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

eskbanker

mark55man said:

£50K in premium bonds (they would return about 1.4% I think currently)

No, the notional headline rate dropped to 1% late last year, but, allowing for the distorting effect of the minuscule odds of big prizes, the 'average luck' expectation is more like 0.9%.

mark55man

Thank you for the correction, so PB not quite as attractive as I thought, but if you decide (or aren't quite ready to decide) that you don't want to invest in S&S its still a relatively neutral and safe place that negates the need for an urgent decision.

You have to remember though that although low interest / cash based solutions are good if you are mentally matching the inheritance against the mortgage with which it will retain its value, in the real world the value of your pot will by decreasing through inflation.  Now inflation isn't that high at the moment although many are thinking post Brexit / Post pandemic there may  be pressure 

macman

The saving in interest over 15 years will be about £2,755, less any charge for early repayment. The decision as to whether you pay off all or some of the mortgage will really depend on what you intend to do with the £100K if you don't put some of it towards clearing the mortgage.
Also, you are on a tracker mortgage, so where do you see base rates going in 5/10 years from now? That is the big unknown. As some have said, it makes no sense to clear debt at 0.6% if you can save at 1.25%, but that imbalance may not be there forever.

RetSol

There are plenty of very cautious funds that are designed to protect capital and did quite well even during COVID.

As I am thinking about paying into a SIPP as an alternative to overpaying the mortgage, I would be interested to know what specific funds you have in mind, @mark55man.  I am thinking in terms of HSBC Global Strategy Cautious. 

mark55man

so for my mortgage pot - I am using a mixture of International Corporate Bond and equity, but they are not Cautious (as in your needs are different so don't do what I do!!).  What I meant by cautious funds are Investment Trusts I have seen written about like  Personal Assets or Ruffer investment - but anything with Cautious in should be fine.  I'm not an expert (not an IFA for sure).  I understand Cautious implied a maximum equity exposure - that said it is still equity exposure so some would avoid even that if you were to need the money in the next 5 years. 

I would raise a separate question on the savings and investments forum, or wait and see who else adds extra feedback here