Pay off the mortgage?

pimento

I've had an insurance payout that would almost cover my mortgage (but not quite). Should I use the money to pay off almost all the mortgage or are there better ways to use the money?

I owe £59k on my mortgage and I have £50k. I have no other debts. There is 12 years left to run and I am 53. I have a final salary pension but there's a chance I might be made redundant in about five years.

What should I do?

Morgage_Confused

Whats the interest rate on the mortgage? Its normally better to pay it off rather than saving the money in ISA or something. But it is hard to chuck everything at the mortgage even if it does make financial sense. Why not pay half off first and put the rest in an ISA or whatever just in case.

pimento

It's base rate plus 2.5% tracker.

tBagpuss_2

Can you get a pension forecast and see what your pension would be if you left tomorrow?
Then you can consider whether it would be a good idea to put the money (or some of it) into a pension rather than paying off the mortgage.

What other savings do you have? Have you got a 'buffer' to cover 6 months outgoings if you couldn't work?

What is your attitude to debt? Would it make you happier to know you were mortgage-free?

In your place, I would probably use half to reduce the mortgage, continue to pay the same amount each month (which would mean you could be mortgage free in about 4 years, assuming no interest rate changes) Put the other £25,000 into savings or pension.

dimbo61

You cannot take your pension until you are 55 at the earliest ( unless in a very special job IE fireman, footballer,senior civil servant, COE of shell!)
So I agree with tBagpuss ( great name :-) )
I would pay £34,000 straight off the mortgage if you have no other savings?
Think benefits if you have over £16,000 in the bank you are expected to live off your savings.
Put the max amount you can in a Cash ISA this year and next, start regular saver if paying more than 3% and keep mortgage payment the same to pay down mortgage quickly.
You can live life much cheaper if mortgage free!!!

pimento

Thanks. If I were made redundant I'd get 2 years salary (before tax) of about £100k. Would that make a difference?

My pension assuming I retire at 65 as I plan to will be 25/65ths of my salary.

No other savings.

Morgage_Confused

how much are you allowed to pay off the mortgage?
if you are in a tie in period its usually only 10% without penalty.
and do you mean 3% ( 2.5 plus 0.5 base)
id be tempted to just do the lot and be mortgage free. but its really up to you.

pimento

I'm not in a tie-in. It's a special SVR I reverted to after a fixed rate came to an end. I suppose I do mean 3% (I think it's actually 2.79% - not sure why I think that, though, it just rings a bell).

Not sure how much I can pay off.