£100k and 40. Invest or Pay of Mortgage?

shortsleavedshirt

Hello All,
This is my first post here, I am very new and naive to the world of money and investments and a lot of what I am reading about is very much going straight over my head!

Basically, this is our current situation.  We are homeowners near Manchester and have about £100k left on our mortgage and my fabulous father in law has offered to gift us the money to pay the mortgage off.  Which is exceptional.

I am 40 work full time (£24k salary), have a wife and 8-year-old child.  I have no pension plans, or ISAs and am living pretty dept free apart from about £7k on a 0% balance transfer credit card which is good until end of 2021.
Ideally we would like to have an extra monthly / quarterly income to take the stress off my work, which is looking likely to be unstable during the current climate.  

Our current mortgage payment is around £600 per month, which if paid off would be a great bit of extra income to save each month.

Is paying off the mortgage the best approach, or is there something clever we can do with such a lump sum to make us better off.  Or should I just make an appointment with a financial advisor?

Thank you.

Gary1984

If your FIL is gifting the money to pay off the mortgage then that's probably what you should do with it. Might be best to wait until the current term ends though to avoid early repayment charges.

Sign up for your workplace pension as you're currently throwing away free money in the form of employer contributions. Use the extra money saved from the mortgage to save up an emergency fund of 3-6 month's living expenses and then enough to clear the credit card when the 0% term ends. After that look into saving more into your pension. 

Set up a standing order to immediately move the extra cash into savings once you've been paid so you don't get used to having the extra £600. 

Bravepants

I agree with Gary. If you are being given the money to pay off your mortgage then you should pay it off. He is giving you the money to secure the roof over his daughter and grandchild's head. If you accept the money and invest it in something else, without telling your FIL, that is not going to sit well in regards to the trust he has built up in you over the years.  Don't fall out with your family over money!

83705628

All of the above.
IMHO you don't need an IFA for your situation.

webnibbler

What Gary said.

Having your mortgage paid off is great, but more important is what you do with the £600 extra you have each month. You already know you can live within your means without it so set up a standing order to pay this money into savings early each month, before lifestyle inflation arrives to fritter it away.

Sailtheworld

I think I'd say thank you and pay off the mortgage as that's the point of the gift. If you're looking for something clever to do then do it with the £600 / month you're saving. You're 40 and have no pension savings - that looks like an area to rectify.

steampowered

If you qualify for the full state pension (i.e. 35 years of full national insurance contribution), you would currently get £175 per week in retirement. That's about £9.1k per year.
 
If you don't think you could live comfortably on £9.1k per year, or if you might not qualify for the full state pension, then you need to address your pension situation urgently. You should really consider investing the £600pm you were paying on the mortgage into your pension.

Do you have access to a workplace pension? If so you should opt in to that immediately.

El_Torro

Yes, if your father in law wants you to pay off the mortgage and he’s given you money to do it then that’s what you should do.

Think of the £600 a month you save as money you can use to make your financial position even more secure. Don’t ignore your emergency fund, build an adequate amount as soon as possible. Then make sure you’re contributing a good amount to either your pension or your wife’s pension (or both). Any money left can go into Stocks and Shares ISAs.

barnstar2077

I would have his arm off before the fickle fingered hand of fate can interfere! (before he changes his mind, or his circumstances change.)

MaxiRobriguez

Mickey666 said:

Perhaps your (very generous) FiL knows that at the age of 40 you're yet to make any pension provision and are leading his precious daughter into an almost penniless and frugal retirement . . . if you'll ever be able to afford to retire in the first place!

Take the generous gift, pay off the mortgage, and spend the saved £600/month on a decent pension plan.

Your daily finances will be no different today but will be transformed tomorrow.

Agreed.

Do make a commitment to put £600 into your pension. Don't waste this opportunity. 

ZeroSum

Pay off £80k & invest £20k
This will reduce mortgage payments to about £100 a month, then drawdown £100 from investment.

If you pay off mortgage & clear credit cards, you wont have any debt history & will in future struggle to get the best credit cards if you ever need them or rates improve & do a bit of stoozing. This is from past experience.