Clear mortgage dilemma?
Discussion
We took out a 230k mortgage 4 years ago on a property we bought for 340k, and have 199k left to pay. We have 3 years left on this low rate fixed term when we re-mortgaged in 2020 on a 5 yr fixed deal. The payments are currently 1k a month . My self and the wife have joint take home income of 5.5k per month and have no other debt barring bills etc.
We have recently inherited 200k so as someone who is not an expert with investing, could I get some ideas of what my best options would be ?
( Property currently valued at 500k as we spent 70k extending amd renovating with initial mortgage loan and we have 18yrs left of repayments to make . To clear mortgage now would be 7k extra in fees. At end of this 3 yr term that would be almost zero I presume, as last year it was 9k in fees, and remaining loan would then stand at around 180k.
Any financial advice greatly received
Thanks
We have recently inherited 200k so as someone who is not an expert with investing, could I get some ideas of what my best options would be ?
( Property currently valued at 500k as we spent 70k extending amd renovating with initial mortgage loan and we have 18yrs left of repayments to make . To clear mortgage now would be 7k extra in fees. At end of this 3 yr term that would be almost zero I presume, as last year it was 9k in fees, and remaining loan would then stand at around 180k.
Any financial advice greatly received
Thanks
If your goal is to get rid of the mortgage, then you can achieve that.
I'd weigh up the interest payments on the next 3 years' mortgage repayments against the fees your mortgage provider would charge you for early redemption.
If they're more or less the same, and you have the balance of cash available to cover the early redemption fees, I'd get it paid off.
It's a huge weight off your shoulders knowing it's gone.
A caveat I would add, aside from that I'm NOT an IFA, would be to ensure that by NOT having a mortgage, you're not adversely impacting your credit rating.
I'd weigh up the interest payments on the next 3 years' mortgage repayments against the fees your mortgage provider would charge you for early redemption.
If they're more or less the same, and you have the balance of cash available to cover the early redemption fees, I'd get it paid off.
It's a huge weight off your shoulders knowing it's gone.
A caveat I would add, aside from that I'm NOT an IFA, would be to ensure that by NOT having a mortgage, you're not adversely impacting your credit rating.
I posted the other day in another thread that getting a redemption figure from your bank (possible for them to discuss figures with you over the phone) is a useful way of getting a snapshot of the current state of play in terms of balance, total amount repayable now and in future daily interest etc.
Moneysavingexpert also has an overpayment calculator to assist.
Moneysavingexpert also has an overpayment calculator to assist.
PM3 said:
I would say a lot of the decision would depend on your age ( s ) , you family situation or what that is likely to be in foreseeable future .
Presumably ONE of you inherited the amount ? does that one person want to write off both peoples mortgage ?
I'm 50, the wife 37 . We have an 11 year old . I inherited the money which will write off joint mortgage. Married 15 years and have always had joint account paying everything together, so that not a factor for us. ThanksPresumably ONE of you inherited the amount ? does that one person want to write off both peoples mortgage ?
I'm not a financial advisor and this will 100% not be the best way of doing
money into a secure pot, or pots, premium bonds / locked in cash isa which will allow withdrawal by the time your renewal is due.
end of year make the maximum overpayment you are allowed without penalty and repeat until the end of the mortgage deal then pay it all off rather than renewing
money into a secure pot, or pots, premium bonds / locked in cash isa which will allow withdrawal by the time your renewal is due.
end of year make the maximum overpayment you are allowed without penalty and repeat until the end of the mortgage deal then pay it all off rather than renewing
I would utilise your ISA allowances to invest some in stocks and shares ISAs. You could utilise your wife's Lifetime Allowance as part of this. I prioritised mortgage repayments over everything else at your stage in life and now in my 60s wish I had taken a more balanced approach and invested some income alongside repaying the mortgage. I'm not saying put it all in equities and would continue to overpay the mortgage and pay off a lump when renewal is due.
I am not a financial advisor and what I would do is not without some risk.
I am not a financial advisor and what I would do is not without some risk.
From a purely financial perspective, it is exceptionally likely that investing the money will ultimately provide you with a greater return and more money in your pocket at the end of the mortgage term, assuming that you invest it halfway sensibly and don't just throw it all into Bitcoin.
But it is hard to put a price on the security of having paid off the mortgage and being completely free of any niggling concerns about what might happen if the market crashed and you lost your job. There are no right answers and it entirely depends on your attitude to risk, but I have to say in your shoes I would be tempted to pay off half the mortgage and invest the rest. Obviously, this is not actual financial advice
But it is hard to put a price on the security of having paid off the mortgage and being completely free of any niggling concerns about what might happen if the market crashed and you lost your job. There are no right answers and it entirely depends on your attitude to risk, but I have to say in your shoes I would be tempted to pay off half the mortgage and invest the rest. Obviously, this is not actual financial advice
50/100 grand in a separate account that you then change over to the where the mortgage comes from.
Avoiding an early redemption charge.
Mortgage paid you can then save what you were paying and pay in to which or what ever you decide but still have the rest as a buffer if needed.
Premium bonds
Isas
Etc
Alternatively coke and hookers
Avoiding an early redemption charge.
Mortgage paid you can then save what you were paying and pay in to which or what ever you decide but still have the rest as a buffer if needed.
Premium bonds
Isas
Etc
Alternatively coke and hookers
Quite an interesting situation - one thing to consider is that if you decide to keep the money in cash/premium bonds, the value of the pot will fall year on year given inflation is around 10% at the moment. Think about that in YoY terms: the value of £200k comes £180k after 1 year, £162k after 2 years, £146k after 3 etc. We don't know how long inflation will stay high - could be "transitory" for the next couple of years, could be more persistent.
If it were me, I would likely invest the £200k given I would expect the total return over 5 years to be higher than the interest rate of your mortgage/whatever you can get in premium bonds. But that really depends on your access to someone who can manage the money on your behalf (I don't offer and am not offering these services).
There are other considerations here (your age, the state of your other savings, the state of your pension and whether it is DC or DB etc). This is when a financial adviser can really help, but appreciate that the good ones are far between.
If it were me, I would likely invest the £200k given I would expect the total return over 5 years to be higher than the interest rate of your mortgage/whatever you can get in premium bonds. But that really depends on your access to someone who can manage the money on your behalf (I don't offer and am not offering these services).
There are other considerations here (your age, the state of your other savings, the state of your pension and whether it is DC or DB etc). This is when a financial adviser can really help, but appreciate that the good ones are far between.
andburg said:
I'm not a financial advisor and this will 100% not be the best way of doing
money into a secure pot, or pots, premium bonds / locked in cash isa which will allow withdrawal by the time your renewal is due.
end of year make the maximum overpayment you are allowed without penalty and repeat until the end of the mortgage deal then pay it all off rather than renewing
That’s what I’d do toomoney into a secure pot, or pots, premium bonds / locked in cash isa which will allow withdrawal by the time your renewal is due.
end of year make the maximum overpayment you are allowed without penalty and repeat until the end of the mortgage deal then pay it all off rather than renewing
Douglas Quaid said:
andburg said:
I'm not a financial advisor and this will 100% not be the best way of doing
money into a secure pot, or pots, premium bonds / locked in cash isa which will allow withdrawal by the time your renewal is due.
end of year make the maximum overpayment you are allowed without penalty and repeat until the end of the mortgage deal then pay it all off rather than renewing
That’s what I’d do toomoney into a secure pot, or pots, premium bonds / locked in cash isa which will allow withdrawal by the time your renewal is due.
end of year make the maximum overpayment you are allowed without penalty and repeat until the end of the mortgage deal then pay it all off rather than renewing
Make the maximum overpayment on day 1 of the new financial mortgage year.
Douglas Quaid said:
That’s what I’d do too
Yep even at 1.5% in chase for 2 years that's just over 6k interest rather than paying 7 in fees. But you don't mention your interest rate which may make a difference but is likely not so consequential. If its more than 1.5% you losing on interest but gaining on fee. If its less than 1.5% you are technically up and gaining on fee.
Certainly this year I think!
I'm no financial advisor though!
I had a similar opportunity recently and I used some of the cash to significantly reduce my mortgage, thus needing less take home pay and being able to put more into my pension via salary sacrifice. Not my numbers - but if a higher rate tax payer then you may be able to drop mortgage payments by £500 pcm, and increase pension contributions by almost £1000 pcm.
Bingobobster said:
PM3 said:
I would say a lot of the decision would depend on your age ( s ) , you family situation or what that is likely to be in foreseeable future .
Presumably ONE of you inherited the amount ? does that one person want to write off both peoples mortgage ?
I'm 50, the wife 37 . We have an 11 year old . I inherited the money which will write off joint mortgage. Married 15 years and have always had joint account paying everything together, so that not a factor for us. ThanksPresumably ONE of you inherited the amount ? does that one person want to write off both peoples mortgage ?
Firstly, assess you own attitude to risk and effort you are prepared managing investments.
No matter what the forum says, unless you understand your own risk attitude; answers here are anecdotal.
Being mortgage free is or can be a huge enabler. Likewise taking financial risks pays dividends. Its impossible to guide a person until their attitude to risk has been ascertained.
I work in FS, but priority for me was own house. Rubbish for potential investment upside, but I'm free from burden. I'm younger. But your ambition / risk appetite may be different.
Great position to be in, even if (condoleneces) it's from unfortunate circumstances.
No matter what the forum says, unless you understand your own risk attitude; answers here are anecdotal.
Being mortgage free is or can be a huge enabler. Likewise taking financial risks pays dividends. Its impossible to guide a person until their attitude to risk has been ascertained.
I work in FS, but priority for me was own house. Rubbish for potential investment upside, but I'm free from burden. I'm younger. But your ambition / risk appetite may be different.
Great position to be in, even if (condoleneces) it's from unfortunate circumstances.
That is a significant amount of money. No way I'd pay off the mortgage until I had a financial plan taking me through to retirement and beyond with a goal is to ensure you and your family can meet your future spending needs.
That's just me though. Plenty of people would simply pay off the mortgage and be comfortable in the knowledge that have avoided some of the scary moments you will get from investing. But it also means you may also miss some of the investment gains and tax efficiency opportunities that are available.
Financial planning is hard work (and can be expensive) in the short term, with long term benefits.
That's just me though. Plenty of people would simply pay off the mortgage and be comfortable in the knowledge that have avoided some of the scary moments you will get from investing. But it also means you may also miss some of the investment gains and tax efficiency opportunities that are available.
Financial planning is hard work (and can be expensive) in the short term, with long term benefits.
911r said:
Bingobobster said:
PM3 said:
I would say a lot of the decision would depend on your age ( s ) , you family situation or what that is likely to be in foreseeable future .
Presumably ONE of you inherited the amount ? does that one person want to write off both peoples mortgage ?
I'm 50, the wife 37 . We have an 11 year old . I inherited the money which will write off joint mortgage. Married 15 years and have always had joint account paying everything together, so that not a factor for us. ThanksPresumably ONE of you inherited the amount ? does that one person want to write off both peoples mortgage ?
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