Made redundant: Should I pay off my mortgage?

maddarlo

Hi folks,

I was made redundant on last month and got a pay-off of about £18,000. Added to my existing savings, I now have a pot of very roughly 40,000.

I also have a £33,000 endowment mortgage - I pay about £40 a month on the mortgage interest and about £50 a month on the endowment.

So, what should I do? Should I keep my £40,000 in the bank and have the security of knowing it's there and that I don't need to find a job for a good while (my career is rather specialised and there are next to no jobs out there for me at the moment)?

Or do I pay off the £33,000 mortgage, which would only leave me with about £7,000 (and no real income) - an amount that wouldn't last too long. Also, if I do pay it off, what do I do about the endowment? Keep paying in or can I stop (it has a shortfall red alert on it, by the way)?

I'm on contributory Jobseekers' Allowance, but can't claim any other benefits as my savings are over £16,000. One benefit of dropping them to £7,000 would be that I could claim - council tax benefit, for example, I suppose?

I really have no idea what to do and would be so grateful for any help you could give me.

Thanks in advance!

MsHoarder

You probably want to put this question on the benefits board, because there is an issue with benefits if you have intentionally deprived yourself of money (i.e. spending large amounts of savings). I can't remember the details on this though: they know more about it.

Of course, if you have also just slashed your outgoings, this may be less of an issue, if you can cope without extra benefits for a while.

maddarlo

THanks MS Hoarder. Will do!

themull1

Can you not get a non specialised job for now? till something better comes along?

Ada3050

I would carry on as you are for a few months and see if anything turns up job wise. £90 a month wont hurt in the short term.

It will give you time to job hunt and come to a decision long term. I was in a similar situation about 4 years ago, I decided to pay the mortgage off after a few months and be done with it. It was less than yours (£6000) so didn't eat in to my savings too much.

I was glad I paid it off though, one less thing to worry over.

Edit: how long before the endowment pays out? I would keep this going so you ensure you get the lump sum at the end of term. It may be worth getting a surrender value as well as this may cover some of the capital.

Andy_L

What rate of interest are you paying on the mortgage? Is that higher or lower than you can get on your savings?

maddarlo

Many thanks for your replies, folks. I've now been advised to stick this on the mortgage board, so it's here: https://forums.moneysavingexpert.com/discussion/comment/40222954#Comment_40222954

Andy L, I must confess I don't know what the interest rate is - pretty small though.

Ada, the endowment is due to pay out in 12 years' time. Hope this helps!

Peelerfart

This question has been asked before on this board and I have followed the one's I've seen with interest as it is a potential scenario for me too.

Some say it would affect benefits through depravation of assets, other say it wouldn't because how can repaying a debt be classed as a deliberate attempt at disposing of money.

To date I've not read a definitive answer.

flea72

Peelerfart wrote: »

This question has been asked before on this board and I have followed the one's I've seen with interest as it is a potential scenario for me too.

Some say it would affect benefits through depravation of assets, other say it wouldn't because how can repaying a debt be classed as a deliberate attempt at disposing of money.

To date I've not read a definitive answer.

redundancy pay is just an upfront payment of your income. its not a cash bonus. so should be treated as you would do, with your normal income. if you couldnt afford to pay a lump sum off your mortgage whilst you were still in employment, then you are still in that situation

the redundancy is to cover your income for the coming time frame. so if you get 12m redundancy, then that money, for benefit purposes would be seen as your income for the next 12m. that is why it is viewed as deprivation of assets if you blow it on your mortgage

F