Paying off (most of) my mortgage with inheritance

JimmyTheWig

There is little point in paying off the mortgage while you can get better net returns from a savings account than you are paying on your mortgage.
Stick the money in a savings account until the tracker ends.

Repaying your mortgage is a good idea. You can either do that physically (pay money into the mortgage account) or virtually (pay money into another account that will ultimately pay off your mortgage). Doesn't matter which is which.
So rather than getting a repayment mortgage, why not put money each month into the same savings account. (Again, you'll be earning more on it than you'd save by paying it off the mortgage.)

Then when your tracker expires, you have a choice...
1. Pay off a lump sum of your mortgage and stay on the SVR.
2. Remortgage for a lower amount.

Option 2 would probably result in a lower interest rate but would cost you fees to do it. But you don't need to decide between 1 and 2 right now.


Be aware that if the bank you save with goes bust then you will only get back £50k. It is probably worth splitting the savings between 2 or 3 institutions.

jamesd

JimmyTheWig, in this case the person already has the mortgage so it's not suggesting additional borrowing but whether to reduce it rapidly or try to make the money go further. No increase in mortgage risk involved.

Increasing borrowing to invest would be increasing borrowing and increasing risk to the home. It's commonly done for things like BTL buys and by a fair number of people for investing so I might and some others might but it's not really a popular activity. Sometimes it's more interesting in retirement than a lifetime mortgage product, though.

In BenG1s case consider the indication of a willingness to consider a high risk investment action: "Should I MAYBE instead invest in another property to let?" and that sets some context here - BenG1 clearly does think that it's within risk tolerance to use the money for investing, even in a high risk leveraged transaction like a BTL purchase.

Personally, I wouldn't really want a repayment mortgage and wouldn't get to 10% LTV if I could help it, because investment-backed better matches my own objectives, getting any mortgage I have cleared as efficiently as possible, through things like getting higher rate income tax relief on pension payments then using the tax free lump sum to do the mortgage clearing. I borrowed around £30,000 on 0% credit card deals to invest with last year, currently up by perhaps £12,000 on it.

But that's me and what matters here is the risk tolerance BenG1 has indicated, not mine. And BenG1 doesn't have to make just one choice, it's possible to do several different things with the money.

BenG1

jamesd - nice reply, much appreciated. What you suggest is perhaps the more profitable(?) option. I don't have the knowledge or the time to pursue that route though. Nor do I feel I could trust someone to manage it for me.

With regards to risk tolerance, property I know, other investments I don't. And even the property route isn't HUGELY desirable. Hence the leaning towards the short term, clear the damn mortgage and save a chunk and leave it at that.

I know I COULD be cleverer than that. I just don't feel confident enough to try!