Using inheritance to pay off mortgage or save?

junebug87

Im expecting to receive £250k in May. 

We're looking to move house ASAP, though currently haven't seen anything we like and haven't started getting the ball rolling on our house sale yet.

Our mortgage fixed rate ends on 31st May and we were looking to remortgage - though we'll be going from our very nice 2.3% to a less nice 4.something %! 

The question I have is, should we use this money to pay off our current mortgage when the fixed rate ends, and save the remaining £100k. Or should we keep it all in savings account ready for when we move, which would hopefully be within the next 6 months or so, but theres never any guarantees, and remortgage likely with our same provider (Nationwide) for ease. 

Is there any downside to paying off the mortgage? Is there an obvious best move in this scenario? 

Yorkie1

There's often a suggestion to not look at this question in isolation, but to consider the rounded picture of other savings, pensions, emergency funds, anticipated future expenditure etc.

There's a flowchart that hopefully someone else will post a link to, which helps you think through some of the wider considerations.

Bigphil1474

If it was me - what are you looking to spend on a new house? If it's around the £250k mark, then I'd be keeping that money, go in as a cash buyer, and essentially own 2 houses for a while. You'll pay extra SDLT, but can claim that back. You will be in a good position as a buyer, and won't have all the faff of the completion day merry go round. If you would need more money, then that's different calcs., although you could looking at re-mortgaging property 1. Generally though, if you gain more in savings interest than it costs you in mortgage rates, then keep the cash, and vice versa.

If you are serious about moving, you need to get your house on the market. You can't really offer on a new house (unless the cash covers it), until you are sold. Not much point looking for a new house until you are in a proceedable position IMO. If you are sold and that dream house comes along, you are in position to buy it.

Albermarle

Yorkie1 said:

There's often a suggestion to not look at this question in isolation, but to consider the rounded picture of other savings, pensions, emergency funds, anticipated future expenditure etc.

There's a flowchart that hopefully someone else will post a link to, which helps you think through some of the wider considerations.

Agree, and these types of questions, mortgage vs pension etc crop up regularly in the Savings/Investments/Pensions MSE forums.

junebug87

This is useful thank you. I haven't found the flowchart you referred to so I'm unsure what this will show - dont suppose anyone else knows what to search for to find it? 

I suppose I'm asking the question here as we have to move quite quickly in terms of the decision to save/pay off mortgage, as our fixed rate ends at the end of May.

The house is ready to go on the market but I'm very much a "don't count your chickens" risk averse person so won't put it on the market until we have the money in our account. 

The next house will likely be around £500-600k so will still require a substantial mortgage. We have about £8k in other savings currently so not much at all. 

Definitely interested in finding these other resources so will keep looking but if anyone knows off the top of their head where I can find it, I'd be very grateful for a point in the right direction! 

Cairnpapple

I think this might refer to the information from the ukpersonalfinance reddit/wiki.

Try

https://ukpersonal.finance/flowchart

https://ukpersonal.finance/lump-sum/

Yorkie1

Found the link to it from another post: "The Flowchart - UKPersonalFinance Wiki offers a structured approach to help decide what to do with your money if it's unfamiliar territory...."