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.

We have just done exactly that but we are early 50s. We aren’t going to move though but knowing we’ll never lose our home is a great feeling.

I became mortgage free at 37. It was and still is a great feeling! I put the extra money that I would’ve paid for my mortgage into a mix of pension/ LISA and S&S ISA and they’re all doing quite well. I’ve still got the flexibility to reduce all of those payments should I need more money.

Also my LISA interest rate is 4.35% with Moneybox plus I get the 25% government top up (I put in 4k a year and it’s automatically topped up to 5k).

I disagree, you have to bear in mind the amount of time we have been together here. Our families are incredibly close. They have always treated him in the same way they have us. Equal presents at Christmas (as an example). They would have expected and known that money would go to us.

If I entered into a new relationship in my late 20s/ now then I would apply that logic but it’s different here where he has had to shoulder the burden of me being at university for 5 years, taking more of a back seat career wise as mine has taken so much time/ effort and I was poorly paid until recently!

I do understand everyone’s concern but I out earn him significantly. I’ll do alright (even if he ups and leaves).

If the roles were reversed, would people’s views change? How would you feel if your DH/DW ring ended their inheritance? It’s an interesting topic!

In a heartbeat.

The isA is but you could put the rest into another s&s investment and move £20k a year into an ISA. Then after 5 years it would all be in an ISA.
But your original question....look at what you'd save by paying off the mortgage against what you'd earn on the investments. You can put your mortgage saving into your other savings.

It was reversed here, it was my husbands inheritance. He very quickly said off his own back we will clear the mortgage. If he hadn’t I might have felt slightly meh, but it’s his money to do with as he wants. It wouldn’t have been a deal breaker or anything.

It’s a very freeing feeling having no mortgage. Do it, and save your repayment amounts each month.

Having been through my divorce I’d never again pool money and wouldn’t expect a spouse to do that. You just don’t know what’s going to happen. I’d also make a will leaving that money to my children so that it would be protected from any new wife/dc if I died

It might sound brutal and cold hearted, but life doesn’t often turn out as we think it will

this was in answer to your question @Jasmine94 !

I suppose it depends on whether you view money as his money/ my money. We have almost two decades of trust built up from literally growing up together. It’s legally my money but we have shared goals, financially and otherwise so I will use it in a way that helps us achieve those goals.

So many people get married without realising what the actual practical consequences are. It’s a contract with legal/ financial implications so nobody should take that on lightly.

I actually agree with you! I am almost certain I would never marry again but if I did, I would have very separate finances with all the protections possible, including a trust if needed!

I know and accept that I am not taking the most legally/ financially advantageous approach.

4.65%, over 15+ years, is a lot. Especially as without careful investment, you won't get that out of your inheritance. So in this case, yes, I'd pay off the mortgage.

The TRICk though, is to make sure you then save/invest at least a big chunk of what would have been your mortgage payments rather than frittering that money away every month which is what I would struggle to do

Personally I would spend some time on the relationships board here and then take a view. A few things to note. To be clear I am not a financial advisor and this is what I have gleaned from several years reading posts from women who are years into marriage and children and whose relationship has gone south. In true it can't happen to me style, they are then trying to find their way through it.

Your inheritance is not currently considered a joint asset even if you are married. You can hold it separately, invest it and the income and capital will not to the best of my knowledge be considered as a joint asset. So in the event your marriage goes south, you will have a nest egg.

If you pay off the mortgage, that money will automatically become a joint asset and will be split 50:50 in the event of a divorce. Should your husband also inherit and choose to do something different, that's out of your hands.

Many women move to part time work or stop altogether when they have children. This has a detrimental effect on their long term pension and financial position when they retire particularly if their marriage has ended or their spouse dies as his/her pension pay only pay out a spousal pension and not the full amount.

Many women have little or no personal savings. I note you intend "to put the mortgage money into your husbands S&S SIA". I mean this kindly but you have your own tax allowances. He could spank the lot in vegas and you'd be none the wiser.

Maybe you are married to gods gift to husbands. I know I am by and large and I trust him implicitly. But if Mumsnet has taught me anything it is that there is a lot of sense in holding some assets in your own name.

I would see a proper financial advisor. This isn't about mistrusting your husband, it's about the most tax effective way to invest the money so that you and your family will benefit from it long term.

We’ve also got an inheritance due. We’re paying off about 15% of the (bigger than yours!) mortgage. The rest will go to s&s isa, kids isa’s and SIPP’s. They will perform better than the interest on the mortgage. Slightly risky I guess, but not crazy.

I agree with this, generally, women are much worse off overall because they take on the primary caregiver role when children come along, they often earn less, even before children, but certainly after. Their pension is impacted but most detrimentally, they give up their financial independence.

My approach is definitely not a financially/ legally wise approach for many and I wouldn’t advise my friends to do as I am doing. Sounds bonkers! I know.

The difference here is that I am very financially independent, I out earn DH significantly. I won’t be a SAHM/ go part-time, he will. There have been changes over the last decade or so that make being a mother/ going part-time easier but it’s not looked upon favourably and even if I wanted to, it just wouldn’t be feasible. I have my own ISAs/ savings already.

More importantly, we discuss finances very openly and honestly. If he was going to spend thousands in Las Vegas, I’m sure he’d have done it at 21,25 or even 30! We had jobs at 13 and would save our pay packet to catch the bus to spend time together, buying sweets or going to the cinema. We have always had to count the pennies because when you have NMW jobs and one of you spends 5 years at uni, it becomes absolutely crucial. Every financial decision is made together, always has been. We have an annual financial plan and quarterly reviews 😂

We just aren’t the norm and I’m happy to take the risk. If he has a personality transplant and decides our plans to retire early and live by the sea are no longer for him, well, that’s life!

Is there a penalty? Do you have a pension? What about emergency savings? I would look to divide it between pension, mortgage and savings.

There is no cap on investing. You are thinking of ISAs where there is an annual limit. All it means is that you will pay tax on any gains over your allowance. If you are a basic rate taxpayer you are still likely to be much better investing the money if you dont need it in the next 5 to 10 years.

You only pay tax on the interest so you factor in what might be better, reduced mortgage and savings, or no mortgage. I think more savings is better for flexibility.

£20k your S&S isa
£20k your husbands
£10k kids S&S ISAs
Pay £30k off the mortgage
£20k left - dream holiday, car, keep the rest in savings for easy access

Oh, @Jasmine94 , your optimism is touching

no reason not to protect yourself