Do we pay the mortgage off?

Atomix

Last year we unexpectedly came into some money, enough to pay the mortgage off. Our 5 year mortgage term (we have roughly 20 years left total) is due to end soon - therefore we won’t have to pay any early repayment penalties etc.

Its a reasonably large, detached, x4 double beds, double garage etc, we are still in the process of making it ‘how we want it’. - we are both in our early forties, two kids, good jobs earning good money… - in our position would you:

Pay the mortgage off, then pay the spare money each month into our pensions etc.

Sell (we’ve worked out the house has risen by 150K or so, since we bought it (so worth around 500k) and buy an even nicer, bigger house - (750k budget) and the mortgage will remain roughly the same for next 15-20 years… but higher council tax, bills, etc. - interest rate rises, job security over 20 years might change…

Stay as we are - leave money in banks earning 1%, and have it as ‘just in case’ -

Or we could buy another property, and let it out, or keep money in bank, and if house prices do fall in the next few years, we could pick up a bargain or 2.

Lokolo

What about emergency savings, pensions, savings for the children (university, house deposit for them)?

ellie27

Do you want a bigger house?

I wouldnt just move because I had the money to have a bigger house. Do you need more space?

What ages are the kids? If they are teens they might leave home in a few years then you might be in a 5 bed house with just 2 adults? Would you want/need a spare room?

Atomix

Kids: We have a Jisa setup for youngest and CTF for our eldest.
They are increasing roughly £1k per annum to date. so they will benefit by roughly £20k each by adulthood. Realise this may not be anywhere near enough in the future...
Pensions: We both are paying in 10% of salary... (wife has a contribution-match scheme) but we could be saving into lifetime isas etc on top (with the monthly mortgage payment disappearing) -

fairy_lights

I'd pay off the mortgage.
The extra money you'll have every month can then be put in to savings, pensions, or used to get the house just how you want it.

Niv

So many factors to take into account, it really is a personal decision.


If it were me, in the house I am in now then I would pay it off and then make the effort to save the value of my previous mortgage payment while still doing the house up as I want it.


To me I feel that I would mentally be in a better place knowing that the mortgage is gone and the house is paid off, giving the freedom to pretty much do whatever I like (maybe my plans are modest in monetary terms!).


You mention moving for example. Why? If you didn't come into this money would you aim to move to a more expensive house once you paid off / down you current mortgage? Is where you are now your 'forever' house? Is there any great benefit moving form the 500k to a 750k house? Personally I don't see the point unless it was part of your plan to move on from your current place.


Do you really want to become a LL? Is that an aspiration or do you just think its a place to dump your money that's 'safe and easy'? If so, look around this board and you will see how difficult and time consuming it can be.

ST1991

If i came into money i would pay off the mortgage. Maybe not even all of it, but leaving some over as 'emergency fund' or go on holiday...

BJV

I would not move unless you really want to. Instead I would ( and just because I know I am rubbish with money) Pay off the mortgage.

P.s LL is not an easy option. So think carefully before going down that road. Don't forget that you will also be paying tax on rental income.

Pay it off, live, holiday and fun!

ReadingTim

Kick starting some sort of investment fund / nest egg to deal with university tuition fees / living expenses for the kids (if university is likely to be on the cards for either of them) should be a priority for at least some of the money - the position is very different from the early/mid-90s when (based on your age), you might have gone to uni.

Atomix

The house is ok size wise... garden could be bigger...

floor plan attached, kids are 4 and 7

Atomix

Thanks for the replies, think the consensus is to pay it off...