Should I repay my mortgage from redundancy money? Help please.

Retired_I.F.A.

Barring these credit card that lure you with 0% interest then trust you will be like all the other sheep and spend what you have not got and stick you with 18% or whatever mpney owed on a mortgage is the cheapest money most of us will ever borrow and as long as (which is historically only in recent years)deposit based accounts/investments pay more than the rate on the mortgage you'll be on a loser repaying the mortgage. However longer term say 7 yrs plus history and future reasonable expectations should / has always made investing in equities a better proposition yielding more than deposit/mortgage rates regardless of the economical state of the country.
So the decision will always come down to your attitude to risk, do you bet on a racehorse against a donkey (investment v deposit) or do you not have any money to bet (repayment) ?

jamesd

dimbo61, "please please tell me HOW": BlackRock UK Absolute Alpha fund, CF Arch Cru Investment Portfolio, lots of different bond funds if held inside a stocks and shares ISA. Many Permanent Interest-Bearing Shares (PIBS) or corporate bonds or corporate bond funds if held inside a stocks and shares ISA. It's not that hard to beat just 6.5% tax free. Even with what the pure share markets are doing there are alternatives around.

There's also Zopa and that can beat it if you're a basic rate tax payer and manage your lending rates carefully.

setmefree2

Nell51 wrote: »

I have just taken redundancy and have enough money to repay our mortgage. The outstanding debt is £46.5k made up of £21k on fixed rate of 5.74% due to expire in Nov 2009 and the remainder at base rate tracker.

Are we best to pay off the mortgage in full? Friends and family have advised us to keep a small amount say £10k as if we clear the mortgage this will affect our credit rating going forward. If we did this the repayments for the new £10k mortgage would have to come out of savings as I do not have any income at the moment. Others have suggested investing the money instead and keeping the mortgage as we would earn more from savings than the interest paid on the mortgage but I'm not sure about this. Any help and advice would be appreciated on the best way forward.

Hi

Make sure you have read the following.

http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

Do you have any other savings? Do you have cash ISAs?
Lonestar1's post on benefits is important too.
Can you overpay your mortgage? Are there any penalties for early redemption?

For me personally, if this is all your money I would not be "investing it" (if by that you mean taking risks for higher returns.) In the current stock markets it will IMHO be very hard to make money even for those "in the know" and it will be quite easy to lose a great deal of money. If you don't have cash ISAs this is probably a good place to start and there are a number of "Regular Savers" around at the moment that would give a non tax payer a fab return (10%). You need to look at the Savings board for the best current deals.

Al the best

SMF2

Nell51

Thanks very much to you all for your replies. We have some other small savings for 'rainy days' but would no other savings therefore this is really our only funds. Any money that would be invested would have to fund the repayments to the mortgage if we were to keep part. The early repayment fees are approx £450 on the fixed rate and I think we have more or less decided, subject to any further comments, to go ahead and clear the mortgage with the redundancy money. Thanks for all your help and comments, it's really been appreciated.

Nell51

Thanks very much to you all for your replies. We have some other small savings for 'rainy days' but would no other savings therefore this is really our only funds. Any money that would be invested would have to fund the repayments to the mortgage if we were to keep part. The early repayment fees are approx £450 on the fixed rate and I think we have more or less decided, subject to any further comments, to go ahead and clear the mortgage with the redundancy money. Thanks for all your help and comments, it's really been appreciated.

zzzLazyDaisy

I was in a similar position. I paid my mortgage off and it was the best thing I ever did!

evab_2

Enjoy being mortgage free! Ev x

setmefree2

evab wrote: »

Enjoy being mortgage free! Ev x

Ditto - I wanna be mortgage free too:rolleyes::D

dimbo61

Go for it nell if you clear the mortgage then it takes the pressure of you
and your other half. If you cant find a job paying the same as your old job
you will not have the same worries.
This gives you more options about part time work and if you do get a well
paid job you can save for the good things in life and not just a roof over
your head.
Clear your debts first then build up your savings and GOOD LUCK

Nell51

Thank you all very much for your good wishes. Your advise and good wishes are very appreciated.