Inheritance - pay off mortgage or something else?

[33goingon64]

My Mum is terminally ill and I'm likely to inherit quite a lot of money as she was a very savvy investor and benefited from a public service pension as well as my Dad's estate. I realise some people might think it's poor taste to be thinking about what to do with the money while she is still alive but we're very practical and open in my family and she has encouraged us to start thinking about it.

DH has suggested we pay off the mortgage. For background, DH earns way more than me and pays all the mortgage, bills, for the cars etc. He has a fair amount saved. I work PT and pay for holidays, clothes, and other expenses etc and I have some savings in my name. The mortgage is in joint names and we have always treated our money as joint pot. He doesn't see his earned money as 'his'. We have 2 DC.

So his suggestion that we pay off the mortgage with my inheritance seems fair, doesn't it? He has, after all, been the one to get us so far through paying it off already. The house is in joint name, if we pay it off and then further down the line something went wrong and we split it doesn't disadvantage me at all if the house is paid for. My contribution to paying for the house would have been very small compared to his. The DC will both get a nice sum from my Mum too which we will invest for them and with luck over the next decade that might cover a fair bit of university fees or a first home deposit.

Yet I somehow feel like 'my' inheritance should be used for something else, like a holiday home, or to invest for something big later in life. I mean, I think I know that paying off the mortgage is the sensible thing as it frees us up for the future. But it's a big decision and I just want to stand back and consider it carefully. Would love to know what you think. Thanks.

I'd pay mine off in a heart beat if I could. Think about what that monthly mortgage payment could be used for instead - even going towards buying a holiday home.

How’s your pension looking? Putting some of it into a pension would be great for giving yourself more little treats and luxuries when you’re older.

Do you have a pension ? I would consider this if it was me. All the time mortgage interest rates are low your money would work harder in a pension fund.

If you were to buy a holiday home, would you put it just in your name or both?

Sorry to hear about your Mum . Paying off the mortgage seems a perfectly sensible option but there are other, also sensible and potentially 'better' options too so it might be worth paying for some proper professional advice from an independent financial advisor so you can properly go through all your circumstances and make a plan both for the inheritance but also, if for instance you do reduce or pay off the mortgage, what you do with the income that is freed up to avoid just frittering that away.

For instance you don't mention your pension situation, I assume since your DH is in work he has at least reasonable provision but sounds as though you maybe less so? So you may want to put a lump sum or potentially trickle regular smaller payments into a private pension for you and perhaps your DH might want to start his own private pension or make additional contributions to his workplace pension too, this is usually a really tax efficient and safe way to save for the future. Depending on the rest of your financial situation it might also be more beneficial to invest some of the lump sum in funds particularly if you have ISA allowance left over between you, and keep a small mortgage esp as interest rates are low at the moment, although this may change in the future. The holiday home I'm not sure on personally, unless you would holiday there enough to make it worthwhile and/or it would be a long term plan to retire to that location which you don't think you could achieve other than by buying now (ie house prices are going to sky rocket in that location), I normally think they are more a nice to have luxury than an investment (plus ethical issues re pricing the locals out of areas etc but we won't go there). Maybe you should treat yourself to a nice holiday or some other luxury though as a one off with the money, it sounds like you've been through a tough old time and I'm sure your mum would want you to enjoy yourself too...

If you pay off the mortgage, what will happen to the money your DH is using for the mortgage payment each month?
I think I’d want at least half of that money to be coming back into the family budget, rather than dh keeping it for himself.

I paid the mortgage off with mine, there was about £30k left to pay so just cleared it.
Have invested the rest over ten years and will absolutely definitely retire at 55 with DH and start holidaying several times a year.
Neither parent made it to 70. I wanted to really start enjoying life as soon as I possibly could and felt making a big lifestyle change was the best use of the money.
Five years to go.

Put a good amount in your pension, then make sure you have the same level of personal savings (and a personal emergency fund on top) he has been able to build up while you've worked part time. Buy something that postlitively reminds you of your parents as you go about daily life (painting or a piece of jewellery etc)

Open stakeholder pensions for the kids and sock in the max amounts each year. Then start both thinking of what you spend on.

I recently inherited a lump sum. Not quite enough to pay off my mortgage. I have split it across a lump sum off mortgage, lump sum into my private pension (I have a work one too), maxed my stocks and shares isa. I also had some "fun money" so took the kids on holiday and replaced some furniture that would have taken me a really long time to save for!
I guess some of it will be down to your approach to risk.
If you pay off the mortgage would you be able to then put some of the money saved into your pension?

Depends on what your repayments are and what you think interest rates are going to do. Mortgage debt is actually very cheap finance. You might be better investing in pension, ISAs etc where you may be able to get a better return than the saving on your mortgage would represent. OTOH there is a lot to be said for the security of your own home. Might be worth taking financial advice.

Don't pay off your entire mortgage. I've been recommended this so many times. You need to leave about £5000 or so on it. Just so it's minimal payments coming out. If you pay it off totally, you don't ever have a cheap way to borrow money in the future if needs be.

The first thing I did when I came into a small amount of money was pay off all of my debts.
Now I have paid those off I'm putting all the money I would have spent on the debts into savings and pensions.
But I know if I need anything I can now afford it. Its a good feeling.

I am really sorry about your Mum, she sounds amazing. Definitely ask a few financial advisors for their suggestions. I think the suggestions on making sure you have a good pension is always sound. Of course it depends how much mortgage you have to pay off but I would not necessarily pay it all off and instead perhaps consider investing in a good rental or Airbnb property so that your money will continue to give you a return ideally without a BTL mortgage but if the figures work out to show a profit then it means you have both revenue and the property as an asset as well.

I don't think I would pay off the mortgage. I would look into a buy to let property. I would do that rather than invest in a private pension.

It really depends on your financial situation. How much you have saved, amount of other debts, how you a faring financially while paying mortgage. Also your age.

My mortgage interest rate is so low, salary is good and my investments earning so well, that I would not pay off mortgage.
Instead I would:
1)Pay off any higher interest debts
2)Top up my savings
3)allocate a bit for fun
4)add the rest to pension or investments

Sorry about your mother. 💐

Please seek legal advice re mingling inheritance with other assets.

You may want to keep this separate as part of your own old age security.

Thank you all so much for replying. There's a lot to think about. We haven't sat down and looked at figures yet (plus we don't know what sort of sum it will be after tax). But I hadn't really considered the matter of my pension. DH's pension will be pretty healthy. I do have one but it's tiny. When we know more about the figures involved it may be that we can do a bit of both i.e. pay off a large chunk of mortgage without actually paying it all, and make a lump sum into my pension too. I will definitely get some professional advice too. I was just interested in knowing how other Mumsnetters would see it. You're a very sensible lot!

Do you pay anything towards the mortgage currently?
I personally wouldn't hesitate to pay of the mortgage, or at least my half with inheritance, however it's your decision what you do.

I don't believe you need a financial advisor as there is plenty of good free advice above.

ISA and pension (at least to amount you can get tax relief for) is sensible.

After that, the balance into the pension and paying off the mortgage are both good options. Mortgage rates are low, but equally the stock markets are high and may (or may not) fall, so it's unknown which would prove the better investment. You need to consider your current pension arrangements, DH's pension position, and what what happen to the extra net income if the pension is paid off.

Using some to treat yourself / the family is also worth considering - perhaps a nice family holiday to create some memories compliments of your mum (travel restrictions permitting).

I'd think carefully about a holiday home, unless you're very sure there's a special location you want to visit frequently, and it's practical to do so. Otherwise, I'd park this for now. The option is always there because if you paid off the mortgage, for example, and later decided you'd like a holiday home, you could re-mortgage.

I'm really sorry about your mum, too. It must be a very tough time for you all.

If you paid all the money into your mortgage, then would your husband just have more in his savings? I know you say that money is shared (which is great) but you do distinguish between his savings and yours.

Is there anything you’d like to retrain in but haven’t been able to afford? I think you should be able to buy something as a memento of your mum. I also think you should use some of the money to reinvest for the medium term- I know a pension is attractive- but having some savings of your own invested will give you if unexpected things crop up. Which I imagine would have been something your mum would have liked. I’m sorry that she is poorly. Be kind to yourself.

DH ... pays all the mortgage, bills, for the cars etc ... I work PT and pay for holidays, clothes, and other expenses etc ... we have always treated our money as joint pot.
If money is joint then why is there 'his' expenses and 'your' expenses? This could be a good time to raise the idea of a joint bank account that receives all income and pays all bills.

I paid our mortgage off with my inheritance, it was the obvious thing for us. The feeling of relief when it’s gone is indescribable.

Of all the advice you have been given buying a buy to let property is the absolute worst (abd I say that as a BTL investor with a portfolio of properties!). It can be an expensive headache if you don’t treat it like a business. The returns are really not great any more due to recent tax and regulatory changes.

I’d favour your pension over the mortgage as being far more tax efficient. Max out both of your ISA allowances.

I’m sorry to hear about your mum. I’d definitely beef up your pension first. Mortgage rates are at an all time low. I’d also query the “his expenses” “your expenses” if all money is family money. Also, the reason your husband has paid more towards the mortgage is because, presumably, you took time out of work to have kids and look after them etc and now you work part time because you take on the burden of family duties. I’d have a very honest discussion with your husband firstly. If there’s not going to be an equal sharing of all finances, I wouldn’t go hoofing all your inheritance off the mortgage leaving him with extra capacity to beef up his pension and savings and you with limited capacity to do so. Why hasn’t he used his savings to pay down the mortgage? Things can and do go wrong with marriages every day. You need to mind yourself as best possible.