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?!

Can't seem to quote the post but you said you didn't know anything about investments so this is in response to that. meaningfulmoney.tv/ This guy, particularly his YouTube channel has helped me enormously. He was recommended by a good friend who has a financial background. Hope it's helpful.

Close brothers are at 5%+ at the moment, save and secure and better then paying off your debt.

Id pay the 30k now and then you can decide whether you will pay in or save the rest in September.

Don't forget to keep some back for a fabulous holiday for you and your child!

Definitely do not put any money into stocks and shares ISA. These are for people who can put their money away for many many years. Are happy to pay charges and can live with the terror of never Knowing how their fund will
perform . It a sensible investor who,only has such a small amount.

i would also stay away from premium bonds. £70000 will yield £2800 per year after tax. This will be great as an emergency fund, an annual holiday or paying down the mortgage without risking your capital

I mean it is not sensible

I'd pay 20k off the mortgage and that still leaves 20k to invest. If your fixed mortgage usually only overpay 10% anyway

Money devalues and is easily spent so I’d keep emergency fund of £10000 and pay down your mortgage.

I really don't get the Mumsnet obsession with paying down the mortgage/being mortgage free. Yes you'll pay it off much sooner so if you've got loads of spare money it makes sense but if you are in your tightest cashflow years it is much more important to have some kind of buffer, or fun money or whatever you need now, rather than look forward to rolling in it in the future. If I'd wanted to pay my mortgage off faster I'd have chosen a shorter term in the first place.

Geniune question: where are your tens of thousands of savings invested then?

You can stick up to £50k in Premium Bonds and can cash in whenever you want. Might be a reasonable short term solution while you figure out long term strategy

What is your mortgage rate currently? That will be a more important factor than the overall debt. I also don’t think you can overestimate the value of having some security as a single parent. Depending on the rate I’d keep some invested/accessible (at least 10k) and pay a chunk off the mortgage- higher the rate the more I’d put in.

You need to see a financial advisor, who will ask you what your current position is and then what your goals are. Then they will advise the best use of the money to achieve your goals.

It's ok if one of the goals is to have fun with some of it, or to have some mental sense of immediate security - that's a very acceptable goal!

I was thinking pension. Tax boost plus conservatively 6-7% year on year interest. In 10 years it could be worth at least 170k if done with advice (you would have to spread out payments perhaps to get the tax benefits).

It depends on your mortgage rate but When you say you save 400 a month is that for holidays and xmas and stuff or is it literally just money that you won’t need to spend so you save for a rainy day? If that’s the case personally Îd keep the 70 000 in a savings account and overpay mortgage by 400 a month.

i don’t understand your question

Sorry I haven't RTFT so I apologise if this has already been mentioned but please be aware you can't save £200 per month AND knock years off your mortgage, it's one or the other. You'll either need to change the term, in which case your payments will stay the same and your term will reduce, or you recalculate your monthly payment, in which case the term will stay the same and your monthly payment will decrease. I used to work in a bank and this would catch people out all the time - they would overpay but wouldn't pay attention properly to what they were doing and then years later would be confused about why their term hadn't decreased. Just didn't want this to catch anyone out!

You've said you think s&s isas and premium bonds are both poor choices for 70k.

Where have you invested your money to achieve growth?

Thanks for replying. Financial markets have always been volatile. We have had many years of low interest rates and the only thing to do in those times is to put money where it is safe and just keeping up with inflation. I have found the local small Building Societies offer the best rates. it pays to keep an eye on the market and not rely too much on money advice forums. They have their place but often use much lesser know. , often foreign based companies.

i invested when the stock market was massive, rising month on month and was luck to enjoy the benefits. More through luck than judgement I got out just before the Leeming scandal and the massive crash that followed.

The poster has a very sensible approach in my opinion. This money will probably need to last her 35 years. Divide that up it gives her £2000 extra each year. If, and it is a big if, interest rates stay the same she could double that yearly income.

if the poster was to put £50000 in premium bonds she would need to win £2000 every year to get the equivalent in interest.

All of this is just subjective of course DH and I both worked in Financial Advice and massively disagree about premium bonds.

Could you remortgage to a lower interest rate than you are on now, using £50k as additional equity so you also have a shorter repayment term? Be careful you don’t incur any early repayment charges though.

1.8% of 160,000 is £2800 per year 8% over 3 years is just under 3% so 3% of one third of your mortgage is going to be less than the £2800 interest per year on a 160,000 mortgage.

If the mortgage was a higher amount it's definitely worth paying the mortgage. A lower amount maybe not but piece of mind for me is key and the extra income from not having a mortgage is priceless

I'd pay £50 off the mortgage then keep £20 and put in high interest account. You would be paying maybe £150 less mortgage each month plus it will take save you far more than £50k in interest. You'd still have £20k for emergencies.

because you pay massively more on the interest over such a long period. so you end up being more out of pocket.

a full 70k for a buffer or fun money is a lot.

not everyone has the luxury of paying higher monthly rates by choosing a shorter term, and it's not a smart thing to do if a small interest rate increase would mean you struggle.

See if you can find an offset mortgage - best of both worlds. It reduces the interest you pay but the money isn’t completely tied up. :)

I disagree with Flowsome and would definitely but a portion into a stocks/ shares ISA.

I would split:
45% mortgage
30% ETFs
5% bonds
10% mid term fixed term savings account
10% holiday or similar