To not want to pay off my mortgage?

[IProbablyAm2024]

My DH and I are very fortunate to potentially have a nest egg of about £50K. MIL has also offered to pay off the remaining £50K if we put it in our mortgage so we are "debt-free".

I am struggling with this for a few reasons:

• mortgage is manageable and not a problem (although has increased)
• our house is old so don't really want to "invest" in it - we might move
• money is then trapped in the mortgage and unavailable
• I think a lump sum/nest egg would be more use for large purchases and rainy day problems
• it reassures me to know this nest egg is available for emergency medical or other expenses
• I feel exposed knowing it's all in the mortgage
• we'll be better off each month but only by the amount of the mortgage payment
• what if we fritter it away each month?
• I feel bad having my MIL pay off my mortgage- a failure as an adult and a parent (backstory alert)

Husband is on board with the plan and is excited to save £30k of mortgage interest over the life of the mortgage. I think you don't save what you might never pay.

Should we do it?

Well how much would a safari cost? With no mortgage payments how long would that take you to save up?
Or put Mil £50k in and £40k of the nest egg, she doesn't need to know

I think it would be foolhardy NOT to pay off the mortgage. You say that you might not always want to live in your present home, but being mortgage free in this one would put you in a much stronger position when you put in an offer on another house as you will be cash buyers. There is a lot of talk of interest rates going up imminently, so you will be paying back a lot more on your current mortgage if you don't accept this offer, which is why, l suspect, your MIL has made it. What a very kind and generous person she is. Please don't look this gift horse in the mouth.

Have you looked at OPs second comment on the thread? The gift comes with 'strings' that include, but are not limited to financial decisions being taken out of her hands, that may lead to financial determent.

Beside that, the Inheritance Tax issue would be for MIL to take care of and wouldn't be levied against OP. Annual exemptions and gift allowances is beyond the scope of the OP and not what she needs guidance on.

And while I agree that being free from debt upon repaying the mortgage must be (yet to experience it for myself) incredibly liberating, my guess is that it would quickly evaporate once the realisation hit that I had no savings to replace my boiler that just failed in the middle of a cold snap!

umm I take your point about the tax issue being for Mil to deal with but what if she doesn't?

@godmum56 if her estate exceeds the IHT threshold, with non-exempt gift element added, there will be IHT to pay on her estate. Indirectly, I suppose the OP is affected assuming she's a beneficiary, but no one will come after that £50k gift, only the MIL estate in excess of the threshold.

Then you’ll have extra money every month to pay for your safari. Quite honestly the level of financial illiteracy that values a fortnight’s holiday over owning a house outright is mind blowing.

• our house is old so don't really want to "invest" in it - we might move

this makes no sense, you’ll have to pay it anyway. Whether you pay it now or when you sell makes no difference.

• it reassures me to know this nest egg is available for emergency medical or other expenses

what country are you in that you might need “emergency medical expenses”?

• we'll be better off each month but only by the amount of the mortgage payment

so set up a direct debit for the mortgage amount straight into savings. You won’t miss it and it will build up a nest egg at a faster rate as you will also save/earn interest.

the only reason not to pay the mortgage off is if the interest on your nest egg is higher than the interest on your mortgage.

I think you should pay off your mortgage. You are committed to the mortgage - even if you move- so you might as well get it paid off sooner - look at how mortgage rates have gone up in recent years - paying the mortgage off will give you security against that.

i get that you don’t want to be beholden to MIL, but relationships can change - your relationship might improve or it might worsen regardless of whether you accept this financial gift, so you might as well take it.

I guess the other question is whether the 50k you have is all your savings? Do you have any other emergency cash? Do you have financial protection in place were you to suddenly both lose your jobs? Are you saving a decent amount each month? Yes technically you would have money in the house but it’s not really accessible if you had an immediate need.

It is vital OP has an emergency fund. But aside from that, this is as much of a discussion as to how much control of her own life is OP willing to sacrifice for financial benefit. Believe me, there aren't too many more financially literate than me.

But she’s talking about blowing her emergency fund on a holiday. 🤷‍♀️

So it's got nothing to do with paying off the mortgage?

The question is really 'should we accept 50k from MIL when it comes with strings'.

My answer to that would be different.

You pay the mortgage off so that you are no longer paying interest.

You then save what you would have been paying into the mortgage and earn interest on it.

Madness to turn down a £50k gift.

Please get some proper financial advice because most of your listed reasons make no financial sense at all.

Which is her right as a grown up, with her own money. The point is that accepting £50k now means that she effectively gives up control of her finances and that everything needs MILs sign off. I would rather have £50k that is mine than £100k that someone else controls.

There seem to be two separate issues here. One is whether it makes financial sense to pay off the mortgage. The other is the OP's concern about being beholden to her MIL.

The answer to the first question is: yes, of course it does. I am puzzled by the people saying a financial adviser would say otherwise. My experience is that financial advisers always tell you to prioritise paying off your mortgage. It simply makes sound financial sense because of the interest it saves you over the years. Of course it doesn't tie you to the house, because it's just as easy to move from a house you've paid the mortgage on as one you haven't. If you suddenly feel the need to go on safari somewhere, you can always borrow against the value of the house.

It may be that the OP has it in mind that one day she might want to leave her husband and she likes the idea of having a sum of money in a bank account she can draw on. That's a different kettle of fish and one I can't help with.

On the question of being beholden to the MIL, well, only the OP can decide if it's worth accepting a gift that has emotional strings attached. But I think that's completely separate from the issue of whether that money goes on paying off the mortgage or something else.

You could also save some interest on your mortgage by overpaying.

What is your current interest rate? Lots of savings accounts over 4% (and many better).

I'd keep some ring fenced and earning interest. If you already have a 50k emergency pot then you don't really need monthly savings. So instead direct that to the mortgage. Most allow at least 10% overpayment per year but you need to check.

You also need to check there aren't penalties for early repayment.

I could pay off mine in full but it would cost me more than the interest saved (it's not high now). Instead I am overpaying so it will be done when the fix ends.

Google the money saving expert mortgage overpayment calculator. It lets you compare savings figures so you can have a sensible discussion with your husband armed with full figures.

What's the reason for this? Can't find any

Your financial reasoning is completely nonsensical and illogical and self-sabotaging. I really can't make head or tail of it.

You're right that nothing comes without strings attached from a woman like you paint your MIL to be. Only you can know if the price is worth paying.

Read the whole thread, lots of good reasons

Theres more to life than money.
Not a hope would i take anything with strings attached.

We are mortgage free and it's much easier living without it. If you sell your house with a mortgage you need to pay off the mortgage before you can move. Without you get all the proceeds less costs.

As previously stated, not if you go to a fee paid financial advisor.

If someone chooses to go to a financial advisor who makes money off particular advice, they are choosing to take the risk that the advisor will have ulterior motives (and mis-selling isn’t allowed so they’d have to have a dishonest advisor even then).

As a person who has IL's who only give gifts with strings, no...don't accept it. It causes more arguments than it's worth. People won't understand it, that's fine. But when you are told "we did this for you...." and it's held over your head, it's hard to accept "gifts" from them. It's not a gift if it has strings

If your financial considerations are that you have greater benefit from a safari than paying down the mortgage, then I can fully see why MIL is trying to put in some caution via her DS. Why should she give you £50k for you to blow it on another holiday, because after safari comes disneyland or diving or whatever other experience? All money has the same value, wherever you put it. If you lose a jobs or the boiler blows up, you can get credit with no mortgage owed but a big asset... the safari and mortgage don't help you out there. Universal credit will pay your bills and not your mortgage, did you even know that?

At the moment, many, many people pay less interest on their mortgage than they can get on savings - even cash savings in the bank so no risk.

That means every mortgage overpayment instead of saving money loses that person money (more interest would have been paid on the savings than is saved on the mortgage).

Having said that, I paid off my mortgage anyway because of the emotional component to doing so. I just did it knowing it was costing me money.

Edited to say: also, leaving yourself with no savings runs the risk of having to take out a high interest loan in an emergency. Most FAs advise on having an emergency fund first.