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  • FIRST POST
    oliel
    Inheritance pay off mortgage or not?
    • #1
    • 3rd Jan 11, 12:10 PM
    Inheritance pay off mortgage or not? 3rd Jan 11 at 12:10 PM
    which is best to do if i inherit £200k

    1) pay off my £125000 mortgage and bank £75k

    2)invest £200000 into term deposit draw the interest on this at the end of the term and then reinvest again and use the interest earned each time to cover mortgage payments

    I am thinking that with option 2 i would eventually pay off mortgage and also still have £200000 in bank? whats your opinion?

    Thanks
Page 1
    • hcb42
    • By hcb42 3rd Jan 11, 12:17 PM
    • 5,774 Posts
    • 3,492 Thanks
    hcb42
    • #2
    • 3rd Jan 11, 12:17 PM
    • #2
    • 3rd Jan 11, 12:17 PM
    depends on your attitude to debt,the interest rates, and your income to pay the mortgage, personally I would pay it off, and be clear of it, enjoy the relative freedom - but that's my personal opinion....
    • p00hsticks
    • By p00hsticks 3rd Jan 11, 12:23 PM
    • 4,925 Posts
    • 4,323 Thanks
    p00hsticks
    • #3
    • 3rd Jan 11, 12:23 PM
    • #3
    • 3rd Jan 11, 12:23 PM
    I am thinking that with option 2 i would eventually pay off mortgage and also still have £200000 in bank?
    Originally posted by oliel
    Yes, but if you went with option 1 and paid the £125k (plus interest) that you would otherwise be paying on your mortgage into the bank alongside your £75k, then you'd probably also end up with a similar amount in the bank in the same timeframe...

    At it's most basic, if the interest rate you are paying on your mortgage is higher that the net rate you can get on a savings account, it makes sense to pay off the mortgage (and vice versa)

    Also bear in mind that the interest on any money in a savings account is going to be liable to tax - even at todays rates, the interest on £200k is not to be sneezed at, and when taken alongside any existing income of your it might even have the effect of putting you into a higher tax bracket .....
  • opinions4u
    • #4
    • 3rd Jan 11, 12:24 PM
    • #4
    • 3rd Jan 11, 12:24 PM
    Without knowing the rate, how can anybody answer?

    Also, what early repayment charges are there?
    • Gorgeous George
    • By Gorgeous George 3rd Jan 11, 12:41 PM
    • 7,787 Posts
    • 8,466 Thanks
    Gorgeous George
    • #5
    • 3rd Jan 11, 12:41 PM
    • #5
    • 3rd Jan 11, 12:41 PM
    If you can save and/or invest the money at a post tax rate greater than your mortgage rate then saving or investing is the answer. If not, then paying off the mortgage is the answer. Paying off the mortgage is also the answer if you value the satisfaction of being mortgage free.

    I'd consider what the person leaving the money would like me to do with the inheritance. I'd probably buy property.

    GG
    • Thrugelmir
    • By Thrugelmir 3rd Jan 11, 1:09 PM
    • 51,296 Posts
    • 43,116 Thanks
    Thrugelmir
    • #6
    • 3rd Jan 11, 1:09 PM
    • #6
    • 3rd Jan 11, 1:09 PM
    Personally I would use the inheritance to pay off the mortgage. Progressively invest the remainder into ISA's with a mixture of cash and stocks and shares. With the money saved from having no mortgage repayments to make, save a reasonable amount into a pension scheme every month.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • originalmiscellany
    • By originalmiscellany 3rd Jan 11, 1:52 PM
    • 1,546 Posts
    • 3,766 Thanks
    originalmiscellany
    • #7
    • 3rd Jan 11, 1:52 PM
    • #7
    • 3rd Jan 11, 1:52 PM
    Like Thrugelmir, I'd pay off the mortgage, and put the rest into a mix of cash and share isas. On top of that, I'd effectively keep up mortgage repayments but channel them off into alternative savings over say 10 years, so you would save a decent amount for when you're older.

    In fact, I'd do almost everything Thrugelmir has said. He's a bright spark (assuming it's a he)!
    • getmore4less
    • By getmore4less 3rd Jan 11, 2:55 PM
    • 26,292 Posts
    • 15,806 Thanks
    getmore4less
    • #8
    • 3rd Jan 11, 2:55 PM
    • #8
    • 3rd Jan 11, 2:55 PM
    If you have a mortgage on a good rate and might want to move in the future then keeping and porting the loan might be an option to consider.


    Look at mortgage free as part of retirement planning.
    • dimbo61
    • By dimbo61 3rd Jan 11, 3:04 PM
    • 9,140 Posts
    • 4,975 Thanks
    dimbo61
    • #9
    • 3rd Jan 11, 3:04 PM
    • #9
    • 3rd Jan 11, 3:04 PM
    If you do inherit £200K will there be inheritance TAX to pay on the estate?
    What would the person who left you this money want you to do with it ?
    How safe is your job? Are you happy in work or do you dream or working part time? or doing a less stressful job!
    Do you have other savings or do you love hand to mouth each month?
    As others have said we dont know your interest rate on the mortgage or any ERC if you cleared it early.
    ME I would pay off the mortgage and invest the rest in cash ISA,s stocks and shares ISA,s maybe a nice holiday and newish car
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