We have inherited £115k and we owe £110 on our mortgage - should we pay off entire mortgage ?

[Munichfam5]

I am 53 and DH is 55 and we are tied in to a low mortgage rate for the next 4 years

So i am not sure what to do ,?

Also - we can pay off £10,000 this year and £10,000 next year with no fees

the other thing is that we need lots doing to our house and so it would be good to spend £40,000 approx on doing those things ,,, ?

We have 3DC’s - 2 at uni and one a college so we are financially supporting them

A friend said we should invest the money and then we’ll get the interest - he said around £200 a month ,,?

I think we need to speak to a financial advisor, but Any advice appreciated!

Tia

£110k ! :)

Seek financial advice but personally I wouldnt clear my mortgage as you have to pay erc.

You could pay max each year and then lump sum after 4 years. Personally with your ages id clear my mortgage as a priority if this is your forever home. Freedom of never losing your house is too valuable. You can always save for renovations esp as you won't be supporting your children forever. It really depends on how much u have put aside for retirement too alot to factor in and consider hence financial advice is better

I would overpay and get the renovations done. Invest the rest with a return and let it build up a little again. When mortgage expires decide what to do with remainder spending on dc and life situation.

Why wouldn’t you pay off the mortgage?

even if you did it in 4 years and put the money in bonds with several banks paying 5%

set up a £10000 bond for one year
another for 2 years, another for 2 years and reinvest for the 3rd year and find a decent isa paying 5% there is a few about

then in 4 years pay the entire mortgage off rather than pay out to remortgage

Alternatively you could put £50 each in an atom bank bond and both get monthly interest £2177 per annum so £362 per month for both of you

use that to overpay your mortgage monthly, £4300 in the year so we’ll under your yearly limit

but going in monthly will save you more in interest over 4 year and you’ll reduce your mortgage by £16000

then when the 4 years is up pay off the remainder

If you pay off the mortgage, the money you were paying to the mortgage will be your income, rather than £200pm from an investment.

I'd pay the £10k pa, put £20 each into cash ISAs or other high interest account, unless you are high earners.

Rationalise re the home improvements, see what you really need, get that done.
Pay £10k a year the next three years (don't let them reduce your monthly payment) then in four years see where you are and what you have left in cash and what the outstanding mortgage is and decide if you want to pay the rest down then.

How urgent are the house repairs? If you have draughty windows or a leaky roof I would pay to have the work done, otherwise it’s going to cost you more further down the line.

If you're on a low mortgage rate, I wouldn't pay it off just yet. But I'd make the maximum overpayment in lump sums for the next 2 years.

I'd get the renovations done ASAP.

And invest the rest. You can decide what to do with the invested money once you've done the renovations and paid off more of the mortgage. And those investments should give you a decent return too.

It's a minefield isn't it? And somehow, being mortgage free seems like the dream, doesn't it, so it must be hard to resist the urge to get rid of it! Bit see and IFA, they'll tell you how to make the most out of that money, and at the end of the day, that's what you want, isn't it?

Sorry for your loss

Pay it off. It’s going to be seriously eroded if you hang on to it trying to even find contractors with enough supplies.

it’ll give you huge piece of mind and freedom from here on in to shape the life of your choosing.

You need to see an FA

Generally think pension first - you have a plan to pay off your mortgage, so make sure you have enough in place for your retirement, and if not, put the money there

You don’t need a financial advisor. If you’re on a low rate, I’d not prioritise the mortgage as you’ll get a better return elsewhere, either by enhancing your property or investing/ saving, and be in a better place for a full repayment in 4 years time. You need to weigh up the cost of interest v potential return v peace of mind/ quality of living. Only you can decide that. An IFA will just erode that with fees.

No hesitation I would pay off the mortgage if I could

Overpay on your mortgage now and then pay off the remainder at the end of the 4 years.

You will be so glad to be rid of it. This recession could well last 10 years.

I would spend as little on your property as you can get away with given that we’re looking at 10% drop in house prices.

If your kids are at uni you could even look to downsize in 4 years. Mortgage free + some extra equity will help you weather the coming economic storm.

Overpay the most you can without penalty - £10k this year, £10k next year

If the renovations are to improve the fabric of the house (roof, windows, render etc) I would get that booked in and set a realistic budget. If it's cosmetic (old carpets, bad wallpaper, dated kitchen) I would consider either not going ahead or doing as much DIY as possible.

Put the rest in stocks and shares ISA.

Paying off our mortgage was the single most liberating thing we ever did.

Of course pay off your mortgage!

Don't pay off the mortgage at the expense of doing necessary renovations. Pay off £10k this year and £10k next and do the work you need to do. There is no point owning a home outright if it's in bad repair and desperately needing fixing or updating and you can't afford to do the work.

Of course you DON'T pay off your mortgage. If you're on a low fix (under 2%), that's insanity, unless there's a reasonable chance you'll both lose your jobs in the next few years so you'll need to claim universal credit. That's the only reason to pay it off.

Put it in a combination of premium bonds (because otherwise you'll pay tax on the interest), fixed rate savings and instant access savings. Use some of the money to make the payments if you want to feel like you don't have mortgage payments to make.

Then the money is available if you do the renovations, and you can pay what's left off your mortgage when your fix is up. Unless you really spunk through a big chunk of the money, you'll probably be mortgage free then anyway.

It depends on the terms of your mortgage of course. Our mortgage is 3.4% Per year and there is a 3% charge on overpayments above the 10% per year allowance so you make the erc back in a year.

Inflation will probably eat away at your lump sum faster than any interest or returns.

Personally I'd pay £60k off now (assuming charges are not too high), use £40k for the works you want, spend a little, and keep the rest in a rainy day cash fund.

Never pay off your mortgage. Cheapest money you can get and great for credit score. Invest as PP suggest

A point on cosmetic work to homes, which lots of people consider unnecessary, I disagree! You shouldn't waste money, of course, but we all spend a huge amount of time in our homes and if you've got e.g. old/worn carpets, dirty paintwork, a dated bathroom, no downstairs loo, or whatever, it can be depressing and inconvenient living in a home that needs work. As others have said, set a budget, but if it will really improve your quality of life I would do it.

Inflation is a red herring as it affects the money and the value of your mortgage at the same rate. Comparative interest rates of savings vs mortgage is what you need to look at.

Plus if you end up doing the work after you've paid off the mortgage and need to reborrow, that's likely to be more expensive than the current mortgage rate.

Given you have a good rate for 4 years I'd pay off the max over payment each year so you don't incur early repayment charges, do the work you need to do and then clear off as much as you have left at the end of the 4 years before remortgaging the last little bit for as short a period as you can afford.

You could also put a chunk that you don't think you'll need just yet into a high interest account that locks the money away for a couple of years - they pay a lot better than instant access accounts.

What is the interest rate on your mortgage,

Assuming you're not close to struggling to pay your mortgage, I'd prioritise getting work done on the house. It will increase your quality of life and will add value if you later sell it. If you funded renovations later and need finance to do it, the interest would be higher than your current mortgage.

If you have money left over, you could overpay your mortgage but I'd only do that to the maximum limit and not aim to pay it off.