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Should I use a lump sum to pay off a mortgage
9 Answers
I have inherited a lump sum and was wondering whether it is best to use it to pay off my mortgage, or to invest it in shares/unit trusts etc
Answers
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There are many things to consider.
Are you a tax payer? How much is the mortgage?
Do you have any other debt?
Do you intend to buy high valued goods / service within the next 12 months?
Do you have any savings or investments?
Are you in a 'secure' job? Are you struggling to pay the mortgage?
Mortgage rates are low at the moment. It is possible to earn 7 - 10% interest in very safe, guaranteed accounts at the moment, if you have the time and inclination to search.
If your mortgage is lower than this (if not, why not?) then it may be worth your while holding on to your money for a while.
A compromise might be to reduce your mortgage with half of the lump sum and invest the rest .
If this is a large amount of money you really should consult and INDEPENDANT financial advisor.
I suggest you put this money in an instant access 5% account for the next two months so that you can think very hard about your options.
Are you a tax payer? How much is the mortgage?
Do you have any other debt?
Do you intend to buy high valued goods / service within the next 12 months?
Do you have any savings or investments?
Are you in a 'secure' job? Are you struggling to pay the mortgage?
Mortgage rates are low at the moment. It is possible to earn 7 - 10% interest in very safe, guaranteed accounts at the moment, if you have the time and inclination to search.
If your mortgage is lower than this (if not, why not?) then it may be worth your while holding on to your money for a while.
A compromise might be to reduce your mortgage with half of the lump sum and invest the rest .
If this is a large amount of money you really should consult and INDEPENDANT financial advisor.
I suggest you put this money in an instant access 5% account for the next two months so that you can think very hard about your options.
The advice given by Golden Shred and Yorky Lass is by far and away the best. I'm sure that Ethel means well, but all that stuff and independent financial advisors (ugh!!) is for the birds. I've done the (very detailed) calculations for myself and five members of my family over the years, and each time paying off the mortgage was very much the best.
If you have a lot of years to pay on a repayment mortgage, pay if off, you will never earn in interest, what you will save by paying off the mortgage, why not work out what you have left to pay e.g. �600 per month = 7200 x years say 20 = �144,000 and maybe your mortgage statement shows you owe �80,000, you can see that by paying of the assumed �80,000 you would save yourself �64,000 - you wouldn't earn that much interest on your saving would you? Hope this makes sense to you, if not just trust me and pay it off, it is the best thing to do.
What price do you put on having peace of mind? If you are worried about ever being made redundant or losing your job through ill health, pay the mortgage off and then you'll never worry about losing the roof over your head. You will also save a lot of money in paying interest, depending on the size of your mortgage. This will then leave you with surplus income every month which you can drip feed into an ISA (up to �7,000 per annum in equities). I'd keep a couple of thousand pounds in liquid savings for emergencies.
Ethel makes some very sensible comments which might be valid in your case, but I reckon that being debt free is a very happy state in which to find yourself.
Ethel makes some very sensible comments which might be valid in your case, but I reckon that being debt free is a very happy state in which to find yourself.
i would definately say pay off mortgage. I have just come into a big lump sum of money also. everyone has told us to pay off our mortgage.... we have still 15 years left to go!
As regards INDEPENDANT adviser, i wouldnt personally recommend investing with an independant advisor as a relative of mine did that on a large sum of money, and they found out later that their money was invested but not by the person they were dealing with.. he invested it 3 companies down the line and it has not made them any money at all, and to now recover the money it is goign to cost them to get back what is already theirs!! contd. . . . .
As regards INDEPENDANT adviser, i wouldnt personally recommend investing with an independant advisor as a relative of mine did that on a large sum of money, and they found out later that their money was invested but not by the person they were dealing with.. he invested it 3 companies down the line and it has not made them any money at all, and to now recover the money it is goign to cost them to get back what is already theirs!! contd. . . . .
cont....
I have spoken to my high street bank and an advisor there, and found he was extremely helpful. He advised me to pay off the mortgage too... best thing anyone could do he said to us. We have been advised to invest in a secure account where by our money is safe and we cant lose anything, but we are going to have a large monthly return on it which will act as an income for us and yet our money will still be 100% safe. It has been spread out over many accounts to save paying too much tax, so we are reaping in the benefits and paying very little to the taxman. We were initially thinking of purchasing property and have a big return that way, but surprisingly our current high street bank has really come up trumps for us, and the advisor in our case spoke to us in terminolagy that we understood and he listened to what we wanted and helped us all he could to get back as high a return with no risks of losing what we have. We are very happy and financially sound going forward of two people in their thirties and forties with a young daughter. :-) . Hope this helps, and dont allow peoples views to swing you away from your own bank!!! Listen to the people like me, who are in a similar situation to you, and do have to make these decisions..... ive just literally been through what your going through. obviously i dont know your value as you dont know mine.. i hope you are as lucky and get all the help that we did.
I have spoken to my high street bank and an advisor there, and found he was extremely helpful. He advised me to pay off the mortgage too... best thing anyone could do he said to us. We have been advised to invest in a secure account where by our money is safe and we cant lose anything, but we are going to have a large monthly return on it which will act as an income for us and yet our money will still be 100% safe. It has been spread out over many accounts to save paying too much tax, so we are reaping in the benefits and paying very little to the taxman. We were initially thinking of purchasing property and have a big return that way, but surprisingly our current high street bank has really come up trumps for us, and the advisor in our case spoke to us in terminolagy that we understood and he listened to what we wanted and helped us all he could to get back as high a return with no risks of losing what we have. We are very happy and financially sound going forward of two people in their thirties and forties with a young daughter. :-) . Hope this helps, and dont allow peoples views to swing you away from your own bank!!! Listen to the people like me, who are in a similar situation to you, and do have to make these decisions..... ive just literally been through what your going through. obviously i dont know your value as you dont know mine.. i hope you are as lucky and get all the help that we did.
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