Should I pay off my mortgage with a £100k inheritance?

[Jasmine94]

I am due to inherit £100k and I’m wondering, despite advice against it, whether I pay off my £80k mortgage?

The first 20k will go into a S&S ISA but then what to do with the rest? I’ll likely pay tax on the rest so wouldn’t it make more sense to pay off my mortgage?

Likely to relocate in the next 2 years so I can pull out the money again at that point.

If you are planning to move soon definitely keep the mortgage and invest the money. It will be much easier to get a new mortgage as being a reliable mortgage holder boosts your credit rating. It will just make things smoother. There is no particular need to be mortgage free in your 30s

Secondly, you will save 4-5% by paying off your mortgage, but I made 12% on my investments last year. Obviously there are no guarantees, but your £100k could earn you £8-10k over the next year if invested. Money to put towards your next place.

I hadn’t thought about this.

When we got the mortgage, they only asked for one month’s payslip! It was so easy 😂

We would only need to lend a small amount so I’m not so worried. We have been paying the mortgage perfectly fine for 10 years and also buy everything on a credit card.

I’m getting 7-10% on my S&S but my mortgage is 4.5% so I chose to invest my inheritance and keep the mortgage.

OP, please, please don’t follow advice to invest in single-stocks.

It’s absolutely appalling advice, and no-one should be giving it. A single stock gives you no higher expected return than does a portfolio of a great many but gives you massively more risk.

No competent and honest adviser would suggest this.

This is also terrible advice. If someone is planning to move soon they should keep their money in cash or money-market funds, not risk it by investing in stocks.

Stocks are appropriate for longer-term investments, from several years up to decades.

This is why people are advised to de-risk by moving some of their investments out of stocks as they approach retirement.

No. Invest it instead and use the interest from your investment to overpay. That way you’ll pay off the mortgage earlier but still retain your capital.

Investments don’t generally pay you interest. Did you mean savings rather than investments?

She’s unlikely to get enough interest (especially after tax) to cover her mortgage interest.

Congratulations for not reading the post properly and completely misunderstanding.

The fundamental point of my post is about whether or not to pay off the mortgage. I gave no advice as to where to invest, the money can be put in any number of easy access, interest bearing accounts, until needed for the move.

I merely used the example of my investments as a demonstration of cost comparison. Most banks run a variety of suitable schemes one of which will be ideal for OP and her future plans

This thread really shows the wisdom of asking advice from a properly qualified experts, not a bunch of random women on Mumsnet.

No I meant a dividend.

If it’s in a bank account then that’s savings, not investments.

If you use the wrong terms as you are ignorant of the right ones then don’t get pissy at people reacting to what you wrote rather than what you meant to write.

You also said that her investments could make 8-10% next year, so no, you were not talking about easy-access savings accounts, as you know full-well that none pay that much.

Well done for the misogyny by the way in suggesting she not take advice for random “women.” This random woman has been a senior rates trader for several decades but will remember not to pretend this means I know more than you.

Can you convert to an offset mortgage? The 80k sits in a linked savings account so that you have it accessible, you keep your mortgage and only pay interest on the difference between the mortgage amount and your savings? We do that. In effect we COULD pay it off, but it’s meant we can access money to pay uni rent for children or to replace the boiler when it died unexpectedly, and then we re-built it back up again afterwards.

I'd pay off the mortgage in full.

Save £15K in a stocks and shares ISA.

Enjoy £5K.

Use the extra monthly income you have from being mortgage free to build up more savings and pension for the future.

OP , I’ve also got an inheritance due (sadly have lost both parents) and I’ve made an appointment with an IFA to look at pensions, investments, saving for DC etc.

I also want to move & there’s some great ideas here which are worth exploring.

And awful to say, but at 31 I’d be very careful about future-proofing in terms of divorce.

I don’t think my situation/ inheritance warrants an IFA but can see the appeal if you inherit a substantial amount. Especially with having children.

Happy to be called naive here but I accepted when we got married that we were financially tied and I’m happy with that. We have been together since we were 12 so everything I have now, has been as a result of building it with him.

Yes but DO SOMETHING with the mortgage money - straight into an ISA etc so it builds up a nest egg for your next house move, uni fees and so on for the kids. You have a real opportunity to make a difference here. By all means keep a tiny bit back (£100 a month?) for a monthly treat that you might not be able to afford now but do it knowing why you are able to. Please DO ringfence your inheritance into the house. You might not split up (but you might you have no idea what the future holds and I hope its all good) but there are other scenarios. You 100% need to think of it as protecting your children rather than anything else.

I would pay off the mortgage, if nothing else it is mentally freeing. Yes you might earn more money investing it but you cannot put a price on the freedom being mortgage free give you.

Pay the mortgage off and start saving the mortgage amount, it wont take that long to build up a buffer again.

But ring fence it.

Me and my husband did that. And i know that the advice is to invest instead of, but it feels amazing t have no mortgage and we can put our monthly mortgage payment to investing instead….

I wouldn’t do this if the house is a jointly owned or marital home as you might love to regret it, at least without an agreement saying you’d get it back if you split

I’d ask a financial adviser tbh

Sorry, I see others have advised similar

I never in a million years thought my marriage would break up. I’m glad I got my inheritance post divorce as I’d be gutted if I’d had to lose half of that too

The other option is a SIPP. You get tax back on it and then can withdraw when you are 57 and pay off any outstanding mortgage then. It would almost certainly be a higher rate of interest than you are paying on the mortgage

My understand is it isn’t possible to ringfence an inheritance. The court will see any inheritance before seperation as a martial asset. There are risks of giving it to DH as he could spend it, but it’s very hard to prevent it from being part of the pot on divorce if required, so there’s little point in making non ideal decisions on that basis.

I’d pay the mortgage off then put the same amount into a combination of savings/isa/pension each month

OP, in the nicest possible way, your parents left the money to you, not him.

No-one gets married thinking they will get divorced, but you really must protect your inheritance.

You could as long as you don't use it on any family matter. Iirc they are non matrimonial asset unless used as matrimonial asset. But it's not straightforward because who manages to keep it all on a side

Pay off the mortgage, we did in our 30s and the relief was massive. I have been able to take a pay cut and retrain in something, and am on track to earn more than I did before by quite a bit. We also saved what we were paying towards the mortgage rather than spending, and have a substantial savings pot ready to move to a much larger house also mortgage free, and have recently bought 2 new cars outright

If you're not locked in, yes I'd pay it off.

Not much around that's +4.5% unless you want the risk of stocks & shares (I'm cautious).