Pay off mortgage, or...what??

[BranstonTickle]

If you came into enough money via inheritance to pay off your mortgage, would you?

Yes.

Yes, I would then use the money previously allocated to the mortgage, for a holiday, new furniture or renovations

I did that when my mum gave me some money after my father died. I was able to pay off my mortgage ( single parent) but saved the same amount each month to build up my retirement savings - paid extra into my pension, set up ISAs and other bonds. 20 years later I was able to retire at 60 with a decent pension and some investments, best thing I did!

yes and did. The peace of mind is worth more than I thought.

yes, but be aware of any issues around paying off a jointly owned property in case of separation ... inheritance may not then be ring-fenced for you, but treated as a shared asset (sorry, not explaining that very well).

Yes, I really want to be mortgage free. Think we will stay in our 'starter home' forever to do so!

Yes I agree with this. One of my friends lost out on her inheritance that way.

sorry to hear that, @determinedtomakethiswork

Thank you for all of your thoughts, everyone. Lots to think about but feeling extremely fortunate to even be able to consider these things.

(It's my husband's family's money, as well!)

It depends on your mortgage rate and term, I think. If your mortgage rate is lower than potential interest you could gain from saving the money, then it makes more sense to invest the money and continue to pay off mortgage. For example, our mortgage is fixed for 10 years at about 3% (with early repayment penalties in the first five years). If I came into a sum big enough to pay off the mortgage it would make more sense to invest it in a higher interest bank account (~5%) while continuing to pay off the mortgage - at least until the early repayment charges go away. Inflation also devalues the balance of your mortgage (although with interest rates the way they are it might not feel like it). There are lots of variables to consider, and obviously there's a psychological benefit from having the mortgage paid off, but if you're just looking at the financial aspects, paying it off may not be the best choice.

I would eventually, but if you are on a cheap fix, then you're generally better off sticking it in high interest savings and then paying mortgage off at the end of your fix (with the caveat that if you/DH are likely to dip into that money and whittle it away if it's there it may be better just paying the mortgage ASAP). I'm about to get an inheritance that will pay off our mortgage, but we are on a 1.7% fixed rate till 2026, so to both avoid early repayment charges and make a bit of extra money with it, I'll wait till 2026 to pay it off. You can get 5% in instant access savings now.

Nah I can get 40% tax back on paying the money into my pension. Beats my low mortgage rate everytime - not to mention the growth.

We’re paying off the mortgage next year and then plan to put what we save into our pensions.

Retirement unlikely to be for 30 years, but gives us a good starting point.

It depends on the rate, also what else you could do with the money, how much of a difference it would make to your day to day finances etc.

If your current mortgage rate is under 4% you could get more money in savings so I'd put it in savings until I needed to remortgage.

If you're planning on home improvements or a new car, it might be worth using the money for that. You don't want to pay off existing debt at a low rate, only to need to borrow it back at a higher rate. Also make sure you have a decent emergency fund, so some could be earmarked for that.

You might decide to keep on with your mortgage and use the money to top up your pension instead.

But if none of the above applies and not having a mortgage would make a difference to your day to day finances, then paying off the mortgage would be a sensible use of the money. It also doesn't have to be all or nothing, you could use some to pay it down, and some for other things.

If I could pay off my own mortgage myself and had children, I would keep the money and pass it on to them for a future house deposit so I could have a child -free retirement.

No, but I'm on a cheap fix with a 5% early retention charge until it ends. I would however, put the money in an interest bearing account ready for when the fix ends.

Personally I'd speak to an IFA, they can assess your full circumstances and advise you on what's best for you as everyone is different.

Unless the OP is going to have a minimum of £50k+, and preferably 6 figures) left after paying off her mortgage (or saved instead because of interest rate/penalties) then an IFA really isn't necessary.

You'd be paying a minimum of a few hundred pounds for them to ask you questions that you probably don't know the answers to because if you did, you'd also know that you don't need an IFA.

If you're inheriting enough to pay off a mortgage, which may be 6 figures, then they are the best people to speak with. The IFA I work with in a professional capacity doesn't charge for initial consultation and its your choice whether to proceed with their advice or do your own thing.

We did this (critical illness payment) and have since bought a new car, a new bathroom and a very nice holiday with the savings from mortgage payments

Really appreciate each reply.

Some more detail: it would be over £100k and we are just coming to the end of a fixed rate so we don't yet know what new rate we'll be able to get. We will get professional advice but I do value the experience and opinions posters have shared here, thank you all.

Hey OP, just wondering if you made a decision?