ? Is there a possibility of you ever paying it all off ? I would have looked into all this - if I wasn’t going to pay my mortgage off until very late in life then it would have impacted my decision as I would want to be in a position to be mortgage free earlier on so that I have a house to leave my children if - god forbid - anything happened to me at an earlier stage in their lives ,

If you invest the money you could overpay your mortgage as and when with the interest.

Get an offset mortgage. Then you can benefit from reduced mortgage payments but also have the ready cash there if needed. That's what I did with my redundancy payment.

Mortgage. You have to factor in the length of time you're chained to the mortgage and compound interest.

I agree with the offset mortgage, if that's an option for you, at least for some of the money (enough for 12 months' expensive would be a good guideline).

It will reduce the interest you're paying, and if you keep your repayments the same you will pay off the loan quicker, whilst still keeping the cash available for emergencies.

Depending on your mortgage interest rate, the interest saving will probably be lower than you could get by investing the cash, but there will be no tax to pay on the interest so it might work out similar or better.

Have a look at changing to an off-set mortgage. Any savings are offset against the interest. We have shaved about 18 months from the term. Have also made a few overpayments as well

So you would keep the lump sum but reduce your interest paid

Put it in a high interest account and annually overpay the mortgage with the interest earned.

Unless you have a very low interest mortgage and a very high interest savings account, it is almost always going to make more financial sense to pay down a mortgage. It isn't just saving £200/month. It is a saving of potentially 10s of thousands in accumulated interest over the lifetime of the mortgage.

If OP is saving £400/month, her financial situation is not precarious. With an additional £200 not going on mortgage, she is able to save closer to £600/month. Which most people would consider a great amount to be able to put aside. Alternatively, she could overpay the mortgage by a regular £200/month and further reduce the long term accumulation of interest.

We have just done very similar and paid off around £70k of mortgage whilst in the process of remortgaging. This sounds like a similar proportion to OP's mortgage. By continuing to pay at our current monthly rate, our mortgage will be fully paid off within 5 years, instead of about 12 years. It accelerates, as more of the monthly amount goes towards capital then closer you get to the end.

I'd put 20k on the morgage
10k in easy access rainy day
20k in 24/25 isa allowance
20k next april for 25/26 isa allowance

The missing detail is your interest on your mortgage. If its over 4 or 5% mortgage might be better

Have a look at the Financial Flow chart, easily found by searching the internet.

6 to 12 months expenses in a relatively easy access account, or Premium Bonds, as you can access them in a few days

Cash ISA with enough to replace the car in a couple of years

the longer term you need to invest in stocks and shares as cash will devalue, or in a pension

if you pay higher rate tax choose tax efficient savings like ISA and Premium Bonds, or you will lose 40% of your interest

Don't pay any off without checking if you can do it without penalty. You might need to wait until the end of your term. Can you earn more interest (after tax) than your mortgage interest rate? If you can then I'd do that.
Otherwise I would suggest having 6 months expenses in savings and then using the rest to pay down the mortgage. Look at a mortgage repayment calculator and see how much you can save.
Also, some lenders allow you to overpay now and then take a payment holiday later if you get onto difficult situations so I'd consider that.

I think you are doing the right thing. Peace of mind financially is worth its weight in gold.
i would put £20000 into a q year ISA with a high street building society . £30000 into Kent Reliance instant access account currently paying 5.11%. The other £20000 into a one year fixed rate bond.

Agree with those saying look to see if an offset mortgage will work for you. Has worked really well for us and reduced our term by a number of years but we've still got access to our savings should we need them.

Here is one example calculator of the effect of overpaying. It allows you to adjust your current mortgage size, rate, amount of overpayment either lump sum or routine small amount. It is well worth doing as an experiment on your own situation. See how much it potentially saves in interest, how much earlier you can pay your mortgage off etc. And then decide if there is any other way to invest money that would earn you more than paying off your mortgage can save.

www.halifax.co.uk/mortgages/mortgage-calculator/overpayment-calculator.html

Forgot to say, I have my savings in an ISA and that is offset against the mortgage as well - even better

I would overpay the mortgage by the 10% you're usually allowed and put the rest in high interest but accessible savings. Then you can revisit each year whether you pay off another 10% or keep the cash.

👆 This

That way you do a bit of everything.

I would put £30k in premium bonds, £20k in stocks & shares ISA and £20K off the mortgage.

Dont use the money on expenses and spending for two years as that would be a waste. Make the money work hard for you rather than waste it on frivolous spending.

I'd be concerned I would spend it, if it was there waiting for me. I'd do as some of the previous posters say, pay a chunk off the mortgage, put some into savings for interest and spend a little to celebrate/reward