Do we use our £100K to pay off our mortgage or is there a better use for it?

lzh

Hello, I'm looking for opinions on what to do with £100K i've inherited. I'm 46 & my husband is 50. I work part time earning £18k pa and have had an occupational pension for 20 years that I pay the maximum amount into. My husband earns £42K, his pension pot is currently £515K. My husband is likely to be made redundant later this year and has plans to go self employed. Our outstanding mortgage is £60K with 15 years left on it, do we use this money to pay off our mortgage or is there a better use for it? We have no other loans or debts  and we have no other savings or investments.

London7766551

Seems like a no brainer. Pay it off

dunstonh

My husband is likely to be made redundant later this year and has plans to go self employed.

This is key information that could change the decision in multiple ways.
Redundancy could mean a period with little or no income from him.   Going self employed could mean a period of limited income that takes time to build up.  It may also require capital.

So, maybe not rush into any decision.  Kissing goodbye to the mortgage may seem nice but you would also be kissing goodbye to £60k of savings.    Savings that may be needed in the future.
Based on extremely limited information, it cannot be called a no brainer either way.

lzh

dunstonh said:

My husband is likely to be made redundant later this year and has plans to go self employed.

This is key information that could change the decision in multiple ways.
Redundancy could mean a period with little or no income from him.   Going self employed could mean a period of limited income that takes time to build up.  It may also require capital.

So, maybe not rush into any decision.  Kissing goodbye to the mortgage may seem nice but you would also be kissing goodbye to £60k of savings.    Savings that may be needed in the future.
Based on extremely limited information, it cannot be called a no brainer either way.

Yes, the fact that my husband will be made redundant is definitely "key" in our decision what to do with the money. Our thinking behind paying off the mortgage is one less bill to pay once he does go self employed and therefore won't have the pressure of earning such and such amount. It will still leave us with £40K should we decide to pay it off

unkle

How about switching mortgage to an offset mortgage, that way you can offset as you wish to effectively pay it off but still have access to the cash if it is needed later following the redundancy.

JGB1955

Can you live on £40K p.a.?  Are you happy to do that?  Would you sleep better at night if you knew that your house was fully paid for?  What is your mortgage rate?  What interest do you expect to get on your savings?  How much redundancy money can your OH expect to get?  How long will that last him?  £40K sounds like a VERY good amount to live on from my perspective - but I'm not you and don't have your bills or commitments.....

sevenhills

lzh said:

Our outstanding mortgage is £60K with 15 years left on it, do we use this money to pay off our mortgage or is there a better use for it? We have no other loans or debts  and we have no other savings or investments.

It depends on your attitude to risk. Put some into your pension and gain 20%/40% tax relief, invest it in the stock market and gain 6%-10% as opposed to paying off your mortgage and saving 3%/4%

I would struggle to know what to do with a large sum

jimjames

You've mentioned pensions but not any cash savings. Do you have an emergency savings at the moment?

If you have sufficient savings then normally I'd suggest looking at pension or investments but with the potential redundancy that may not be appropriate. What might be worth doing is utilising both your ISA allowances this year so that you have the allowance allocated, you can then get the full allowance again in April so will have £80k inside an ISA. For the moment you will probably want that as cash but if the situation stabilises for employment then you may want to transfer some to a S&S ISA which will complement the pension. You then have that money as cash to pay the mortgage should you need it to cover the monthly payments. You may want to also look at paying down part of it with the remaining £20k.
I'd certainly not say it was a no brainer to pay off the mortgage completely but many people feel more comfortable doing that even if it's not the most financially advantageous.

lzh

JGB1955 said:

Can you live on £40K p.a.?  Are you happy to do that?  Would you sleep better at night if you knew that your house was fully paid for?  What is your mortgage rate?  What interest do you expect to get on your savings?  How much redundancy money can your OH expect to get?  How long will that last him?  £40K sounds like a VERY good amount to live on from my perspective - but I'm not you and don't have your bills or commitments.....

Our mortgage is a lifetime tracker (0.5% above base rate i think). Hubby due to get £30K redundancy. Savings rates are so low at present which is why I'm exploring what else we could do with the money so that it works best for us and our circumstances once husband is made redundant and we will be on a reduced income, we don't have excessive bills to pay and as previously stated we have no loans or debts but equally we have no other savings or investments.

jimjames

If your rate is 0.6% then paying it off completely makes less sense. You'll have £130k based on that additional info so even if you did invest some of the money you would still have a decent pot to cover the period after redundancy. Although investments are for long term unlike pensions there is no set date when you can access them so you have flexibility there.

DiggerUK

Clear the mortgage. You will still have £40k left......*have you any other savings?*
Add to that the redundancy payment and sleep easy. Best of fortune..._

*edit, no you don't..._