Inheritance - Pay Mortgage or Invest [First World Problem - sorry]

george4064

LondonJim_2 said:

Huge thanks to all. Genuinely much appreciated and clearly not the easy decision I had presumed. Just to answer the question posed, I worked out the higher cost at end of early repayment period due to monthly payments x 34 + remaining balance.
Have joined our pension society to look at that route, and agreed lots of reading to do.  As always future uncertainty and potential/likely reward balanced against surety and limited returns.
I presume we only get in 'trouble' if mortgage rates shoot up and our invested money is locked away? And again presumably we can structure savings and investment to protect against this. 
Having more to save & invest to maximise returns does make sense and Steve182 that maths is pretty compelling. Dunstonh you are right about both your points. Off to read Steampowered's recommended article. Thanks to all.

There’s always the risk of getting into ‘trouble’.

Another option many people overlook is to payoff some of the mortgage and invest the rest. For example, you might want to overpay when you come to remortgage in 2024 to the extent that it moves you to a better LTV ratio so you ‘unlock’ better interest rates. A big factor on how much better you could get your interest rate to depends on your current LTV.

If you went down that route, you could stick the mortgage OP money in premium bonds till 2024 and invest the rest.

unkle

If you are already at a LTV of sub 65% I wouldn't pay off the mortgage. IF mortgage rates stay the same when your fix ends you can go on not much more than 1% right now for a 2 year fix and sub 1.2% for a 5 year. If you are above 65% aim to pay it down to that if you can without penalty.

Do you have any S&S Isa's? If not then open one and trickle in the £20k, if you have a spouse can do the same for them.
Speak to an IFA and see if they have any structured products available at the moment.
Premium bonds?
Some in Cash savings with an aim to use £20/£40k into your ISA each year
Pension?

And enjoy some!

dunstonh

I presume we only get in 'trouble' if mortgage rates shoot up and our invested money is locked away? 

Modern mainstream investments do not lock your money away.  Typically you can get it back into your account in a week.   The risk is if the values of the investments is lower at that particular point.
You should always maintain an emergency fund in cash savings that should cover many cases of "trouble".

Speak to an IFA and see if they have any structured products available at the moment.

SCARPS are a niche option with 100% loss of capital possible.  Plus, they are fixed timescale and not open ended.   Probably not likely to be a good option for a new investor dipping in for the first time.

bostonerimus

It's not an either or choice. I would increase your pension payments to get the tax advantage, put some in an ISA to give you flexibility and make some extra mortgage payments and think of those as a 2% guaranteed saving account. This will give you options.

Canuck01

Due to the 10 year bull market a lot of people have forgotten some simple facts.  House prices can go down.  The stock market can crash and take years to recover.  Your employment situation can change very quickly.  Nothing wrong with being cautious it sounds like you are in great shape financially.

kidmugsy

LondonJim_2  ... stand to inherit £350k.
Mortgage fixed 2.08% until mid 2024.

If I over-pay the 10% allowed per annum: ...

I work, public sector with pretty good pay ... aim to retire in about 10 years @ 60. No other substantial savings/assets other than house (c.650k).

In your shoes (of which I know little) I'd consider (i) overpay the 10% p.a. (ii) fill S&S ISAs for self and spouse, and probably JISAs for children (iii) pay enough into family pensions to ensure that neither pays higher rate income tax (iv) pay even more into pensions if salary sacrifice is available (v) keep large pile of emergency cash e.g. in premium bonds (vi) buy some gold sovereigns and keep them at a commercial dealer's vault or even at the Royal Mint (vii) do sums - could you afford to retire at 55? (Would you want to?)

As for holidays I warmly recommend Australia, though that will mean waiting until (perhaps) 2023.  Maybe you could all learn to scuba dive in the interval as preparation for visiting the Barrier Reef.  Also, buy and study The Venomous Creatures of Australia.

LondonJim_2

kidmugsy said:

LondonJim_2  ... stand to inherit £350k.
Mortgage fixed 2.08% until mid 2024.

If I over-pay the 10% allowed per annum: ...

I work, public sector with pretty good pay ... aim to retire in about 10 years @ 60. No other substantial savings/assets other than house (c.650k).

In your shoes (of which I know little) I'd consider (i) overpay the 10% p.a. (ii) fill S&S ISAs for self and spouse, and probably JISAs for children (iii) pay enough into family pensions to ensure that neither pays higher rate income tax (iv) pay even more into pensions if salary sacrifice is available (v) keep large pile of emergency cash e.g. in premium bonds (vi) buy some gold sovereigns and keep them at a commercial dealer's vault or even at the Royal Mint (vii) do sums - could you afford to retire at 55? (Would you want to?)

As for holidays I warmly recommend Australia, though that will mean waiting until (perhaps) 2023.  Maybe you could all learn to scuba dive in the interval as preparation for visiting the Barrier Reef.  Also, buy and study The Venomous Creatures of Australia.

Thanks - all really very, very useful and a plan is forming that is more spread betting than binary. Clearly need to look into pensions more - current is non contributory final(ish) salary scheme. Need to see if/how can top that up. We did an exchange tour in Australia for a couple of years and loved it ! Think I could quite happily retire to Perth - beaches, sunsets, golf and wine. Am trying to convince myself that spending some on an old, old Aston Martin Rapide (boyhood dream) would be an 'investment' and not at all a frivolous mid life crisis!

barnstar2077

kidmugsy said:

LondonJim_2  ... stand to inherit £350k.
Mortgage fixed 2.08% until mid 2024.

If I over-pay the 10% allowed per annum: ...

I work, public sector with pretty good pay ... aim to retire in about 10 years @ 60. No other substantial savings/assets other than house (c.650k).

In your shoes (of which I know little) I'd consider (i) overpay the 10% p.a. (ii) fill S&S ISAs for self and spouse, and probably JISAs for children (iii) pay enough into family pensions to ensure that neither pays higher rate income tax (iv) pay even more into pensions if salary sacrifice is available (v) keep large pile of emergency cash e.g. in premium bonds (vi) buy some gold sovereigns and keep them at a commercial dealer's vault or even at the Royal Mint (vii) do sums - could you afford to retire at 55? (Would you want to?)

As for holidays I warmly recommend Australia, though that will mean waiting until (perhaps) 2023.  Maybe you could all learn to scuba dive in the interval as preparation for visiting the Barrier Reef.  Also, buy and study The Venomous Creatures of Australia.

I was sold till I got to that last line! :  )