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Do i pay the mortgage off or ???????

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Hi All

I dont know what to do for the best. so maybe some of you may be able to help point me in the right direction.

I am in the starting throws of buying the family home (£220'000)and selling my current property (£210'000). I currently have £55'000 left to pay on my current mortgage.

So, how i work it out is that i would need a new mortgage of £65'000 (approx) to buy the family home.

That is all well and good and well within budget and we could live quite happily with what we have left.

BUT............

I will be having a lump sum (inheritence) coming my way at some stage. And this is the hard part, do i: A) pay off the mortgage and live mortgage free and have a little too no inheritence left. or B) carry on paying the mortgage and have a nice lump sum sitting somewhere doing not alot. or C)pay the mortgage off and live mortgage free in this home and buy another property which can be let out. or D) your ideas please.

What i dont want to happen is that i have absolutly nothing to show for my inheritance, i dont want to waste it.

Many thanks in advance
Gary

Comments

  • Hi

    I am sure there will be more knowledgeable people along soon, but here goes...

    I am sure that unless the interest rate (after tax) is higher than your mortgage rate, then you are better off paying the mortgage with the inheritance.

    Let us say you didn't pay off the mortgage, then you would need to decide whether you saved the money or invested it.

    With investing, I would invest in things you know about and are prepared to work at. Renting out a property comes to mind and if you are prepared for the extra hassle (sometimes), then it can be worthwhile.

    Also lets not forget, once you are mortgage free, you don't have to spend the extra money on frivolities, but you could invest/save what you would have paid for the mortgage.

    Hope that helps.
    If you are at a poker game and you cannot figure out who is the patsy then guess what...you're the patsy - Warren Buffet
  • I am having the same debate in my mind as well.
    I have a mortgage of £80k beween me and my partner that's £40k each. We could pay that off in two years, but he doesn't think it's a benefit to do that because we don't intend to stay here for the beyond the two years.
    His idea is to invest as much in different properties as possible. I just don't know??!
  • Moonbeam
    Moonbeam Posts: 490 Forumite
    Why not do a bit of both - pay off a lump sum towards your mortgage with some of the inheritance and then invest some to get a return....

    You could use your full ISA allowance to get some tax free savings and investments going to start off (if you haven't used them already) and start a nice long term nest egg.....
  • David_B_2
    David_B_2 Posts: 718 Forumite
    hsvqbutr wrote:

    What i dont want to happen is that i have absolutly nothing to show for my inheritance, i dont want to waste it.

    Gary

    I would not say paying your mortgage and having a £220.000 (or greater) house was wasting your money. Of course this then leaves you with not having to pay the normally monthly mortgage repayment that you could invest.

    Just might thought.
    Regards,
    Dave

    If only I had a pound for every time I used the thanks button :D
  • Forgive me as I am a first time "poster"

    My situation is I have a failed relationship and the ex and 2 children are living in our family home..which is in my name..I currently owe £42000 on the mortgage and was thinking of getting a loan to pay it off...I will take the loan over 12 months...and let them "inherit" it in a few years...

    Do you think this is a good idea as the current loan rates are lower than my current variable rate mortgage???
  • MikeLB
    MikeLB Posts: 352 Forumite
    Have you considered offsetting the Mortgage against the lump sum - That way you are not paying much if any interest on the mortgage and you still have access to the lump sum of money, albeit not earning inetrest until the value of the mortgage falls below that of the lump sum.

    Or maybe pay off half the mortgage with the lump sum, keep the other half of the lump sum then offsett that.

    That way, you are still keeping your options open for a while, whilst also saving some interest on the mortgage.

    I know what the temptation is like to pay it off in full - I debated it in my head for a couple fo years, but decided against it and just overpayed what I could. There was someting very physcological about giving up your savings to pay off the mortgage which was due to clear within a few years of hard graft anyway.
  • ferf1223
    ferf1223 Posts: 8,936 Forumite
    Part of the Furniture
    MikeLB wrote:
    Have you considered offsetting the Mortgage against the lump sum - That way you are not paying much if any interest on the mortgage and you still have access to the lump sum of money, albeit not earning inetrest until the value of the mortgage falls below that of the lump sum.

    This is exactly what we did when we found ourselves in the same situation and we think it's a great deal...we used the Abbey Flexible Plus Tracker mortgage and think it's awesome (though we're not experts, of course)...we like to know that the money is working for us in offsetting the interest, but also to know that (god forbid) something happens to one of us, the money is still accessible for emergencies. And the way we look at it is that while we're not earning interest on the money, we're saving 5%+ interest on the amount in our offset account (and we're not taxed on the interest we would have earned were that money in another sort of non-ISA savings scheme). And the little graph that you can view from the online account is a good motivator as it shows you how much time and interest you are saving.

    ...maybe it's just me, but I really like the little graph and look at it more often than I should probably say. :)
    Does remembering a time that a certain degree of personal responsibility was more or less standard means that I am officially old?
  • Kaz2904
    Kaz2904 Posts: 5,797 Forumite
    1,000 Posts Combo Breaker Mortgage-free Glee!
    My thoughts on this are that you would pay your lender around 50-60k in interest (approximate I haven't worked it out!). So the thing to think of is that you will be taxed on any interest you earn on your savings but not on any interest savings you earn (by paying off the mortgage).
    You could pay off the mortgage and then set yourself a goal to save the same amount as your inheritance which will leave you as a winner in all ways!
    Debt: 16/04/2007:TOTAL DEBT [strike]£92727.75[/strike] £49395.47:eek: :eek: :eek: £43332.28 repaid 100.77% of £43000 target.
    MFiT T2: Debt [STRIKE]£52856.59[/STRIKE] £6316.14 £46540.45 repaid 101.17% of £46000 target.
    2013 Target: completely clear my [STRIKE]£6316.14[/STRIKE] £0 mortgage debt. £6316.14 100% repaid.
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