What are the consequences of being mortgage free for a year

generallyhappy

We have about 95k left on the mortgage, we also have about 100k that was given as a gift. This was going to be used to build an extension - we have a very small house.


Recently a relative died, (I am very sad about this and would much prefer the relative back.) I am one of the main beneficiaries, due to probate and the relatives financial affairs I will not receive any inheritance for 9 to 12 months. I do not know yet the size of the inheritance.


I would prefer to use the gift to pay off the mortgage and be mortgage free for now at least, use what we were paying in mortgage repayments as savings, a bit more spending money each month and a cleaner. I really want a cleaner and we cannot afford one on our salaries. Next year we would use the inheritance to either extend or move.


My husband believes that if we needed another mortgage to help finance either the extension or move. It would be difficult to get due to not (needing to) making any mortgage payments for what could easily be a year. Also our age would be against us (I am just short of 50, he is just over). He thinks that we are better releasing some if the savings and carry on paying the mortgage.


I think this is unlikely as we would have a massive amount of equity.


Who is right?


Does anybody know the advantages/disadvantages of each?


Thanks

pavlovs_dog

What interest rate are you paying on your mortgage? How many years do you have left? Depending on the early redemption charges your mortgage provider may levy, your £100k may not cover the full cost of clearing your mortgage.

Have you costed the extension that you would like done? Are you likely to get planning permission for what you want done (e.g. have neighbouring properies had similar extensions done?) Would this add value without putting you over the ceiling price for houses in your area?

If you were to move, how much extra would you need (on top of equity in your current property)? Don't forget things like solicitor fees, stamp duty, removal services too

generallyhappy

What interest rate are you paying on your mortgage? 2.39%
How many years do you have left? 12 years
Depending on the early redemption charges your mortgage provider may levy, your £100k may not cover the full cost of clearing your mortgage. £3,235.73 - Actually, thank you for this question, if we wait till after 31st March it is only £275

Have you costed the extension that you would like done? about 100k
Are you likely to get planning permission for what you want done (e.g. have neighbouring properies had similar extensions done?) - This may be very tricky, but until recent developments the only option of getting a bigger house in the area we want.


Would this add value without putting you over the ceiling price for houses in your area? Would probably only recoup the cost, not make a profit. But the plan was to stay here for life, so was not bothered.

If you were to move, how much extra would you need (on top of equity in your current property)? Don't forget things like solicitor fees, stamp duty, removal services too - Completely depends on size of inheritance.

Having looked at the last mortgage statement, the extra 2 months interest will be a lot less than £2960.73. So will wait till the end of the fixed rate term.

However, the main question still applies - is there any implications in our credit rating if we are mortgage free for up to a year. We do not use our credit cards, as historically I have been very bad about remembering to pay off the balance - however always paid off minimum amount on time, due to direct debit.