Mortgage free later Vs mortgage now?

MrMCalavera1

Hi guys,

My mother passed away recently. As she died less than ten years after retiring I am due a 31k pay out from her pension in a few weeks. I will also inherit half of her estate once the house is sold so I'll receive approx another 150k give or take. 

I'm currently renting and I wondered whether I should buy a house with the 31k as a deposit and pay it off monthly or wait until the estate is wrapped up and spend it all at once? What would your advice be? 

getmore4less

Start looking for the right place.

You might find you need both a mortgage and the inheritance to get something you really want if its going to cost more than £180k

I would find out the likely max mortgage you could get  based on the current deposit and income. 

go from there.

there should be mortgage options that mean the cost of setting one up won't be to expensive even if you need to eun one for a couple of years.

Probably work out cheaper than renting anyway.

MrMCalavera1

Thanks. In the area I'm living the money I inherit should likely buy me a big enough house without a mortgage if I so choose. 

steampowered

Sorry to hear about your loss.

If you can afford the house you would like without this £150k, I would go ahead and buy it now, with a mortgage on a 2 year fixed rate.

You can usually overpay by up to 10% of the mortgage balance each year, and any more can be overpaid at the end of the 2 years. At that point you can overpay with the £150k and reduce the LTV of your mortgage, should you wish to do so. 

However, please do think carefully about whether putting £150k into paying off the mortgage is actually a clever thing to do. If you have an affordable mortgage, you are likely to be better off putting spare cash into a stocks & shares ISA, or topping up your pension, than ploughing all of your money into the mortgage.

If you do not feel that you know much about investing, it is well worth spending a few hours reading up on it. Especially the benefits of low cost tracker funds that track the entire stock market (e.g. Vanguard funds); and the tax benefits of paying into a pension. The savings & investment forum on MSE is a good place to start.

Thrugelmir

Much may depend on how long it takes you to find your dream property. Heading into the quiter period of the year. 

MrMCalavera1

steampowered said:

Sorry to hear about your loss.

If you can afford the house you would like without this £150k, I would go ahead and buy it now, with a mortgage on a 2 year fixed rate.

You can usually overpay by up to 10% of the mortgage balance each year, and any more can be overpaid at the end of the 2 years. At that point you can overpay with the £150k and reduce the LTV of your mortgage, should you wish to do so. 

However, please do think carefully about whether putting £150k into paying off the mortgage is actually a clever thing to do. If you have an affordable mortgage, you are likely to be better off putting spare cash into a stocks & shares ISA, or topping up your pension, than ploughing all of your money into the mortgage.

If you do not feel that you know much about investing, it is well worth spending a few hours reading up on it. Especially the benefits of low cost tracker funds that track the entire stock market (e.g. Vanguard funds); and the tax benefits of paying into a pension. The savings & investment forum on MSE is a good place to start.

Thanks for that - that's the kind of advice I was after. Very helpful.