Invest or pay some off mortgage.

abwsco

Apologies first as I wasn't really sure where to post this.

We're shortly going to be getting £16,000. We can pay just under £7500 as soon as we get it, off our mortgage without incurring any penalities and then could pay another £7,500 at the beginning of July, again without penalties. The mortgage is a mix of Cap/Repayment with an Interest only amount currently of £24,000. The mortgage rate is discounted to approx 5.5% (due to rise again soon no doubt) with a tie in until 7/09. We've got another 16 1/2 years left on the mortgage.

As we've virtually no savings would be be better paying off just £7,500 and then saving the rest.

We have been advised to use all the money against our mortgage but surely it would make sense for us to have some savings behind us. I think our mortgage payments will only be reduced by about £50 per month if were were to pay £15,000 off the mortgage.

Hope this makes sense and TIA

dunstonh

With virtually no savings, you should be building up an emergency fund before you consider investing. Everyone should have an emergency fund of around 6 months expenditure (rough rule of thumb, some use variations).

After that, you need to decide whether you want to invest or pay the mortgage off. Investments have higher potential and the use of the stocks and shares ISA can be far more valuable in the long run than paying off the mortgage. However, it depends on your risk profile as to what you would do.

Robert_Sterling

Pay off some of your mortgage and have a reserve for a rainy day or have a gamble with stocks and shares.

abwsco

Thanks guys. We've decided to pay 10% off our mortgage as soon as we get the cash, replace our old boiler(desperately needs doing as it's over 20 years old) and put the remainder in savings. I'm assuing the NS & I direct ISA is the best option for us.