Inherited money, to pay off morgage or move??

nicolaspets

We will shortly receive around £160000, which will easily pay of our £130000 mortgage, our house has been valued at £185000, but we would ideally like to move. We are 37 and 38 , and have 4 children, aged 15/14/8/3.
We have no other real debts apart from a couple of hundred quid here and there on catalogues, we have no credit cards, and have no intention of ever getting any,
We have a couple of thousand in the bank, but that is it.
My hubby earns 23000 pa, but we have really stuggled with paying the £700 mortgage repayment each month (NORTHERN ROCK!!!).
We would ideally like a house at about 290000, but that would mean a mortgage, would we be better off staying put for the time being, either by paying mortgage off, or investing the money? our current house has 5 bedrooms, but is in totally the wrong area, so it would mean downsizing.
It also is over three floors, and bearing in mind that i have a disability that means some days i cannot walk, we really don't know what to do.
Any help would be very gratefully received xx

PasturesNew

Pay off your mortgage. Easy choice.
You say your hubby has had trouble paying the mortgage. So pay it off.

Moving to a house costing £290k would cost you £9k in stamp duty, possibly another £2k to estate agents, another £1k mortgage arrangement, another £2k in solicitors/searches/fees etc. So that's a £14k cost to move.

Figures:
A] Pay off mortgage, Stick £30k in the bank. Relax and enjoy life
B] Pay off mortgage (£130k), get new house (£290k) = new mortgage of £160k + £14k = £174k

If hubby can't afford £130k, how would he afford £174k?

Anyway. House prices aren't rushing up. Probably going down.

If you saved the £700/month in the bank, with interest that would be about £9k/year. So after 3 years, with the starting £30k you'd have about £65k saved.

If house prices fell by 20%, you'd sell your £185k house for £148k and your £290k house would cost you £232k. So your new mortgage would just need to be £232k-£148k=£84k... but you'd have £65k savings. So you would need a mortgage of just £19k+£7k moving costs, or £26k. (stamp duty would be under the 3% threshold so an instant saving thousands)

Hope you followed that back of a fag packet maths.

merlinthehappypig

I agree with everything PasturesNew says and she has saved me the trouble of having to justify it as well.

nicolaspets

Thanks for your reply, however, i think you have got muddled !!.
We will inherit 160000, we have 55000 equity in the property we have now.
So that makes 215000 (yes?), surely that makes a new mortgage of about £75000?, on a new house at £290000
We can afford payment of about £500 pm .
What is your advice now please?
Your fag packet maths comment is an expression my dad would use, made me smile! lol

Kez100

My feeling is to sit and wait and nab the best interest you can on your inheritance. However, you seem to have many reasons to want to move. Are they really necesaary and if you move area do you have any thoughts on the changes (good or bad) to your childrens schooling?

I do agree with the others, personally, but you may have many reasons for moving.

You have forgotton the fees to move in your calculation...the mortgage will be higher by 14k (estimate), that's about 90k. Consider also that your house, in this market, may not be worth as much as you think it is.

Trollfever

In times of uncertainty cash is King.

gingin_2

If it were me I would pay off the rest of the mortgage, take the kids on a nice holiday and head over to the savings and investments board and work out how best to invest the remaining money.

Your outgoings will considerably fall with not having to pay the mortgage, so I would save the rest of his income sensibly and watch the housing market over the next few years whilst earning a nice bit of interest from the bank. In 2 years time or so I would look at buying that newbuild hopefully at an even cheaper price.

TTMCMschine

nicolaspets wrote: »

Thanks for your reply, however, i think you have got muddled !!.
We will inherit 160000, we have 55000 equity in the property we have now.
So that makes 215000 (yes?), surely that makes a new mortgage of about £75000?, on a new house at £290000
We can afford payment of about £500 pm .
What is your advice now please?
Your fag packet maths comment is an expression my dad would use, made me smile! lol

You have £55,000 equity if it sells for £185,000. Although i don't think you explained it too well. Which is why i thought the same as pastures new. The question is do you want a mortgage? Add up all the other fees as well, because it isn't just about the mortgage as others have pointed out. It depends how desperate you are to move out of the area. There is no reason why you couldn't save for a few years and reduce the mortgage right down. Afterall they're not going to go up that much in the near future like they have done. How much could you save a month, and work out how much interest you would pay.

I'm also interested in the equity side of things. How much was your mortgage originally for? How long have you had it etc.

nicolaspets

we took the mortgage on in 2003, fixed for 7 years, it was originally 120000, and then we have had 2 top ups of 5000, the term of the mortgage is 35 years...I know it sounds like a nightmare but it was the only way we could get this house, current repayments are about 709 pm.
We are prepared to have a mortgage, just not one like we have got now.
Sorry if i didn't explain properly in the first place.
Thankx

Kez100

You need to look at why you needed top ups as well. Presently you struggle to pay 700/month and have had to draw on 10,000 extra money in four years (equivilent to 200 pounds a month). The net effect is you have actually only been paying 500 a month so, perhaps, you cannot afford 500 a month even though you think you can.

You should try and use this inheritance to improve your situation not just transfer the same problems to better accommodation.

nicolaspets

The reasons we needed the top ups, was to do up the house.
I think the best thing to do, is get the inheritance in the bank, take a deep breath, and then think about the options. (although saying that I have found a gorgeous house, which we could have with about an £80k mortgage and 30K) in the bank lol) I know we wouldn't get that one, but it does prove there is hope.
Thanks ever so for all the replies and advice xx