Use savings to pay off some of mortgage?

charlotte29

Hi!

This is the first time I've posted on here, but thought I'd see if anyone could give me any advice of what to do. I was diagnosed with MS in 2000. At this stage me and my then boyfriend had a £58,000 mortgage. We married and then moved to our current house - worth £240,000 2 years ago. We now have a £170,000 mortgage - just over £1000 a month.

When we took out the previous mortgage we took out a critical illness cover and since then have received £58,000 for my MS - thank goodness!

I now obviously cannot work, so my husband sees this money as my future, but I'd like to use some of this towards the mortgage - which we can now reassess as we are past the early redemption charge date!

Does anyone have any advice?

We really haven't got a clue and I've currenly got the money in a savings account, which pays 4.5%.

Thankyou

A very confused person!

silvercar

Hello and welcome to MSE. Sorry to here of your diagnosis.

As a non-taxpayer (I'm presuming this since you don't work) you can reclaim the tax paid on the interest on your savings. You need to look at the gross rate on your savings. If 4.5% is a net figure, the gross would be 5.625%.

The standard advice is that if you can get a mortgage rate less than your savings rate, you should keep the money in savings. If the mortgage rate is higher than your gross savings rate your better off reducing your mortgage.

Everyone's circumstances are different. If you feel you may need the money in the future you may want to keep it in savings (another option would be an offset mortgage where the savings are used to reduce the outstanding mortgage but the funds are available should you need them).

Are you on a good mortgage deal? If not and you may want to move mortgage companies, can your husband's salary alone justify the large mortgage you have?

Another consideration to bear in mind is that you may want to claim benefits in the future. If any of these benefits prove to be means tested, having a large pot of savings will count against you.

The other point to make is that at some point in time the mortgage will need to be paid off, have you considered how you will do that?

I know some of these points are contradictory but I am just mentioning the things that crossed my mind on reading this thread.