Should pay off my mortgage with my redundancy payout

homerblade

I am due to be made redundant over the next few months and will recieve sufficient funds that would allow me to pay off my mortgage(4.89% fixed for next 7 years). I don't have any other income or savings. Should I pay off my mortgage and become debt free or should I use my redundancy money to live on until I get another job.

opinions4u

I would be very reluctant to repay the mortgage until I have a secure job in place (and have gained an element of job satisfaction from that new employment for a period of at least 6 months).

So stick it in an easy access savings account (e.g. The AA at 3.15%) and wait to see what life offers before making an irreversable commitment to debt repayment.

It may also be worth checking out if the lump sum affects any benefits/tax credits that you are potentially eligeable for.

Post on the Benefits and Tax Credits board for that.

LeeSouthEast

Will JSA (£64.30 a week) cover all your other outgoings, if you tighten your budget post mortgage? If not, then don't do it.

homerblade

Thanks guys I recon I can survive for about 12 - 18 months on my payout and if I havn't found a suitable job by then I can always sell up and rent a place.

dimbo61

What is the ERC for paying off the mortgage early?
If you use your redundancy money to repay the mortgage that is seen by the benefits people as deliberate disposale of assets or something like that!
If you do get a new job and have money sitting in the bank you could always reduce your mortgage to 7 years or whatever is left of the fixed length deal and use the savings to pay the bigger mortgage payment each month!
GOOD LUCK

opinions4u

dimbo61 wrote: »

If you use your redundancy money to repay the mortgage that is seen by the benefits people as deliberate disposale of assets or something like that!

Repayment of debt cannot be classed as deprivation of assets. You net asset level remains unchanged.

DISCLAIMER: I've never tested this with a benefits claim, so check officially before making an irreversable decision!

homerblade

I think the ERC is a couple of grand so I begrudge giving the thieving banks any more than I have to. Good idea reducing the years to end at the same time as the fixed rate as this should mean less interest.
Another question does anyone know if any grants are available for setting up a business or going self employed (or should I start another post with this)

Chris_N_3

homerblade wrote: »

Another question does anyone know if any grants are available for setting up a business or going self employed (or should I start another post with this)

The answer is probably no, but I would recommend contacting Business Link and local business support organisations as it varies by area.

pawpurrs

I wouldnt pay off the mortgage, at least untill you have another job. If the family has no other income, then you can go on to income based jobseekers, depending on savings. If eligable for this your mortgage is paid up to 200k worth, at a set interest rate approx 6%, even if your current interest rate is lower than this, this is paid after 13 weeks, and is paid for up to 2 years.
As far as I know repayment of debt is not depreciation of assets.
Regarding help for going self employed after six mths of signing on, you would be eligable for self employment credit, which is £50 per week for 16 weeks, which is supposed to help ease you in to self employment.

shorehambeach

This is my own personal opinion - I am not a financial advisor, but most financial advisors have a mortgage and not much else :rotfl:

I would pay off the mortage with the redundancy - Why ?

You won't get this opportunity again in your life, most people who play the lottery do it so they can live without a mortgage..

You made a great comment in your earlier post....

If I couldn't find a job I could just sell it, pay off the mortgage and rent..... (or words to that effect)

Once the mortgage has been paid off then you have a home for life.

Out of debt = out of danger

Although you have an ERC (and don't let that put you off doing it, 7 years of payments is a lot more that paying it off in a lump sum now)

You'll never regret the day you pay it off.

You'll always regret it if you don't.

Good luck - JMHO of course but take it from someone who knows.

underthematress

I reckon it all depends on what stage you are in life and what outgoings you have..children, school fees, car loan, other loans, any commitments and how much you have in savings. If you had no commitments and 4-6 months of wages in the bank you could get by until you found other work. I would agree with the above post that if you are out of debt you are out of danger...You could end up being very fortunate with no mortgage and another job lined up for when your current one ends!Good Luck!