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Original poster

To pay off mortgage or not?

54 replies

Coconutstory · 26/10/2021 21:24

I’ve just come into £75k inheritance. My mortgage is £56k
I planned to pay it off in full, but several people have said not to pay it off in full…. But to pay half or some other amount.
I have no other debts. What is the done thing? Pay it off in full or not?

OP posts:
earsup · 27/10/2021 15:29

If interest is low then its cheap money...i think i might invest it elsewhere safely for a year and see what happens.

Mischance · 27/10/2021 15:34

When we down-sized, because OH was unwell and could not cope in his profession any longer, we were able to pay off the mortgage with the profit. Accountant advised against it - said that the mortgage on one's own home attracts tax relief - we knew that, but paid it off anyway.

Psychologically it helped us to face what was an uncertain future, because our calculations could be based on nil housing costs. It felt right for us.

Whammyyammy · 27/10/2021 15:38

Pay it off.

ZenNudist · 27/10/2021 15:41

I paid mine off in similar circumstances BUT wish I'd bought another house with the money in our area as the value would gave gone up a lot. I'm quite risk averse so now considering what to do to invest my money better...

Silkieschickens · 27/10/2021 15:45

I would pay off in full though check no early redemeption penalties first, if there are you maybe better investing it for period of penalties then paying off.

BobLemon · 27/10/2021 16:00

I was once selling a property to a lottery winner (he was buying a business premises). As we were chatting about his funding (a commercial mortgage) he said to me - if you ever win, here’s my top tip: don’t pay off your mortgage completely!

I didn’t ask him to elaborate, but took it to mean that maybe there had been an adverse affect on his credit rating?

MrsKDB · 27/10/2021 16:06

I would only pay it off if I was still able to max out pension and ISA contributions for the next 10 years. Depending on your age that could be way more important and better return.

Vickim03 · 27/10/2021 16:41

I’d pay it all off. I’ve paid off 2 mortgages with inheritance. And did swallow the early repayment charges. It was lovely not having the payments each month. We have since moved again and taken out a small mortgage. You still have plenty left after you’ve paid it to treat yourself to a nice hol etc or put in savings.

TuftyMarmoset · 27/10/2021 16:51

I agree with the recommendation to speak to a financial advisor. There are so many things it depends on and it can be really helpful to work through it all with someone. For example things to think about:

  • are you likely to want a lump sum for other things, eg new car, kitchen, kids’ education
  • what does your pension pot look like and how long you have until retirement
  • whether you are likely to want to move to a new house where it would be useful to have the cash for renovations/stamp duty/moving costs/additional deposit
  • whether there are early repayment charges and how close you are to the end of the ERC period
  • whether you have any other savings and how much
  • what your interest rate is and whether you could do something else with the money to get a greater return
Etc
waitingpatientlyforspring · 27/10/2021 17:26

I would pay off my mortgage in a heartbeat. Yes a mortgage is low interest borrowing, but it's meant to be long term borrowing so doesn't mean work out cheap then.

XingMing · 27/10/2021 17:56

Another vote for paying off the mortgage, but the advice about investing if you can get a better rate is worth considering. We paid ours off when we had the money to do so, but interest rates were 7 or 8% when we did.

purplesequins · 27/10/2021 17:58

iif you can pay it off without penalty do it.
if not, pay the max and divide the rest between your pension and a rainy day fund.

Toddlerteaplease · 27/10/2021 18:42

Definitely pay it off!

jaundicedoutlook · 27/10/2021 19:28

Pay it off unless there is a crazy early redemption charge. If there is then negotiate it with the lender - chances are they will do a deal.

DramaAlpaca · 27/10/2021 19:30

Pay it off. It's such an amazing feeling to own your home outright.

Unreasonabubble · 27/10/2021 19:35

@Dogsandbabies thank you very much! That gives me a brilliant starting point.

Mantlemoose · 27/10/2021 19:45

Pay it off - that's the first thing I did with my inheritance and I'm so glad I did - totally takes the pressure off! Ask your mortgage provider for a settlement price.

AlwaysLatte · 27/10/2021 19:46

We paid ours mostly off years ago and kept a small amount on it as it would have been cheap rate for borrowing in the future if needed. But when we didn't need that safety net we paid the rest off. I'd probably do that again if I were in the same position.

alwayswrighty · 27/10/2021 20:05

Please speak to an IFA they will go through a full assessment with you and based on your attitude to risk and wider financial circumstances will advise accordingly

Kite22 · 27/10/2021 23:46

@Dogsandbabies Thank you.

Justcannotbearsed · 28/10/2021 08:07

I probably wouldn’t now if I inherited enough. Mortgage rates are cheap and unlikely to go up significantly. I would provide up my payments to reduce it quicker. But I’d invest, in something safe as I’m 8 years away from retirement.

Did pay off a previous mortgage with inheritance and that was the right thing for me to do then. But actually I was young and I probably should have invested and that would have nicely built up by now and the mortgage would still have been long gone.

Capricornandproud · 28/10/2021 08:10

My first question would be how’s your pension? Having £50k put into your pension and maturing for a long time might well be better than clearing the mortgage… however you’re paying interest on that mortgage. And symbolically it would be amazing to own your home outright!

Rainbowqueeen · 28/10/2021 08:16

I think you need a financial plan. It’s hard to say what would be best without knowing your age, kids, job situation.

I’d do some figures. If you pay half off what do you do with the rest? If you pay it all off what do you do with your regular mortgage payments?

Your aim should be to be mortgage free by retirement with the biggest pension pot you can but also something special and memorable eg a holiday, nice piece of furniture or art work.

TangoWhiskyAlphaTango · 28/10/2021 08:17

It depends on personal circumstances but I would not pay it off either. I wold prefer to save it and keep chipping away at my mortgage with my salary that way you will be mortgage free in the future and also have a lump sum of savings.

HolidaysAreComingBack · 28/10/2021 08:19

MN always wants you to pay off the mortgage , but you’ll take decades to save that lump sum again.
So live life for now. But a caravan/camper van. Take a 6month sabatical from work. Go in a few holidays if a lifetime. Build an extension. Buy a car. Upgrade and buy a new house. Do something fun.

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