Financial Advice - Mortgage Related

[EchoSevenNine]

Afternoon guys,

I don't want to tie up anyones precious time, but if there's anyone here that could give me some advice in reference to paying off a mortgage, i'd be very grateful.

The long and short of it is that @ 38 years old, i have 13 years left on my mortgage and my fixed rate is due to run out in a couple of months. My Mum, bless her, who's in her 70's, would rather see me get some good from the money she will enevitably leave to me, and has offered to pay off the remainder of said mortgage.

I am NOT up to speed with this al all, so would love some advice from anyone who is more clued in than me. SHOULD i pay it off? Would the money be better invested? Risk? Reward? Benefits? Downsides?

I'm lost with this sort of thing!

Thanks all.

[Devonian]

Without sitting down with an Adviser (so they can get your complete picture) its impossible to say what would be best for you. However a few thoughts:

First of all that's a lovely thing for your mum to do - so many people leave it to children for when they are gone, however if they can afford to do it when they are alive, it's much nicer for them to see it enjoyed.

There is really only one thing you can do apart from pay it off and that's invest it - now that could be a bank or building society account, the stock market or even property, endless options really. However they are all a risk and that risk is 'will they do better than simply paying it off?' I would imagine your mum wants to see your mortgage paid off and if that's the case maybe that's the best course of action.

One option that might be sensible is to do something with the monthly mortgage amount that you are saving. Reason being is if you don't 95% of people simply increase their outgoings and 10 or 20 years down the road are no better off whatsoever. Again that could be putting it towards property, stocks and shares, topping up your pension, national savings etc etc. I wouldn't use all of it as lets face it, life is for living today (as long as we plan a bit for tomorrow), so if say your mortgage is £500 per month, how about putting £250 away for the future and using £250 for holidays, nights out, watches - whatever you like! That's probably what I would do in your circumstances but as I said without the complete picture, very hard to say.

[Ethos]

Some factors to consider:

1. Is your Mother would give you the money to pay off the mortgage - or just a gift to do what you would like with? If she would like you to experience the freedom of being mortgage free, it might be an idea to follow her wishes

2. Given you're in your last 13 years, I'd imagine that if you remortgaged, your Loan-to-Value ratio would be low and you would have a pretty low rate. However, if you invested instead, your returns would be fairly small as well (I'm guessing you're not an investment professional!) - and you would likely pay tax on those returns as well. On that basis, I would be inclined to pay off the mortgage

3. There is a third option in case you want the flexibility. You could get an 'offset' mortgage and put all the funds into the linked savings account. That way, you would be paying no interest on the mortgage but have the flexibility to use the money in case of emergency

I really like this advice below!

One option that might be sensible is to do something with the monthly mortgage amount that you are saving. Reason being is if you don't 95% of people simply increase their outgoings and 10 or 20 years down the road are no better off whatsoever. Again that could be putting it towards property, stocks and shares, topping up your pension, national savings etc etc. I wouldn't use all of it as lets face it, life is for living today (as long as we plan a bit for tomorrow), so if say your mortgage is £500 per month, how about putting £250 away for the future and using £250 for holidays, nights out, watches - whatever you like! That's probably what I would do in your circumstances but as I said without the complete picture, very hard to say.

[DavidL]

She can give you what she likes but it becomes part of her estate should she die within 7 yrs. I believe its a sliding scale in sevenths.
I assume this still stands if she simply pays off the mortgage in one go but it may not if she takes over paying the mortgage.
Equally you (she) put the money into as high an interest account as you can and hopefully get paid more interest than the mortgage rate (s+s isa maybe - not sure about the rules on this).
If its not an instant access account then take 3 months or a years worth out at a time (depends on the notice required) and put it into another account to actually do the paying then rinse and repeat every year.
Professional advice is what you need.

[Robsmck]

Fwiw I downsized just before the property bubble burst here in 2006 and have been mortgage free ever since. It is nice to be secure in owning ones own home, but I would agree with the above advice about being wise with your resultant increase in disposable income.

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[cyrusir]

pay off the mortgage and invest the monthly mortgage amount you would have paid.

also look into the tax implications (if any) of the gift / inheritance.

[Integrale]

Listen to what your mother wants.

If she is prepared to pay off your mortgage so that you have a secure home regardless what happens in the future, then do it.

If she is giving you the money to make you generally financially more secure, then a different matter.

Don't think she'd be impressed if you started living it up with money you're saving. I would feel obliged to invest my existing payments, unless and until my circumstances changed.

It's a wonderful gift, so use it wisely.

I'm doing the converse, telling my mother to live it up and enjoy her life, rather than worrying about what's left to pass on to the family.

[EchoSevenNine]

My Dad sadly died in 2010 and the bulk of their cash was moved into my name then, so no worries over inheritance tax or the 7 year thing.

I'm an only child and it's no secret that I will inherit everything eventually. My Mum would still have a small buffer of accessible cash after giving me the mortgage amount. She really would just like to see me do something constructive with it while she's still here...the mortgage was just the starting point of the conversation and seems like the most logical choice.

Although she's forever telling me that the money I have belonging to her is mine and she'll never need it, I still have a hard time in taking it. I intend to still bank the equivalent of my mortgage payments into my savings account every month as a repayment to her. At least I avoid paying the interest that way. She hasn't asked for this but it's the only way I can justify it to myself.

Its not a massive amount of money to a lot of people on here, but my parents were average, working class people like me, and this is literally the bulk of a LIFETIME of hard work and hard saving for them. Definately not an easy thing to put your hand out for and I want to make sure I get it right.

[Omegamanic]

I feel a much greater feeling of freedom now that I have paid off the mortgage. The lighter feeling alone is, in my eyes, greater than any slightly higher financial return some savings may be making - I have more desposibale income to enjoy now, not potentially later.

[stoneyloon]

I agree, the freedom I have now the mortgage is paid off is great.
Some good advice re. sticking the equivalent monthly amount away too. I haven’t quite got that sorted yet!


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[bootneck]

Mortgage free is a wonderful feeling but it's very very easy for your outgoings to increase and swallow up any excess you have. Very sensible advice above bank/invest half enjoy the other half.


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[Scepticalist]

Please remember that if your Mum needs old age care from the council, it is possible for them to try and claw back money if they feel it was moved with the intention to avoid using your Mum's assets. With most in your name already and a specific use desired by your Mum, you "should" be ok but it's worth bearing in mind. It must be very clear it's a gift so worth having it in writing.

Other than that yes, make sure you put your mortgage payment into some sort of investment rather than spend it.

[aldfort]

Some things that have chimed with me in this thread:

The feeling of freedom, security or whatever that comes from being mortgage free.

You have been paying a mortgage for some time you won't miss the money if you take the same amount and invest it. You will be surprised how it builds up and you may well be able to stick a lot into your pension and exploit the tax advantage.
Exactly what I did.

[GOAT]

pay off the mortgage and invest the monthly mortgage amount you would have paid.

also look into the tax implications (if any) of the gift / inheritance.

This
being mortgage free is nice.And will enable you to improve your pension fund with the extra money available to you

[Tifa]

pay off the mortgage and invest the monthly mortgage amount you would have paid.

also look into the tax implications (if any) of the gift / inheritance.

+2

Doesn't make sense to 'invest' your mothers money unless you can get about 3-5% tax free interest per year guaranteed with zero risk. (isn't going to happen)

[EchoSevenNine]

Thanks for all your opinions guys, much appreciated.

Seems like the general consensus that the mortgage pay off would be the best way to go and i was swinging that way myself. I wont be any better off by the month, as i fully intend to repay to her the normal mortgage amount monthly. At least i can avoid the interest payments though.


It's an incredibly generous thing for her to do for me and quite honestly, the gravity of it has stirred up some strange emotions. The realist in me knows that at the age of 73 she'll most likely never see the full repayment of this money and even if she does, what will she do with it at that age? At this stage i think having my mortgage paid off is a sadder occasion than it is a happy one.

Life lessons are strange indeed!