Would you have confidence to pay down a chunk on the mortgage in this situation?

[moertage]

I recently came into a reasonable chunk of money (45k). Alongside this I had a pay rise and should be in a position to save 1k-1,200 a month. I have no idea how the promotion will go so I don’t want to wholly rely on that obviously but so far so good.

I am thinking of paying down 40k of the mortgage to reduce it to 220k. I am 34 so not exactly a spring chicken and I do worry about how much I currently owe.

I have gone round in circles about this as the security of 45k in the bank feels amazing and I never thought I would EVER be in that position. What would you do? Is it risky to pay so much down? If I pay less than 40k it doesn’t adjust the repayments much but 40k means around 120 saving a month on the repayments

Depending on who your mortgage is with you might be able to do x% as a lump sum and also up your monthly payments by x% as well.

50 year old you will thank you for doing it.

Definitely check for any penalties.

I would also factor into your decision the fact that interest rates are on the way down. BOE rate down 0.25 last month and will be reviewed quarterly, the next review being in September.

The final consideration,for me, would be what you could gain by investing the money. Thus could potentially be more in the long term than you would be saving by paying off a chunk of your mortgage.

This would be a long game. Depends on your attitude to risk and and how you feel about investing of course.

(Disclaimer: not financial advice, and do your own research)

I don't think there is much point in using the cash to reduce your monthly mortgage payments. If you want to use it to save money on your mortgage - I would ask to reduce the term as others have said.

At your age and position, I would keep 6 months outgoings in cash savings - and then use your additional pay divided between pension savings, stocks & shares ISA & a regular monthly mortgage overpayment. That gives you a balance between immediate and long term security.

We attacked the mortgage at your age and I rather wish we had prioritised pension savings (it is much harder later).

@moertage as long as there are no penalties for overpaying, then you could pay some. But I’d keep the repayments as they are so the time to pay will come down. Obviously depends on the mortgage interest rate … if it’s really low then saving the money might be a better option 🤷🏻‍♀️

£10k onto mortgage
£20k into s+s ISA
£7k into improvements that will save you money over the longer term (more efficient household appliances, heat pump, solar panels, whatever)
£3k fuck it fund.

Of your £1k savings increase

£350 pension
£400 mortgage

£250 left split chuck it in your fuck it fund and use it to budget for lifestyle creep and having fun. Living in the now is as important as saving for the future.

Invest the lump sum but use your promotion to over pay each month. That way you can always stop the overpayment if you need to but still have cash in the bank