Should we use our inheritance?

Donnarickysmith

Hi all
My husband and I have some decisions to make but need advice.
We have 12 years left on our interest only mortgage. I know interest only!, but we were young and it was all we could do at the time.
We wanted to change to a repayment mortgage but since my husband was made redundant 4 years ago and has set up on his own, doing very well now but we do not earn enough at the moment so we cannot change at this time.
We have an inheritance of 50k. If we pay that as a lump sum our mortgage will go down to £77k and if we pay an extra £650 per month our mortgage will be finished in 10 years (according to our mortgage adviser and obv if rates stay roughly the same)
We are also hoping in 2 years time our earnings will be improved and could then change to a repayment mortgage.
My dilemma is this: It is not easy spending our inheritance in any way but this is difficult, but if it means long term we will be mortgage free and not owe the bank anything then it must be a good thing.
Does anyone have advice on the best thing to do, we would be grateful to hear your views.

elsien

I'd pay it off the mortgage. Otherwise in 2 years time if your earnings haven't improved enough how do you plan to pay the mortgage off?
I'm presuming you don't have any other repayment vehicles in place? Other than securing the roof over your head, what else have you in mind to use it for?

edinburgher

Sorry for your loss.

A question rather than a suggestion - do you have any concrete mechanism in place for paying off the IO mortgage? I.e. 'we're paying £xxx a month until it's gone', not 'we hope to change our mortgage type etc. in y years'? If not, it's probably worth considering how you intend to pay it off if you aren't going to use the inheritance.

Donnarickysmith

Thank you both. I am not very mortgage savvy but will try and explain all I can what I understand. We were hoping to change to a repayment at April end and a fixed term or 10 years but that is clear we cannot now. So by putting the lump sum down meaning the mortgage we owe is less and paying off extra each month we should be mortgage free in ten years. This is what I understand, and after writing about it I think I understand more and it does make sense to use it for this purpose. We have no plans otherwise of using it. It just seems hard to give it to the bank money that was my parents, but I am sure they would be happy we are looking to be mortgage free rather than still owe £127k in 12 years time.

Norman_Castle

It is not easy spending our inheritance in any way

I wouldn't view this as spending it. You're investing it in property which, unless there is a major collapse in house prices, the money is still yours.

elsien

When you took out the interest only mortgage, what was your plan at the time to pay it back? Do you have an endowment or ISA etc set up to mature when the mortgage needs repaying?

Donnarickysmith

Norman, those few words have helped me a great deal, thank you.

I think when we were young and naive we thought differently but now it would be a case of sell the house or move to something £127k less in price !! Now I am older and wiser I know they were not very wise ideas so I thank you all for your help, questions and suggestions and I am going to use my inheritance to pay off a big part of the mortgage. Thank you all and have a nice day X

greent

Donnarickysmith wrote: »

We have no plans otherwise of using it. It just seems hard to give it to the bank money that was my parents, but I am sure they would be happy we are looking to be mortgage free rather than still owe £127k in 12 years time.

It seems a great way of using it - far better than it 'sitting in an account for.....what?' It could be spent in dribs and drabs on holidays, cars, home furnishings - but this way it makes a real ongoing difference to your life


xx

Darpett

I agree with the other posts. You are investing in your home. If you feel you don't want put it all in the house you could set aside a token sum for a memento or holiday.

SueP19

A few years ago we were in a similar position with a similar inheritance, my gut told me to pay o/s debts but OH didn't want to. Behind his back I did just that freeing up £350 a month. The rest went to pay for DD's post graduate course, despite me falling short of that by about £8,000 (which I had to find and it nearly broke me) I have no regrets as we are now in a position to save, never have had any spare before.

Since January I have paid £300 extra off my mortgage, it is a wonderful feeling

Try this website and put in your mortgage details and play with the figures................if it were me I would pay £47,000 off leaving £80,000 and then work out how much overpayments were then needed for that 10 years marker, then play with the repayment figure it's amazing what a difference just £50 a month extra makes :D:D

http://www.whatsthecost.com/mortgage.aspx

tiger_eyes

Donnarickysmith wrote: »

It just seems hard to give it to the bank money that was my parents, but I am sure they would be happy we are looking to be mortgage free rather than still owe £127k in 12 years time.

I don't know your parents but I'm going to guess they'd be absolutely thrilled that their legacy made a real difference to your life.