Pay off mortgage completely now?

Sobchak

We are lucky enough to have received an inheritance which covers the outstanding amount on our mortgage and leaves an emergency buffer of £10K over.  We had been hoping to pay for a downstairs extension (budget: £25K) out of the inheritance but in the current unsettled situation, it is unlikely that this project will get off the ground for at least another year.  Does it make sense to pay off the whole mortgage now and then remortgage next year sometime when we can start to hopefully think about an extension again? 

Throwaway1

I would think it would depend on what you think interest rates are likely to be next year, compared to what your current rates are. Also factor in the cost of any admin fees, having to get the house revalued, the time it takes to get a new mortgage etc. all of which you don't have if you just stay on your current deal. I don't think I'd bother if you are going to have to remortgage in only a year's time (unless your current deal is awful and you don't have any early repayment charges to worry about).

Sobchak

Thank you for your insight.  We are coming to the end of our current mortgage deal and so have no early repayment charges to consider but hadn't thought about the faff of getting the house revalued etc. and the admin costs involved in that.  We were hesitant to keep £30K sitting in a savings account when it could have been going towards bringing the mortgage payments but hesitant as well to plunge the whole lot into the mortgage!  With the current situation, it seems likely that interest rates will remain low.  If we did continue with the mortgage payments, albeit reduced, we would be looking at 1.69% for a 3 year fixed term for our next mortgage.  It is unlikely that we would find any savings accounts with that kind of return. 

Sobchak

Thank you for your post.  £148K inheritance.  £138K mortgage.  No other debts to pay off.

Bizzywizard

Personally, I would pay off the mortgage. Because of the current covid situation...no ones job is completely safe. Plus the bank will only guarentee up to £85k. Good luck!

Greenglockenspiel

I agree with Bizzywizard - I would be uncomfortable having more money than the FSCS limit just sat around. I'd pay off the mortgage and then save up for the extension as normal, with the aim to not need a remortgage or look at personal loans instead.

Sobchak

Thanks everyone.  Have decided to take the plunge and pay it all off in one go.  Thanks for the heads-up about the FSCS though - hadn't thought about that at all.

Sobchak

Thank you Mickey666 - yes, intending to get a savings account set up with a direct debit of what the mortgage payments would have been.  If it went straight into the current account, I'm sure it would soon get spent in Tesco or somewhere and there'd be nothing to show for it.