Best thing to do with life insurance - ERC

NikC11

Hi all 
I'm after some advice please as I am not sure what would be best to do with a lump sum.  I'd love to be mortgage free asap but I am obviously keen to avoid paying the bank more than I have to!

I currently have a two part mortgage.
Part 1: approx £240k, fixed rate 3.78% ERC 4% until December then drops to 3% (then 2% then 1% over following years)
Part 2: approx £10k, 6.06% ERC 2.5%

I may receive a lump sum of approx £170k

My question is: Would it be financially sensible to pay the ERC and overpay by that full amount now (with part two paid off in full)?
Or might it be better to invest most of the lump sum for now as interest rates are higher than my mortgage rate (although this might be offset by the loan being bigger than the lump sum) and just overpay the allowed 10% each year until the end of the fixed term deal?

I am quite good at maths but this is a bit involved and specialist for me to work out.

Either way would it be sensible to wait until 1st December this year at the very least as the ERC will drop again then to be less than the loan interest rate?

Thanks in advance

BarelySentientAI

NikC11 said:

Or might it be better to invest most of the lump sum for now as interest rates are higher than my mortgage rate (although this might be offset by the loan being bigger than the lump sum) and just overpay the allowed 10% each year until the end of the fixed term deal?

Yes.           

dunstonh

If the life assurance payout is due to death of one of the borrowers, many lenders will waive the ERC

Yorkie1

Whilst focusing on the mortgage is entirely understandable, it might also be worth taking the chance to review the rest of your finances, e.g. emergency savings fund, longer term savings, investments and pension.