Pay off my mortgage or invest? newbie needing advice please!

sall242003

I have just been paid out on my life insurance sadly under the terminal illness cover. The payout was approx £84,000 which is sufficient to pay our mortgage off in full with a little left over to spend.

Now our mortgage is a base rate tracker with a low interest rate of just 2.6% so our monthly re-payments are not too bad.

Should we just re-pay the mortgage in full and enjoy being mortgage free or should we move the money somewhere to gain interest and how much would this potentially earn us?

We have no experience whatsoever in finance and this is a massive amount of money to us.

Any advice would be greatly appreciated

atush

What other savings, investments and pensions will your OH have to survive on after you are gone (and if this money is spent on the mtg?). Are you still working? Do you have death in service benefits?


We don't really know enough to help you with your terribly sad position?

sall242003

atush wrote: »

What other savings, investments and pensions will your OH have to survive on after you are gone (and if this money is spent on the mtg?). Are you still working? Do you have death in service benefits?


We don't really know enough to help you with your terribly sad position?

Hi, its my husband who is terminally ill not me, I have no savings, investments or anything to my name except this payout. We are both employed and yes he does have a death in service benefit which will be split equally between 4 children. He doesnt have a pension as we are both on quiet low incomes and we are young with small children to pay for, so pensions were something that we could never really afford to pay into. Hope this helps!

dunstonh

We are both employed and yes he does have a death in service benefit which will be split equally between 4 children.

Is that wise given that you would suffer a loss of income and have no pension entitlement from him?

Are you sure he also gets that death in service benefit? Most employers require you to be in the pension scheme to get the full package of benefits. Not all but it may be a good idea to check to be sure.

We dont know enough about your circumstances or financial position. However, remember why you took this policy out. It was to ensure that the mortgage would be repaid if something happened to either of you as you wanted to make sure the surviving spouse/partner got to keep the house and it couldnt be taken away.

You are going to lose an income and life will be harder for you going forward as you have the children to bring up alone. It would be very easy to dip into those savings every now and then to pay things. Once you do it once, it leads on from there until you have little left and still have the mortgage. It happens.

Is it really worth it for the very small amount you may gain for a relatively short period with the risks of what could happen as well as the risks of the mortgage rates heading back up whilst you are stuck in a savings account paying less (which will likely happen at some point).

Your husband will be be able to spend his remaining time knowing that at least his family have the house. What is financially best is not always what is actually best. So, even if you can get a bit more, is it worth it (especially given the small amount it would like yield as an alternative)?

I wish you well during this terrible time.

racing_blue

Sorry to hear this. It sounds like you'll have a lot of challenges without having to worry about investments and the security of your home. So based on the brief information here I'd suggest paying off the mortgage.

However, if you have strong self discipline, then I would suggest look into switching to an offset mortgage. Offset the life insurance payment against the full mortgage, effectively paying off your mortgage (no interest) but retaining the option to borrow again if needed over the next few difficult years.

Best wishes, and i hope your husband's health exceeds expectations

Spiggle

dunstonh wrote: »

... However, remember why you took this policy out. It was to ensure that the mortgage would be repaid if something happened to either of you as you wanted to make sure the surviving spouse/partner got to keep the house and it couldnt be taken away. ...

Your husband will be be able to spend his remaining time knowing that at least his family have the house. What is financially best is not always what is actually best. ...

I wish you well during this terrible time.

What a truly thoughtful response.

Sall, my condolences on your situation. I'm no finance person but with four children you have the opportunity to secure the roof over all your heads. No matter what happens or when you have your home for your family secure. I'm sure this will bring comfort to your husband and to you in the future.

Good luck and my sincerest good wishes for the future.

All the best,
Spigs

xylophone

At this sad and worrying time it must be very hard to have to deal with anything other than your husband's welfare. That said, life will have to go on after he has gone, not least because you have four children who will depend even more on you.

I do think that you will feel an enormous sense of relief if you pay off the mortgage and secure the roof over your heads. You might consider putting the balance into an instant access isa?

With regard to the death in service benefit, as a previous poster has noted, this tends to come with a pension package - it would be worth checking this out.
http://www.direct.gov.uk/en/moneytaxandbenefits/benefitstaxcreditsandothersupport/bereaved/index.htm might be worth a look if you have a few spare moments.

I do hope that you have a supportive friend or relation to assist you at this difficult time.

Jegersmart

Definitely pay off the mortgage and rather spend the time and effort looking into what can be done for your other half. There are many alternative therapies that can either compliment or replace traditional methods depending on what the scenario is. I wish you all the very best at this awful time - but would advise focussing your energy on fighting the prognosis rather than the financial (though important it is).

Good luck!

J

squibbs25

I too would definatley opt for paying off the mortgage completely.
The security of having the house sorted will be one thing less you have to worry about, there will be enough pressure on you at the moment is it worth the extra stress on top of it all?
I know it is a lot of money and it would be nice to do something 'useful' with it, paying off the mortgage will be extremely usefull to you.

If you will need benefits in any way sadly the chances of getting them will be reduced if you have money tucked away.



Wishing you all the best x

susan47

Hi
I'm really sorry to hear about your situation. My husband was diagnosed with the 'big C' 6 months ago and we had to think a lot about finances. Fortunately he has since had major surgery and we are thinking positively now, but here is what I think anyway.
The roof over your head is vital - I think you should pay off your mortgage and consider your house an asset. If you really need money further down the line, then you can downsize and get some of your capital that way, but for now I'd say that security is most important - you don't want to worry about how to make the next mortgage payment. You don't get much for savings anywhere at the moment, but I got a couple of longer term bonds to ensure the best rate over the next 4 to 5 years. With a bond, ok you can't get your hands on the money itself, but at least you get a small income. I figure these days that anything over 4% is ok. It won't bring you a lot of money to live on, but if you just spend all that's left after the mortgage is paid, well it's gone...
I'm a financially very careful person and always try and prepare for the worst. Some people take risks, but I don't...
I wish you the very best of luck and hope that your husband has a long time ahead of him yet.

getmore4less

I think you may need to be pragmatic and think about future income and the impact on benifits if you have a larger amount of savings.

No point having savings and a mortgage if the income will be impacted so you just end up suplimenting that from savings.

Some offset mortgages can be set up so you have no savings but can still access the money which might be an option but mortgage free is very atractive security.

I would also make sure you have some funds to make the best out of any time left.