Pay Off Mortgage or Not?

Hey Money Smart People.

We recently won a substantial sum of money, tax free.  Enough to potentially pay off our montage and still have £150K spare.  A fortunate position, but also a trouble for a family used to barley having spare cash at the end of each month.

Anyway, question is, do we pay off the mortage in full or make annual over payments or do something else?
We literally are 2 months into a new 5 year deal at 4.5%, for 19 years, to clear 170K.  Theres a £7k penalty if we did clear, but that's not a problem.

If we clear it early, we are going to be saving around £1200 a month, based on that current rate.  This could be save/invested.

We are approaching 50, so want to try and get the money to make for us if possible.
Just dont no where to start.


  • South_coast
    South_coast Posts: 4,789
    First Anniversary First Post Name Dropper Photogenic
    Wow, congratulations on your win 😀! I suspect this will be one of many tricky conundrums over the next few months - I imagine it's probably a lot easier dreaming about how you would spend the money if you won than actually doing so once you have. 
    I think the thing you need to know is whether your current home is the "forever" one, or if you might have different aspirations now that you have got the cash. Only you can answer that, and it might take a while to reach that decision, so I'd mull it over for a while - there's not really any rush in the meantime. If you do decide that your current home is definitely the one for you, I'd then pay off the mortgage. I know others will probably say "Why pay the £7k if you don't have to?" or "If you had x, y, z regular savers you could beat that interest rate", but who cares? £7k isn't that big a sum in the context, but being mortgage free is priceless. 

    Good luck with your deliberations, and congratulations again 😀
    Mortgage start: £65,495 (March 2016)
    Cleared 🧚‍♀️🧚‍♀️🧚‍♀️!!! In 5 years, 1 month and 29 days
    Total amount repaid: £72,307.03. £1.10 repaid for every £1.00 borrowed

    Finally earning interest instead of paying it!!!
  • I can confirm, this is our forever home,  we are invested into it in many ways, and have no intention of moving.
    I had looked into a buy to let with the money, but I cant seem to make the ROI work in an acceptable timescale.

    Not even interested in a get rich quick saving/investment scheme, just trying to use it wisely to protect us long term if possible,
    I am sure that those that know, will understand where I am coming from.

    @South_coast congrats on your impressive clearance!!
  • powerspowers
    powerspowers Posts: 1,100
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    Ah wow! Congratulations on your win!

    Id suggest taking a step back and have a think about life and what you want to do in your fifties and beyond. What’s important to you? Is there something you’ve always wanted to do but couldn’t because of money or time? Have a think and talk it over with your partner (I assume as you said we) and see where it gets you. 
    I could see how paying off the mortgage could allow you to reduce working hours - or you might want a year off. Or start a business. Or for nothing to change day to day but be more secure in future. Don’t be swayed by what others say, it’s your money and your life! Good luck in deciding xx
    MFW 2021 #76 £5,145
    MFW 2022 #27 £5,300 
    MFW 2023 #27 £2,000
    MFW 2024 #27 £500/ £3,600

  • Sncjw
    Sncjw Posts: 3,487
    First Anniversary Name Dropper First Post
    Yes an early repayment charge but think about how much interest you will save by paying it off too. 
    Mortgage free wannabe 

    Actual mortgage stating amount £75,150

    Overpayment start date 1/3/23.

    Starting balance £66,565.45

    Current balance £63,787.16

  • Perksy5
    Perksy5 Posts: 141
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    Pay off mortgage, have a nice holiday with 10k (you're celebrating after all, go big or go home I say!) 
    Then take some time to plan out what you want to do with the remainder. 
    Could keep some in cash and invest the rest perhaps?
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