Should I Clear my mortgage

nokiauk

I have a current mortgage of just under £70,000 and am on a fixed rate tracker until December 2010 with a % penalty for paying it off, 3% in the 1st year, then 2% etc etc.

Due to the unfortunate death of a relative I should receive somewhere in the region of £85-£90,000.

Now should I:

1. Clear the mortgage and incur any penalties etc and save the rest in some ISA or something. Then invest the same amount monthly as my old mortgage payments were.

2. Invest the money somehow and gain some decent interest for 2 years or so and then clear the mortgage.

What do people think?

ailuro2

Invest Lump for 2 years for Interest then pay off Mortgage

With most deals you can still pay up to 10% of your outstanding balance off of your mortgage, so you can do this aswell as paying your usual mortgage amount.
You will be limited to £7000ish per year per person on an ISA, so you really need to hop over to the savings and investments board and do a bit of homework to find out where to put the money to gain highest interest.

And, fwiw I have always though if someone leaves you money, no matter how big or small an amount, you should buy something for yourself that will always remind you of them, a piece of jewellery, a tree, a sculpture, or even visit a place you always wanted to but never could have afforded.;)

CLAPTON

what is the interest rate you are paying
which year are you in for early settlement purposes

nokiauk

Hi

Current rate is 4.75% as I'm on a tracker 0.25% below base rate, and am currently in 1st year of the term so would pay 3% penalty.

aliwali

Firstly sorry to hear about the death of your relative. Nice to have the money but it doesn't always come in the best circumstances.

I'm no expert but I would pay off the max overpayment I could for the next 2 years, therefore cutting a huge amount of interest. Invest the rest in an ISA and then some other form of high interest investment (I know nothing about investments, never had that much money!). Then I would pay off the mortgage when the penalties have gone. Finally I would have a holiday with any excess that was left.

Just what I would do. Let us know what you decide.
Alison