Money Question

[country_pumpkin]

hi all, we have a mortgage of £59000 left to pay, I have inherited some money so with that and using what we have saved we could pay it off, but dilemea is we want to move house as where we live is too small for an expandin family...if we put the inheritance in a bank account we would then have a mortgage of roughly £60000 on the next house... where as if we paid this house off then we would only need a mortgage of probably 40,000- 50,000 but will l no savings

would you pay this mortgage off or just keep it in an account till we sell this house and get another( property don't sell fast here and could take 3yrs or more

[janbee]

Don't forget that the interest rate is pretty much nothing at the moment so it would have to be a long term bank investment of 5 years+ in order to get any kind of mediocre return on your capital.

[BigMac]

Exact circumstances will determine your most effective choice.

But you could consider having your cake and eating it by retaining your savings and offsetting them against the new mortgage. It would reduce the interest payments on the mortgage/reduce the term of the loan - and still give you access to the savings if you needed to draw on them.

You should consider paying for some independent financial advice - I am not qualified to give it.

[woofgang]

The other consideration from my point of view is how secure your current job and lifestyle is. If you pay off the house then you are guaranteed to have somewhere to live. It may not be where you want to be and it may be cramped but you wouldn't be homeless. If you have no mortgage to pay, its amazing how much less money you need to live on.
I am not an IFA either, but its just a thought.

[country_pumpkin]

I am part time on 184 a week and partner buys and sells and has annual of 9000, I would love to be mortgage free and not have to worry but we need a better house, we not even got a garden for my little girl to play in so we are out all weekends spending money on meals/days out to fun places for her if we had a house we loved and had a garden we would be more settle and not need to go out as much, its just so hard to decide what to do for the best, my dad would know I just wish he was here, id give all that money back for him to be still alive,

[twix123]

If you can switch, use your inheritance in an account with an offset mortgage, which should enable you to use the cash at a later date, when you manage to sell your current house, towards the deposit on the new one. Your current earnings may discourage a lender from advancing a large enough amount, whereas if you still have the cash available, you will be able to provide a larger deposit than if you had already spent the cash on reducing your current mortgage.

Seek advice from an IFA if at all possible.

[factor-fiction]

There will probably be an early repayment fee for paying off all or a large chunk of the mortgage early- you need to check that.

[country_pumpkin]

I don't understand what offset mortgage are,to enable us to move we need to use the inheritance to ge a better house but it will work outpaying the amount we are paying now... if we sold our house for 80,000 then to get anywhere half decent around here the house would be 120,000.. so the inheritance will enable us to get that price house our mortgage has 59,000 left to pay so if we sold this house at 80,000 and get the next one at 120,000 use the inheritance as deposit then mortgage will be 60,000 so roughly what we have now so we can manage those payments and still have some savings, or do we pay off the house with inheritance and savings then get the next one which should only be 40,000 that we will need as mortgage...

[BigMac]

You REALLY need to seek some independent financial advice.
First -
The type of mortgage you get - and for what amount - will be determined amongst other things: a) by the amount you can afford to repay each month; and b) by the size of deposit you can offer + any equity in the existing property.
Secondly -
In an offset mortgage you don't receive interest on any savings (which means you won't receive 1 or 2% pa on your savings) BUT the amount of savings you have offset against the mortgage reduces the amount of interest (at 4 or 5 or 6%) that you have to pay - a significant saving and very tax efficient.

BUT PLEASE seek some independent advice.

[woofgang]

I agree with BigMac, if you don't know stuff like what an offset mortgage is then you need to do research or get independent advice which will cost you a fee or will be paid for out of whatever investment you decide on. The Advisor should tell you how much the charges will be and how you will pay them.
I am not being rude or criticising you, if you've never needed to know this stuff before then how could you?

[country_pumpkin]

would a bank have a financial advisor, ive always been careful with money and tried to save what I can and never spend just for the hell of it, ive just never had a large amount before so I don't want to make a big mistake

[ubasses]

Yes Banks have both Tied Advisers and Independent Advisers, make sure you stipulate which you require an appointment with. They should do an initial appointment free of Charge.

[BigMac]

Yes - your bank or building society should have someone who can give you advice. BUT they may not be 'independent' - they might only be able to recommend their own products. [This may have changed following the RDR - I'm not fully up to speed.]
An independent adviser can look at the whole of the market - not just your existing bank/building society - and make recommendations based on your NEEDS, not the available products.
If you already have a bank adviser, certainly talk to them in the first instance as it may be cheaper, especially if your needs are not too complex.
For an independent adviser, ask for recommendations from work mates, friends and family.

[country_pumpkin]

ok thank you, will certainly speak to an advisor at the bank first and c what they say as im head is hurting thinking about it all lol