HELP - pay off 130k mortgage

steve171_2

My wife and I have a 130k interest only mortgage at 5.9% APR.
We had planned to start paying off the mortgage when my wife returned to work when the kids were older.

Unfortunately my wifes parents died recently and have left us 140k, we want to know if it would be best to pay off our mortgage or to invest it elsewhere?

We want to make sure that we at least have something positive come out of a sad situation.

Any advice would be greatly appreciated.

smiffy

Sorry to hear your sad news, but I would have thought that no mortgage would be your best option. You would then be able to save 00's each month into a couple of ISA's.

UK007BullDog

Can you tell us the actual rate of the mortgage not the APR please. Type of mortgage and tied in how long and how long the term still outstanding.

What is the property value?

What are your ages and gross income and how many kids do you have?

Personally in todays climate i would pay off as much of the mortgage as possible.

Also how were you planning to pay off your Interest only mortgage when the day comes, you most likely retired? Sell property and downsize? Sell and rent? Move in with the kids? Find a council home?

Sorry about your loss.

steve171_2

Thanks for your kind replies,

I am 36 and earn 30k, my wife is 35 and not working at present as she is looking after our 2 little ones aged 3 and 6.

Im not sure what the mortgage rate is but we owe 130k and are paying £560 per month (that is fixed until 2011) and it has 23 years left on it. The house is probably worth £280k.

We had planned that we were going to change to a repayment mortgage and increase the term in 2011 when my wife went back to work when our kids were at school full time.

UK007BullDog

You already maxed out your income multiple as it is more than 4 x income and I guess you have 2 or more kids with another adult relying on your income. When you bought the property you were using two incomes I assume. I doubt very much that you would be able to secure further funds. It does not matter how much equity you have in your property, but it depends on your income.

You might find a broker and lender but in todays credit crunch climate I would suggest you wait until your wife is back at work.

sleepless_saver

steve171 wrote: »

Im not sure what the mortgage rate is but we owe 130k and are paying £560 per month (that is fixed until 2011) and it has 23 years left on it. The house is probably worth £280k.

Another factor to take into account as well as the relative interest rates of mortgage/savings is whether you would have to pay a penalty for repaying within the fixed rate period.

steve171_2

Thats a goodpoint about the redemption penalties, I need to sit down and work out how much that would be and take it into account. It sounds as though paying off a large amount would be the best thing.

Just wanted to make sure we do the right thing. would also want to put some away for the kids when they are older.

Thanks for your replies, it really is good to get advice from you monetsaving experts!

chappers

Why not stash the money away somewhere and use the interest to pay your current mortgage commitments until 2011 when there is no ERC and then pay off the mortgage.
By my reckoning you need to get about 5% on your savings with a monthly interest payment and no withdrawal penalties seem to be few here http://www.about-savings-accounts.co.uk/savings-accounts.htm?source=ggst&cat=Savings|1114277678&tpage=savings-accounts&tkeyword=_savings+rates_&s_kwcid=savings%20rates|1114277678
Don't forget to both use your tax free ISA entitlements each year.
It will be like being mortgage free anyway plus you will have a nice lump of capital should an emergency come up.

neverdespairgirl

Once the ERC no longer applies, you could pay off your mortgage, have £10k left over as a rainy day fund, and save your mortgage payment monthly, which will put you in a great position financially.

I'm sorry about your loss. My OH inherited when his parents died when I was pregnant with our son, and it was a terrible time.

dimbo61

hi steve171
sorry to hear your sad news about your wife,s parents .
check with your lender if you are allowed to pay some ( 10% ? a year) or all of your mortgage off without penalties.
invest 2x£3000 in either barclays 6.5% but not fixed or lloydstsb 6.5% fixed for one year ( over £9000+) and 2x£3600 from april.
look round for the best deals to invest the rest till 2011 GOOD LUCK
also check out children,s account good rates and tax free( uni fund )

steve171_2

Thanks for all your replies, it is a bitter-sweet pill to swallow, much rather have them alive, it certainly makes you realise that money isnt everything.

We will look into our options to see if it better to save or repay.

Thanks again, it is nice to get so many replies appreciatte you taking the time.