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Windfall and paying off mortgage

edited 14 July 2020 at 4:30PM in Mortgage-Free Wannabe
6 replies 713 views
ArtyscoutArtyscout Forumite
73 Posts
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edited 14 July 2020 at 4:30PM in Mortgage-Free Wannabe
Thanks for the advice given

Replies

  • zx81zx81 Forumite
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    I'd make a significant contribution to your pension pots.

    With the tax relief and all the years you have left for it to grow, it would be like setting fire to a big pile of notes if you didn't take the opportunity to kickstart them now.

    In terms of the scale of the renovations, only you know what you want.
  • Qtipps44Qtipps44 Forumite
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    I'd do your renovation fully and enjoy it now when your children are young. Put some in pensions and pay mortgage down.

    Good luck
  • Cornish_mumCornish_mum Forumite
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    Hi we are in a pretty similar situation mortgage and income wise, and also received windfalls of a similar magnitude in our mid-thirties. We spent ours on upgrading from a 2-bed terrace to a 3 bed semi-detached plus fixing it up costs (south east property prices). It was important to me at the time to have more space but I feel now we didn’t need to upgrade quite as much as we did as we also took on a 250k mortgage to fund it all.

    However, I would echo looking at your pensions and emergency fund carefully to. At the time we upgraded we had we both had generous final salary pensions and associated life and sickness insurance so we felt well covered, we also maintained a large EF.

    I assume you are nearing the higher rate tax band/child benefit threshold on that take home, so upping your pension contributions could be highly tax efficient for your family. It’s very complex so I would speak to your pension providers in the first instance and then seek some independent advice.

    Only you can decide what’s best renovation versus pensions/MOP.
  • ArtyscoutArtyscout Forumite
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    Thanks Cornish Mum! I was worried I'd feel similar to you. Husband and I have sat down and chatted a lot further today and we feel like a weight has been lifted as we think we've made a decision.

    We are going to go ahead and spend about 25k on the refurbishments and outside office we really need but without the extension for now. We are then going to reduce our mortgage to under £100k but keep the mortgage payments the same as currently to reduce the term straight away. The remaining money will be put in to EF and S & S ISA. We feel really comfortable with this balance and then we will spend any additional savings monthly probably put straight into ISA each month.

    I really appreciate everyone's thoughts here!

    Thanks again.
  • ian1246ian1246 Forumite
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    Sounds like a good well thought out strategy - balancing your immediate needs (garden office) with greater long-term security (Mortgage reduced & starting overpayments) & future financial stability (pension).

    Just a word of advice/warning: Make sure you split the pension contributions so that you each will have a pension you can independently survive off without the other - since whilst in the event of death, you should inherit their pension pot, the issue will be if one of you has to go into supported living/a care home - at which point, their pension pot will go towards that first and foremost, leaving the survivor to cope with just their own pension & whatever the state provides.
  • Cornish_mumCornish_mum Forumite
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    Really glad you came to decision you are both happy with. Merry Christmas
    CM
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