Do I invest or pay off some of my mortgage?

evelet77

I have recently inherited some money, meaning I could pay off half my mortgage, though this would incur a £2,000 penalty. I can't decide whether to invest the money or pay off half of my mortgage. Any suggestions?

Lokolo

How much m oney is this?

Investing would mean that the money could lose value and you could lose the whole lot (if worst comes to worst). Would you be prepared to do this?

Instead of this you could save.

What rate are you paying on the mortgage?

Barneysmom

I'd pay off half my mortgage, you might save more than 2k on the interest if you did.
Carry on paying as much as you are now, get it out of the way so much quicker.

Lokolo

Barneysmom wrote: »

I'd pay off half my mortgage, you might save more than 2k on the interest if you did.
Carry on paying as much as you are now, get it out of the way so much quicker.

Not necceasrily.

Say mortgage is £100k, someone has £100k savings.
Mortgage is at 4%, savings at 8% (extreme I know but its just example!).

Mortgage after one year will be £104k
Savings after one year will be £108k.

That means you are £4k better off in savings.

Obviously that example was an extreme, but it all counts.

Aegis

This isn't a straightforward question at all. However, if you can supply the following, it becomes a little easier:

Amount of mortgage outstanding
Amount of the inheritance
Interest rate on the mortgage
Time until paying off the mortgage is no longer going to incur an early repayment charge

Barneysmom

Sorry, you're right.
But could you leave it in the bank for, say 10-15 years, I couldn't - I'd have to dip into it. At least if you pay it off the mortgage, you can't spend it.
My mortgage is 7.25% and savings about 4%.

I wouldn't make much.

Lokolo

Barneysmom wrote: »

Sorry, you're right.
But could you leave it in the bank for, say 10-15 years, I couldn't - I'd have to dip into it. At least if you pay it off the mortgage, you can't spend it.
My mortgage is 7.25% and savings about 4%.

I wouldn't make much.

haha yeh with a 7.25% mortgage gotta be a pain!

Obviously some homeowners have a cheapo mortgage rate so obviously it works out best for them :cool:

Aegis wrote: »

This isn't a straightforward question at all. However, if you can supply the following, it becomes a little easier:

Amount of mortgage outstanding
Amount of the inheritance
Interest rate on the mortgage
Time until paying off the mortgage is no longer going to incur an early repayment charge

HEY! longtime no see! IFA yet?

Aegis

Barneysmom wrote: »

Sorry, you're right.
But could you leave it in the bank for, say 10-15 years, I couldn't - I'd have to dip into it. At least if you pay it off the mortgage, you can't spend it.
My mortgage is 7.25% and savings about 4%.

I wouldn't make much.

Are you sure that you're on a 7.25% mortgage with an early repayment charge? Usually the ERCs only apply during an initial discount period, and the rate that you're currently paying is more like a bank's standard variable rate, which usually don't have any exit fees associated with them.

In any case, the rate you're paying is far too high...

However, to work out the benefit of paying back your inheritance it's still important to know the amount of the mortgage. After all, the difference between a £2k charge on a £50k mortgage and a £500k mortgage would be enormous in terms of percentages!

Aegis

Lokolo wrote: »

HEY! longtime no see! IFA yet?

I was on holiday

Lokolo

Aegis wrote: »

Are you sure that you're on a 7.25% mortgage with an early repayment charge? Usually the ERCs only apply during an initial discount period, and the rate that you're currently paying is more like a bank's standard variable rate, which usually don't have any exit fees associated with them.

In any case, the rate you're paying is far too high...

However, to work out the benefit of paying back your inheritance it's still important to know the amount of the mortgage. After all, the difference between a £2k charge on a £50k mortgage and a £500k mortgage would be enormous in terms of percentages!

Also thats not the OP.

And alright, lucky for some, I worked all summer, now back at uni MEH.

Looking for placement job though

Aegis

Lokolo wrote: »

Also thats not the OP.

That would explain it then!