if you move but still owe money on house (but have it in the bank)

RenovationMan

Cleaver wrote: »

It's funny how a lot of people have the 'YOU MUST PAY ALL DEBT IMEDIATELY AS THAT'S WHY WE'RE IN THIS CRISIS!' mentality. It could lose you money over the long term.

It can also be a very risky strategy if you put substantial amounts of money onto a mortgage that is not flexible to allow you to get it back easily and also don't have decent emergency savings.

My own strategy is to have a substantial cash fund for emergencies, to have sufficient money going into a pension plan to allow for a comfortable pension and then whatever is left gets put onto the mortgage.

Gonzo33

Personally if I received a windfall as the OP descibes I would get myself some independant financial advice. Everybody has different circumstances and a different attitude to risk and in reality unless you go into specific details no one will be able to advise you correctly.

StevieJ

treliac wrote: »

Why not pay off the mortgage and then save what you are no longer having to pay monthly? It doesn't make sense to pay mortgage interest if you have no need to. If you invest the 100k you will never make enough to make that a better option.

But take into consideration any early redemption penalty too. Why would you sell the house before you are ready to buy another? You would then have the cost of renting somewhere.

A strange comment to make, it begs the question, How do you know?

treliac

StevieJ wrote: »

A strange comment to make, it begs the question, How do you know?

Okay Stevie, some, perhaps you or Mr q, may do so. For myself and the average non-skilled investor (my mortgage interest rate is fixed at above 4%) it would be a no-brainer.

My time is spent following my career and other interests which don't involve an attempt to become a confident financial speculator... I would imagine that anyone being one wouldn't need to ask the question in the first place.

The_White_Horse

spend it on strippers and burgers. mmmmmm

LilacPixie

treliac wrote: »

Okay Stevie, some, perhaps you or Mr q, may do so. For myself and the average non-skilled investor (my mortgage interest rate is fixed at above 4%) it would be a no-brainer.

My time is spent following my career and other interests which don't involve an attempt to become a confident financial speculator... I would imagine that anyone being one wouldn't need to ask the question in the first place.

If you mortgage rate is fixed at 4% then that begs the question what are the early redemption penalties and how long until the fixed rate expires?

Not that I have 100k sitting in the bank but my mortgage is 110k ish, fixed rate expires in november this year but redemption penalty is 8% of balance 4.89% is rate. As a novice investor I couldn't beat that net rate I don't think but I do know that it would cost me more to clear or almost clear my mortgage now than it would to sit with 100k in nationwide 3.12% gross until november. I can overpay 500 a month penalty fre with my deal so maybe hold 5k back and drip fed maximum overpayments until i could pay the big amount over.

Too many variables for me to make a clean decision

treliac

LilacPixie wrote: »

If you mortgage rate is fixed at 4% then that begs the question what are the early redemption penalties and how long until the fixed rate expires?

I'm half way through a five year fix and hope to clear the mortgage towards the end - am overpaying furiously at the moment. If there is still a penalty it will only be minor and the interest savings will come into it too.

However, the decision won't be entirely financial. There will be a number of considerations to weigh up.

Loopgames

Cleaver wrote: »

Why is it absurd to invest or save money to generate a higher return than paying off your mortgage would save? In the longer term you could therefore pay off more of your mortgage.

Generali and LilacPixie have alreay said that there is no right or wrong answer to this question and it depends on so many factors. Age, risk profile, job status, life goals, investment goals etc. etc. It's funny how a lot of people have the 'YOU MUST PAY ALL DEBT IMEDIATELY AS THAT'S WHY WE'RE IN THIS CRISIS!' mentality. It could lose you money over the long term.

There are two kinds of debt..personal debt and business debt. I would not advise individuals to continue taking personal debt on in order to support an investment.

People mix their personal lives with their business/investment strategies. For a happier and stress free life you should try to limit your personal debt as much as you can. If you can pay it off then that's great. It will then leave you on better stead to pursue business interests.

vigilaire

I have sufficient cash earning me more than my current mortgage costs me in NS&I. It will continue to do so until the inevitable rise in mortgage rates at which time I'll pay off for peace of mind, sit back and enjoy the ride.

Cleaver

Loopgames wrote: »

There are two kinds of debt..personal debt and business debt. I would not advise individuals to continue taking personal debt on in order to support an investment.

For a happier and stress free life you should try to limit your personal debt as much as you can. If you can pay it off then that's great. It will then leave you on better stead to pursue business interests.

We're not talking about taking on personal debt to support an investment, we're talking about whether a lump sum (i.e. additional money) should be used to overpay a mortgage or not. Obviously there's no right or wrong here in my eyes, you do what you want to do.

You're saying that you should pay off debt at any opportunity and above all else, but I disagree with that. We're in our late twenties and have a plan to be mortgage free in at least ten years time through overpayments. But am I throwing every penny at my debt? No, because having all your money in one asset is dumb. Each month spare cash goes on pensions, investments and cash savings at the expense of the mortgage. We're young, our debt is managable and we should be prioritising our money towards other investments IMHO. A lot of financial advisors would say the same too as throwing every penny at your mortgage, especially when rates are so low, may not pay dividends in the long run. Of course though, if that's what you want to do, go ahead...