Should i pay off my mortgage?

Dekyboy83

Having recently had a successful critical illness claim, i am about to receive the most money i'll ever have in my life. Being mortgage free at my age (36) would be a dream, however, I'm wondering if it is the best move to make...... Should i try to make this money work for me and increase what i have? And what's the best way to do this? Property? Investing in stocks and shares? Anyone had a similar experience?

ian1246

Depends. Your Illness - is it likely to have further impact on you? If so, I'd pay off the roof over your head so you don't have to worry about it in the future!

Investments in Stocks & Shares are a long-term affair. If you invest, there is no guarantee you will be able to withdraw your money when you actually need it (i.e. if the market is in a downturn) without making a loss. Think the general recommendation on this board is only invest what you don't need, and leave it invested for at the very least a minimum of 5 years (ideally 10+)

Property - as in renting? I'd avoid - lots of changes happening with Landlords and laws, eating away potential profits.

Pension - definitely a smart investment decision, only issue is whether you need the cash before 55?

Perhaps do a combination of all 3? - Overpay a significant chunk of the mortgage, reducing your monthly payments, so that In the event anything does ever happen, your able to pay the mortgage payments from benefits/long-term sickness allowance, whilst also investing into Stocks & Shares ISA to get a good-long term investment return (accessible before pension age) and then also chuck a load into pension - getting you a good Tax-Rebate & 30+years of investment returns.

enthusiasticsaver

Personally if I had a critical illness I would not risk it and would repay the mortgage. Certainly look into investing either in stocks and shares isas or pension or both. I would not take on a headache like BTL.

Socajam

All of this would depend on:
1. how much money you will be receiving
2. how much is the mortgage and the rate you are paying now
3. do you have a life happens fund and an emergency fund.

I agree with some of what ian1246 said: save 1/3, pay down the mortgage that if you had to go on benefits, the amount received would be able to pay the mortgage and save 1/3 into a pension.

Dekyboy83

Thanks for the advice.
I had stage 1b melanoma which for now is all clear and the stats are good that i can lead a normal life (though i am obviously at a higher risk of it returning).

The payment will clear my mortgage completely and a coupla thousand left over. Only other debt i have is on 0% int credit card. Dont have any savings and never have done, but obviously without a mortgage, we can start putting money away as well as contribute to pension.

ian1246

I'd probably be tempted to pay off the mortgage, just incase the illness returns - keeping the few thousand ££££ leftover as an emergency fund. Top that up to 6-12months of essential living costs, then throw what you can into building your pensions.

Perhaps also open a stocks & shares Isa and put £100 a month in? Just to build up a pot of investments you can access pre-minimum retirement age if needed? Lastly - stick maybe £100 a month into an easy saver, to cover future maintainence/upgrade costs for house? The rest of what was once your mortgage payment i'd put into pension.

If you owe money on credit & no savings, it does sound like you were just about keeping your head above water? Paying off the mortgage would give you the opportunity to lay a stable set of foundations for the future to avoid any future financial-related stress (budget to pay the card when 0% interest ends).

Definitely do set aside a small chunk of what was once mortgage payments for leisure/living your life though - you deserve some reward for paying off the mortgage!

If you do opt to overpay Mortgage - if there's Early Repayment Charges, pay off the max of the mortgage you can without incurring ERC, then put the remaining £££ you ll need to pay of the mortgage into a fixed saver, which would mature at around the same time as the fixed mortgage does. Then you could pay it off without the ERC eating your £££'s!

Dekyboy83

Thanks for taking the time to respond Ian. Very much appreciated.
I am going to pay it in full then start using some of the money we will now have free to put into our pensions.

Dekyboy83

Thank god I didn't go down the investing in stocks and shares route..... I'd be in big trouble with the wife right now!!!