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

Thrugelmir

Pay off the mortgage and thank your FIL. Make inroads into that £7k of debt. The months will soon pass. 

d2446679

Another suggestion,
Are you in a position to remortgage/switch mortgage? (Does your wife work? £100k outstanding on a mortgage that I presume was more than that originally seems fairly large relative to a household income of £24k, so I'm assuming she does, but I may be wrong!)

(With your FIL's blessing...) in your position I'd look into transferring to an offset mortgage, then offset the amount still outstanding with the money from your FIL. Each month "pay yourself" (from the offset savings account) the amount the capital reduces by and use that to invest or put into a pension... If it's set up correctly, that amount should be the amount you're currently paying monthly for your mortgage.

The advantage of that is that you still have the liquidity of the offset savings, but it's working for you at "mortgage interest rate" in the meantime.

The only downside (assuming you have the discipline to leave the money offsetting and not be tempted to spend it!!) is the "opportunity cost" that you could have made more than "mortgage rate" with other investments or pensions - that's up to you to weigh up. My mortgage rate is currently 4% so I'd have to beat that + additional amount for basic/higher rate tax (so 4.8% or 5.6% accordingly) which is possible but not risk-free!

(Offsets are usually variable rate so the other downside is upwards movement in interest rates, although if fully offset relative to the outstanding balance, that wouldn't affect you, even if minimum payments went up accordingly! Also I personally don't think interest rates will be moving upwards any time soon, but as always do your own research!)

I have a similar setup (with a smaller amount involved) albeit without the "gifted" aspect. I could have paid off the mortgage but chose to keep it offset and keep that level of flexibility.

There are variations of this of course, like pay off part of the mortgage and offset the rest (taking out an offset mortgage for, say, £50k).

It goes without saying but this is not investment advice as I'm not qualified to give that

AnotherJoe

webnibbler said:

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.

For values of "savings" = pension.

ian1246

Pay off the mortgage with the money your father in law gave you and then invest the monthly £££'s used for the mortgage into a pension each. If your unsure about locking up the £££'s until retirement, invest a portion into a stocks & shares ISA so that you have will have a good amount in the medium-run (before pension age) i.e. to help cover child university costs or the ability to go part-time later in life etc...

shortsleavedshirt

Thank you all kindly for the advice!  I will get reading up on the points raised.  Pension is the way forward!

Herbalus

ZeroSum said:

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. 

An option would be to keep a few credit cards for your general shopping that are cleared monthly. There’s no cost and keeps a “debt” product ticking over so evidences continual borrowing and repayment.

Sebo027

It it were me:

• Pay off the mortgage. 
• From the extra £600 per month. Pay £412 per month until December 2021. This will pay off the £7k credit card debt in December 2021.
• Use the extra £188 to pay into a private pension or invest through a stocks and shares ISA. Beyond December-21 increase this to £600. After 20 years, with 7% growth, you could be sitting on £196,596 (adjusted for inflation) for you retirement.

Shankers

If you have a fixed rate deal, wait until this period ends then pay off the mortgage to avoid high early repayment charges.
Pay off the £7k CC debt.
Then use the extra 600 p/m ensure you have 3-6 month's living costs saved in something readily accessible (cash or premium bonds): something like NS&I Income Bonds are the best bet atm or premium bonds.
Then use the 600 p/m (or most of it) to pay into a workplace pension and/or a SIPP.

Doshwaster

Sebo027 said:

It it were me:

• Pay off the mortgage. 
• From the extra £600 per month. Pay £412 per month until December 2021. This will pay off the £7k credit card debt in December 2021.
• Use the extra £188 to pay into a private pension or invest through a stocks and shares ISA. Beyond December-21 increase this to £600. After 20 years, with 7% growth, you could be sitting on £196,596 (adjusted for inflation) for you retirement.

Generally a good plan but I would also include building up an emergency fund of at least 3 months essential expenses (which will be fairly low in the mortgage is paid off) to cover any loss of job/income or any sudden big household bills