Money dilemma- re mortgage and poss redundancy

[Cloudtraffic]

Just trying to get my head round a potentially difficult money decision and not sure where to start.

Any advice/suggestions would be really welcome.

In short:

Have (had?) comfortable job - not as secure as I once thought now (civil service)

Restructure means likely to be redundancies in April 2021 - I could be ok but who knows?!

Have a mortgage (16 years to go) with £210,000 remaining (I’m early 50s and it’s just in my name). We have other (pension finance if I lose my job - but not enough to cover mortgage payments which are around £1200)

Obviously I would seek work elsewhere if push came to shove but am in a very saturated profession - so earnings would drop and may be long period of uncertainty

So... dilemma is this: have just been told I have got windfall (from relative) of £65k

Question is - do I sit on this money or do I try to reduce mortgage (tied into another three years and not keen to pay penalty for overpayment. I have option for 10% overpayment so am thinking of this ...but worry that if plough this money into house then if market goes tits-up I’ve lost my “security blanket” of unexpected lump sum.

I know folks are in far worse situations but scenarios are giving me sleepless nights!

What would you do?

Pay what you can on your mortgage , but make sure it goes towards lowering your monthly payments, not off the capital

Thanks @RedHelenB - would that not prolong debt though? Really confused - if I paid 10% extra annual overpayment for next three years and then remortgaged would that be better as I’m not getting any younger? THe 16 years gets me to retirement age

Don’t do anything with it until after next April. That’s only 6 months, you won’t lose out much of anything by waiting.

If you’re made redundant you have a cushion to keep paying outgoings until you find a new job and can look sensibly at your new financial situation.

If you pay it off the mortgage now you won’t have that cushion and you’ll still have a big mortgage to pay anyway.

I’d make no decisions until I knew about my job prospects past next April.

Keep it as an emergency fund to tide you over in case of redundancy. Would be v stressful not being able to make mortgage payments, so agree with pp

You'd keep the same mortgage term, but your monthly amount would go down.

I’d overlay the 10% per year and put rest in savings or premium bonds until the uncertainty re your job has passed - once either settled in a new job or more secure pay a chunk off in 3 years when your fox is up

If you get made redundant, would you get a decent redundancy package to give you a bit of a safety net? Have you worked there for long?

It’s usually the other advice which is given, to reduce the term. Each monthly payment is then paying off more of the capital.

Either way, I agree in your circumstances I’d sit on it. Most mortgage rates are low at the moment, so you wouldn’t save that much by paying off now. And in April that might turn out to cover your repayments for long enough to come up with a plan B.

Have a mortgage (16 years to go) with £210,000 remaining (I’m early 50s and it’s just in my name). We have other (pension finance if I lose my job - but not enough to cover mortgage payments which are around £1200)

What is the interest rate on your mortgage?

What do you mean by “pension finance” in your para above?

Is your 10% overpayment cap subject to a window for this year ending before April?

Thanks all - to clarify some pints
Redundancy payout would be around £20k
I have DH (lot older and not on mortgage) - who has pension (s) of around £1.5k pcm)

DH also works at present (interim post) and has salary of around £1200 PCM - but is in public sector and on 12 month rolling contract

If I lost job and DH lost his (worst case scenario with neither working) - guaranteed incomings would be around 1500 ( private pension plus state pension)

Points not pints!

Interest rate at present 2.57% til August 2023

I would keep it in the bank until uncertainty about your job has passed. With that money in the bank you won’t have problems paying your mortgage/bills

You have time and choices on your side. Would downsizing/moving to a cheaper area be a option next year?

I would 100% keep it in the bank. You could live for a good while on that if you are frugal. I would do some calculations on how much you are actually saving if you put it all on the mortgage. It might not be as much as you think.

Sorry adding more ... we have also managed to save £15k too in ordinary savings account

Work out the minimum income you need to cover your living costs for a year minus your DH's pension income. I'm risk adverse but I don't think you need to sit on 65+15 = £80K savings just in case redundancy strikes. Imo, a year's expenditure would be enough to keep in cash and give you the breathing space if the worse scenario occurs.

Personally, I would pay down the mortgage by the 10% allowed this year and subsequent years subject to keeping a year's minimum expenditure aside.

I would do what @sansou has suggested but I would ask for my mortgage term to be shortened rather than payments lowered. My thinking is if I need to take a job with a lower wage I will need a smaller mortgage thus lower payments. I would make sure I've always got a pot of money to survive for a year. Will you want to move in the future?

My mortgage overpayments go by the calendar year. In your shoes I'd overpay by 10% (20k?) now & then again in January. That way you'd not pay an overpayment charge.

Some places will let you withdraw overpayments (mine does), so you may be able to access it if needed.

I'd keep the rest in the bank until I knew what was going on with work.

Personally I'd repay the mortgage as much as you can but check with the bank whether there is a way for you to access the overpayments easily. For example, what would it cost you to change what I assume is currently a fixed rate mortgage into a flexible mortgage which allows you to use the mortgage as a an overdraft almost. It may come with additional upfront fees to change product and a higher rate of interest but it might give you some peace of mind if you get made redundant because you can draw on your payments to tide you over without having to ask for an overdraft or personal loan at a time when your credit is bad. Do this whilst you still have a job and your credit is good.

Obviously you need to work out the sums. It is possible you might as well just let the money sit as cash if the fees and new rate is too high.

50000 would give you 3 years of mortgage payments and some left over for any other emergencies. I would pay , say, £15 k into overpaying mortgage and hang on to the rest of your relative's money for now and also hang on to your savings. That gives you 3 years to make a plan for the future - and that is assuming worst case scenario that neither of you can find any work at all which hopefully is unlikely.

And if doesnt have to be an all or nothing decision now, you could gradually pay money into overpayments - I have a standing order to overpay an amount each month

If things are uncertain I wouldn't rush into anything re paying the mortgage off. Pay a bit extra by all means. But sit on the money till you know what's happening with your job.

@Cloudtraffic

Do you really think you'll end up redundant? In my 11 year career at the CS I've never known anyone to actually end up redundant. Anyone at risk is made surplus and then is a priority candidate for ANY CS department...why do you think you would end up redundant?

Thanks all - some food for thought and really helpful suggestions

@GallusAlice79 - can’t explain further as outing but have seen in my area of work