Pay mortgage off now, or put inheritance in savings? 16 September 2010 at 8:44PM in Mortgage-free wannabe 2 replies 706 views

williams74

I am in the process of applying for a new mortgage for a house, but am now also expecting a large sum of money in the next few months [enough to pay off the mortgage in full], Can anyone help with which type of mortgage I should go for and if it would be wise not to pay off the mortgage in full just yet, instead put a large chunk of it into a high interest savings account for a few years?
The Mortgage is for: £215,000

I hope you can help, many thanks...

seeff

Depends a lot on your financial situation (eg do you have job security, can you easily afford the mortgage, do you have a comfortable amount of savings/pension) and what you'd like to do in the future which may require capital (eg do you want to buy a car, start your own business, are you going to move house, etc).

If you want flexibility - don't want to tie up the money but don't want to pay a mortgage - then you could get an offset mortgage. This negate mortgage with your savings but whilst still giving you having instant access to the money as you would in a savings account. You pay interest on the difference between the amount in the savings account and your mortgage amount. This isn't likely to be financially sensible if you start taking lots of money out (rates are normally higher) and might be a good way of maintaining the status quo for a few years.

Whatever you do (tracker with unlimited overpayments, fixed term with ERC, fully offset) you really need to do the sums in an honest way. You don't want to say "I'll have an offset mortgage and won't touch a penny" then on day one change your mind and use the money to get a 'buy to let'.

Personally I'd pay the mortgage off - then put the money saved per month into a savings account. It'll mount up quite quickly (sadly for those of us still paying their mortgage off without denting it much)!

williams74

Great advice, thank you o much for all your suggestions.. I think I'll go with your last one = to pay off the mortgage and put saved money each month into a savings account.
thanks again...