Chance to get rid of the mortgage
Discussion
I wouldn't spend the money on a holiday or a depreciating asset like a car.
But I would consider whether I had enough rainy day money set aside first. You have more than £2K as your post implies but how much? If not adequate, I'd be putting 6 months of living expenses aside.
With whatever is left I would either use the rest for the orangery (providing utility to use an increasing the value of your property) or invest it. It should be fairly straight forward to outperform the opportunity cost of the interest rate on your current mortgage. At the same time you get the benefit of the amount of your mortgage is leveraged by.
The true answer is - it depends 
It's a decision to be made based on your attitude to risk, no one else's. If you are a cautious investor, then pay the mortgage off.
If you are more adventurous, keep it, and invest the £25 K. As long as your investment returns more than the SVR you are currently paying (I'm guessing about 3.75% ?), then you will be better off.
A mentioned by someone else, regardless of your RM pension, you could open a SIPP VIA a low cost platform (AJ Bell, Hargreaves etc) Other platforms are available. You are allowed to contribute up to your annual salary (capped at 40K) per annum, including your existing RM contributions. You can also go back one tax year, so a maximum of 80K (subject to income of at least 40K) less existing contributions over the 2 years can be put into a SIPP.
Keeping it simple, say you earn 30K a year, and pay £1000 a year RM contributions, you have enough headroom to put in that 25K into a SIPP as a lump sum.
With Basic Rate Tax relief added immediately , you would actually have £31750 invested in the SIPP. Investment returns never guaranteed of course and dependent on markets and type of funds chosen. A cautious assumption would be in the 8% PA region, could be more, could be less.
Bear in mind you can take money out of the SIPP from Age 55, you do not have to wait until the scheme retirement age of RM,
The SIPP route is what I would (and actually have) taken. But that's me.
It's a decision to be made based on your attitude to risk, no one else's. If you are a cautious investor, then pay the mortgage off.
If you are more adventurous, keep it, and invest the £25 K. As long as your investment returns more than the SVR you are currently paying (I'm guessing about 3.75% ?), then you will be better off.
A mentioned by someone else, regardless of your RM pension, you could open a SIPP VIA a low cost platform (AJ Bell, Hargreaves etc) Other platforms are available. You are allowed to contribute up to your annual salary (capped at 40K) per annum, including your existing RM contributions. You can also go back one tax year, so a maximum of 80K (subject to income of at least 40K) less existing contributions over the 2 years can be put into a SIPP.
Keeping it simple, say you earn 30K a year, and pay £1000 a year RM contributions, you have enough headroom to put in that 25K into a SIPP as a lump sum.
With Basic Rate Tax relief added immediately , you would actually have £31750 invested in the SIPP. Investment returns never guaranteed of course and dependent on markets and type of funds chosen. A cautious assumption would be in the 8% PA region, could be more, could be less.
Bear in mind you can take money out of the SIPP from Age 55, you do not have to wait until the scheme retirement age of RM,
The SIPP route is what I would (and actually have) taken. But that's me.
Edited by Tit For Tat on Friday 7th July 14:49
KTF said:
egor110 said:
KTF said:
What is the SVR rate you are currently paying and what tax band do you come under?
2.25% nationwide's svr what difference does the tax band make ? surely say band c here in this area of Somerset is going to vary compared to band c elsewhere .
For me I would stash it in the various high interest current accounts at 3%+ (if you want no risk) first then see what was left over.
£25k is a lot to pay and get nothing visible in return (if you see what I mean). If the mortgage was less then it would make more sense but I would investigate what you could do with the £25k first.
My brothers wife had a similar windfall but decided to pay off her student loan rather than take it off their mortgage (which would have made a big difference with their young family) even through she wasn't working at the time so was making no repayments towards it anyway. Madness...
I was on a tracker that allowed unlimited overpayments so I doubled the payment each month and stashed the rest to offset the interest until it was paid off. That way I was reducing the mortgage but still had something to fall back on as a backup.
Its amazing how little you need to cover the bills once the mortgage has gone. After that you then have to worry what you do with all the cash thats increasing each month.
MadProfessor said:
I wouldn't spend the money on a holiday or a depreciating asset like a car.
But I would consider whether I had enough rainy day money set aside first. You have more than £2K as your post implies but how much? If not adequate, I'd be putting 6 months of living expenses aside.
With whatever is left I would either use the rest for the orangery (providing utility to use an increasing the value of your property) or invest it. It should be fairly straight forward to outperform the opportunity cost of the interest rate on your current mortgage. At the same time you get the benefit of the amount of your mortgage is leveraged by.
It's not just about 6 months of living expenses but also if your wife becomes ill and ends up on an NHS waiting list any sane man would pay for it to be taken care of privately if he had the means to do so. Having those means locked in illiquid assets is potentially a significant cost. But I would consider whether I had enough rainy day money set aside first. You have more than £2K as your post implies but how much? If not adequate, I'd be putting 6 months of living expenses aside.
With whatever is left I would either use the rest for the orangery (providing utility to use an increasing the value of your property) or invest it. It should be fairly straight forward to outperform the opportunity cost of the interest rate on your current mortgage. At the same time you get the benefit of the amount of your mortgage is leveraged by.
I was fortunate enough to pay my mortgage off a few months ago. Nice feeling and have been doing little projects round the house with the money we saved on mortgage payments. Also my mrs has just been made redundant, and is now looking for a lower paid less stressful job, something we couldn't have done with a large mortgage hanging over us.
As for paying it off (redeeming) phone the mortgage company to get the value owed on a particular day, then pay it off, some companies allow to pay by card but some (mine included) need the redemption to be paid by bank transfer or cheque. Also, I'm assuming you won't have any redemption penalties as if so it's probably not worth paying off.
Once paying it off you will receive a nice letter from the bank telling you they have no interest in your property. They sent me the signed declaration from when I took the mortgage out. They didn't send deeds as its all done online at land registry, but sent me the info from the land registry stating that they have no interest in your house.
As for insurances, if you have mortgage protection this usually won't pay unless you have a mortgage, if it's income protection it should pay (call to check). Life insurance shouldn't be affected.
As for pensions I'm assuming you're on the Royal Mail final salary scheme, I would pay as many contributions into this as you can. As for starting a private sipp, for every £800 you pay in the government will add £200 to it making £1000. If a higher rate taxpayer you could claim back another £200 meaning the £1000 would cost you £600. There's rumours every year that this could stop at some point, and the government would give a 30% relief meaning lower rate taxpayers would gain and higher rate ones would lose out.
As for paying it off (redeeming) phone the mortgage company to get the value owed on a particular day, then pay it off, some companies allow to pay by card but some (mine included) need the redemption to be paid by bank transfer or cheque. Also, I'm assuming you won't have any redemption penalties as if so it's probably not worth paying off.
Once paying it off you will receive a nice letter from the bank telling you they have no interest in your property. They sent me the signed declaration from when I took the mortgage out. They didn't send deeds as its all done online at land registry, but sent me the info from the land registry stating that they have no interest in your house.
As for insurances, if you have mortgage protection this usually won't pay unless you have a mortgage, if it's income protection it should pay (call to check). Life insurance shouldn't be affected.
As for pensions I'm assuming you're on the Royal Mail final salary scheme, I would pay as many contributions into this as you can. As for starting a private sipp, for every £800 you pay in the government will add £200 to it making £1000. If a higher rate taxpayer you could claim back another £200 meaning the £1000 would cost you £600. There's rumours every year that this could stop at some point, and the government would give a 30% relief meaning lower rate taxpayers would gain and higher rate ones would lose out.
Edited by bigmadjohn on Friday 7th July 23:24
djc206 said:
Olivera said:
superlightr said:
Fantastic !!!! whoooooo !!! have a party or nice meal out to celebrate !!
A party to celebrate paying off a mortgage? Sounds like something Alan Partridge would throw 
Immediate plan is just stick the £700 month mortgage money in a regular savings account.
egor110 said:
We know how to splash out , we went to our running club then had kfc , living the dream
Immediate plan is just stick the £700 month mortgage money in a regular savings account.
mate get in there quick it will drift away if you don't allocate the funds....Immediate plan is just stick the £700 month mortgage money in a regular savings account.
put your foot down get the car account on the table right at the start.
ie
£400 saving account £100 holiday/wife account, £200 car account.....
egor110 said:
We know how to splash out , we went to our running club then had kfc , living the dream
Immediate plan is just stick the £700 month mortgage money in a regular savings account.
When we paid ours off we did this but we didn't pile it all in and used to the extra for nice weekends away and just general going out and enjoying not being a slave to the mortgage. Immediate plan is just stick the £700 month mortgage money in a regular savings account.
Great feeling thou.
egor110 said:
We know how to splash out , we went to our running club then had kfc , living the dream
Immediate plan is just stick the £700 month mortgage money in a regular savings account.
When we paid ours off we did this but we didn't pile it all in and used to the extra for nice weekends away and just general going out and enjoying not being a slave to the mortgage. Immediate plan is just stick the £700 month mortgage money in a regular savings account.
Great feeling thou.
Robertj21a said:
Pay off the mortgage - DEFINITELY
It's an enormous worry off your mind to know that, whatever else may happen, you have your own roof over your head.
£27,000 mortgage iassumig 7 year remaining term is only £323pcm. It's an enormous worry off your mind to know that, whatever else may happen, you have your own roof over your head.
If it's 15years it's £160pcm.
If that's worrying territory I cannot see how it can be unless aside from mortgage your up to your neck in unsecured loans everything on the drip.
Benefit of having zero mortgage + a years net salary in the bank is its a "f
k you position". Lose your job / walk out no issue. It gives you utter comfort. Heck you could live in the house no electric no gas no TV licence no telephone no internet simply pay council tax or if your financially struggling the council wave it.
A question OP how much do you pay currently for Mortgage? £500-600pcm? If so your adding maybe £7k a year to savings/investments from not having to pay into mortgage so 4 years you'll have hat cash again
As it's inheritance though clearing the mortgage might be something you can look back on for life.
Or actually an orangery might be something to constantly remember - though you'd then be tied to the house.
Maybe a £25k DB7
Maybe a £25k Patak or Hublot
Maybe £25k paid into your pension fund you'll instantly get either 20/40/45% added to it.... no benefit until you retire but the idea has to be on the table. Personally I'd not do this with equity at an all time high.
Do you have any other debt? If so pay off the most expensive apr% debt first.
Welshbeef said:
£27,000 mortgage iassumig 7 year remaining term is only £323pcm.
If it's 15years it's £160pcm.
If that's worrying territory I cannot see how it can be unless aside from mortgage your up to your neck in unsecured loans everything on the drip.
Benefit of having zero mortgage + a years net salary in the bank is its a "fk you position". Lose your job / walk out no issue. It gives you utter comfort.
Heck you could live in the house no electric no gas no TV licence no telephone no internet simply pay council tax or if your financially struggling the council wave it.
A question OP how much do you pay currently for Mortgage? £500-600pcm? If so your adding maybe £7k a year to savings/investments from not having to pay into mortgage so 4 years you'll have hat cash again
As it's inheritance though clearing the mortgage might be something you can look back on for life.
Or actually an orangery might be something to constantly remember - though you'd then be tied to the house.
Maybe a £25k DB7
Maybe a £25k Patak or Hublot
Maybe £25k paid into your pension fund you'll instantly get either 20/40/45% added to it.... no benefit until you retire but the idea has to be on the table. Personally I'd not do this with equity at an all time high.
Do you have any other debt? If so pay off the most expensive apr% debt first.
I've paid the mortgage off now , but to answer your questions.If it's 15years it's £160pcm.
If that's worrying territory I cannot see how it can be unless aside from mortgage your up to your neck in unsecured loans everything on the drip.
Benefit of having zero mortgage + a years net salary in the bank is its a "f
k you position". Lose your job / walk out no issue. It gives you utter comfort. Heck you could live in the house no electric no gas no TV licence no telephone no internet simply pay council tax or if your financially struggling the council wave it.
A question OP how much do you pay currently for Mortgage? £500-600pcm? If so your adding maybe £7k a year to savings/investments from not having to pay into mortgage so 4 years you'll have hat cash again
As it's inheritance though clearing the mortgage might be something you can look back on for life.
Or actually an orangery might be something to constantly remember - though you'd then be tied to the house.
Maybe a £25k DB7
Maybe a £25k Patak or Hublot
Maybe £25k paid into your pension fund you'll instantly get either 20/40/45% added to it.... no benefit until you retire but the idea has to be on the table. Personally I'd not do this with equity at an all time high.
Do you have any other debt? If so pay off the most expensive apr% debt first.
Was over paying by £200 month so £700
No other debt .
egor110 said:
I've paid the mortgage off now , but to answer your questions.
Was over paying by £200 month so £700
No other debt .
So £8.4k per year your cash pot ISA or S&S ISA will now continue to grow. Was over paying by £200 month so £700
No other debt .
Think of it another way it's the same value as the state pension. So every year you save (in addition to private pension) your going to have in effect 2x State pension + private pension for retirement --- OR you could retire x years earlier by using this saving to effectively start the state pension sooner.
One note - a friend of mine this sept will clear his mortgage (he is 36) it is a lovely house easily he would never need to move again.
However they have already committed to buy a vastly more expensive house more land bigger pad in a really top end area. Which mortgage wise means he is about to commence a new 25 year mortgage.
I think the idea is Coke retirement age downsize to take the cash out but live in the same area. Leveraging the borrowing for higher tax free capital gains on principle primary residence.
I bet they will never downgrade though.
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