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Original poster

If you had 30k would you spend it, save it or pay a chunk off your mortgage?

54 replies

MrsTumbletap · 21/02/2019 09:52

Hi all, my husband has just inherited 30k from sadly losing his dad. We weren't expecting it and we now have this chunk of money we are not sure what to do with.

We still have a massive mortgage that we will be paying for another 25 years at least.

Even if we take the 30k off the mortgage it will still be nearly 180k to pay off.

We both work so go on a holiday every year, and have cars that work fine so we don't really need it for a purchase of anything.

What would you do with it? Put it in an ISA? take it off the mortgage? Take some off the mortgage but not all? Put it in a high interest current account?

OP posts:
Original poster
MrsTumbletap · 21/02/2019 16:35

@dirtystinkyrats we do have a fixed rate mortgage for 4 more years. Does that change things?

OP posts:
Soontobe60 · 21/02/2019 16:41

We had approx this amount when we claimed for a missold endowment mortgage a few years ago. We used 2/3 towards our mortgage and 1/3 for a holiday and upgrade to the family car. We will be paying off our mortgage next month, 4 years early, and I can't tell you how good that feels! We will be £630 a month better off!

MigGril · 21/02/2019 16:43

What's happens if you take the 10k off and they recalculate the repayment is the term normally stays the same so you lose the benefit of paying off a lump sum. So pay of the lump sum and keep the repayments the same, this will the shorten your morgage term. Works in your favour.

reallybadidea · 21/02/2019 16:43

Do you have any savings currently?

dirtystinkyrats · 21/02/2019 17:02

If you are on a fixed rate then you might have to pay a charge to pay off a lump sum. You need to look up the details of your mortgage. We can over pay up to (I think) £500 per month on each mortgage product but anything above that would incur a significant penalty, which would make it not worth doing.

Sortingfinances · 21/02/2019 17:49

Don't reduce the monthly payments unless you are struggling to meet them. That way you are overpaying each month by that £55 and will pay off your mortgage in less time.

MollysLips · 21/02/2019 22:10

But you can just take it off without reducing the monthly payments. Then I got confused and don't know if that would be better?

Remember, your mortgage is just a very long-term loan. The longer you have the loan, the more interest you'll pay.

Paying off a big chunk of the outstanding balance - but keeping the regular monthly payments the same as they are - clears a lot of the debt, so you'll finish paying off the mortgage months or even years earlier, and ultimately pay a lot less interest overall.

I ran the MSE mortgage overpayment calculator again; paying off £10k now would shave 1 year, 10 months off the mortgage length, and save you £13,000 in interest!

www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator#results

PleaseSellMyHouse · 21/02/2019 22:11

Mortgage think of all that interest you won’t be paying!

Ooplesandbanoonoos · 21/02/2019 22:13

Mortgage and a couple k for an extra holiday or home improvements.

Mum2jenny · 21/02/2019 22:17

Apparently one should keep between 3-6 months income in an easily accessible account in case of need. Once that's in place, I'd be inclined to pay off a chunk of the mortgage, have a good holiday and spent the rest on upgrading whatever part of the house needs it most.

WH1SPERS · 21/02/2019 22:17

Mortgage

Makes that 30k into 65k . Magic.

Think what you can do when you are mortgage free 5 years sooner.

Hel82 · 21/02/2019 22:44

I'm sorry for your loss.

Clearly paying a chunk off your mortgage is not a bad idea (save that you usually lose access to it so it's not there if you have a crisis) but do look at other ideas too. How are your pensions? With tax relief and over time it could be worth quite a bit more to top up your pension than paying a chunk off your mortgage. Also do remember that when people say that paying the mortgage off early will save your X amount then that is true but just needs a bit of qualification. Assuming that you'd save the money rather than spend it, if you invested it it might be worth a fair bit more than £X by the end of the mortgage term. Also you're only gaining the £X in 20 years or so when your mortgage is finally paid and by then it's pretty much inevitable that inflation will mean that £X is worth a lot less than it is now. For those reasons we've tended not to pay chunks off the mortgage but I do realise that its a safe bet and that at the moment the world is so volatile that investing can be a bit nerve wracking.

junebirthdaygirl · 22/02/2019 07:34

I would definitely save it. Then start to add to it every month , however small.
Then l would continue to live as usual.
You will always pay your mortgage but if either of ye lost your job having a savings cushion is fantastic. Ye would be very grateful to fil in that circumstance. It would also be lovely for dh to buy a good watch or something nice that would constantly remind him of his dad.

AnnaMagnani · 22/02/2019 08:22

Mortgage. Keep payments the same and take it off the term.

If you put the whole £30K in, you would reduce your mortgage term dramatically and save the amount of extra interest (wasted money) you are going to spend on your mortgage by a huge amount.

Much better than just taking £55 off the monthly payment.

Even putting £10K in to reduce the term would be worth it. Term, not monthly payments.

Pinkyyy · 22/02/2019 08:27

Take it off your mortgage and keep the same monthly payments as you have now.

AJPTaylor · 22/02/2019 08:29

Keep the payment the same. You are then overpaying on the balance without noticing. In your shoes I would like the peace of mind of money in savings.

Original poster
MrsTumbletap · 22/02/2019 13:23

I think taking the 10k chunk off and keeping the payments the same is a great idea.

We may even take another chunk off (2-3k) after the house stuff is done, it may be cheaper than we think.

OP posts:
Original poster
MrsTumbletap · 22/02/2019 13:27

@Hel82 We have private pensions not sure if they are any good though. How do you know if they are good pensions? I have a teacher pension and DH pays 8% in to one. Does that mean anything?

To be honest I almost pulled out of my pension a few years ago when my mum died as I didn't see the point of planning for a future when it isn't guaranteed you get one. I asked on here and people on mumsnet shouted at me and told me I was mad, so I kept it. Grin (sensible advice though)

My fear is plan plan plan for the future and die young, like my nan and mum. Part of me thinks sod it live for now! DHs dad dying didn't help this fear either......

OP posts:
PotteringAlong · 22/02/2019 13:33

Your teachers pension is one of the best around! Definitely don’t do anything with that!

PotteringAlong · 22/02/2019 13:34

But yes, I’d do the improvements, the holiday and take a chunk off the capital of the mortgage, because that will also help you long term with retirement etc if you pay it off early.

MargoLovebutter · 22/02/2019 13:36

I'd put it towards the mortgage but also save a few thousand back to do something special or buy something special (antique / art etc), which your DH will look back on and remember the money from his Dad by.

ivykaty44 · 22/02/2019 14:02

www.icalculator.info/finance/mortgage_calculator/210000.html

Calculator here shows how much you pay over the entire term - reducing your mortgage by £30k will save you thousands over a 25 year term.

I’d rather save those thousands to spend on exotic holidays every year than give to a mortgage lender

PalmTree101 · 22/02/2019 18:33

Holiday, rest off the mortgage

BikeRunSki · 22/02/2019 18:36

Home improvs and mortgage.

sansou · 26/02/2019 20:08

25K mortgage and 5K savings/home improvements.

Nothing beats the sense of financial freedom that paying off your mortgage early brings!

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