200k now and mortgage free or wait 20 years for 1 million
Discussion
Hi All,
Im a average earner with a 200k mortgage, im in the postion through inheritance where i coild have 200k now and be mortgage free meaning I could just go part time at work or step back to a basic minimum wage job. Or i could wait 20 years plus still have a mortgage but would then inherit over 1mill plus minus any taxes.
I have 30 years left on my mortgage and im aged 40. I do have a private pension ive paid into since I was 16 which I can draw at 58.
Thanks for any advice/opinions
Im a average earner with a 200k mortgage, im in the postion through inheritance where i coild have 200k now and be mortgage free meaning I could just go part time at work or step back to a basic minimum wage job. Or i could wait 20 years plus still have a mortgage but would then inherit over 1mill plus minus any taxes.
I have 30 years left on my mortgage and im aged 40. I do have a private pension ive paid into since I was 16 which I can draw at 58.
Thanks for any advice/opinions
If you were 20 years old I'd say wait for another 20 years for the million. But as you're already 40, I'd take the £200k now.
It's a tough one though. I suspect you will struggle to drop down to part time work as you will very quickly become used to the extra money and your expenditure will increase.
It's a tough one though. I suspect you will struggle to drop down to part time work as you will very quickly become used to the extra money and your expenditure will increase.
Or, you could take the £200K now, keep the mortgage and keep working. Invest the £200K - £20K / year into a S&S ISA for the next 10 years. A 10% return compounded will take you to the million in 20 years. Do something sensible with the balance that sits outside the ISA wrapper so you're not paying tax on ALL of the growth of this portion.
Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
omniflow said:
Or, you could take the £200K now, keep the mortgage and keep working. Invest the £200K - £20K / year into a S&S ISA for the next 10 years. A 10% return compounded will take you to the million in 20 years. Do something sensible with the balance that sits outside the ISA wrapper so you're not paying tax on ALL of the growth of this portion.
Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
This is what I would do, and just overpay the mortgage a little if "normal" fund allow, to take the 20 years down a little.Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
omniflow said:
Or, you could take the £200K now, keep the mortgage and keep working. Invest the £200K - £20K / year into a S&S ISA for the next 10 years. A 10% return compounded will take you to the million in 20 years. Do something sensible with the balance that sits outside the ISA wrapper so you're not paying tax on ALL of the growth of this portion.
Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
This makes a lot of sense - you have the funds now and unless the terms of the inheritance are that you must pay off the mortgage, you have total flexibility.Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
At 40 I wouldn’t have wanted to stop working although the ability to do so would have been a nice to have should I have got seriously peed off with it all.
If you are comfortable in your current financial circumstances, then I would be inclined to invest the funds and carry on as you are.
Is the £1m guaranteed? And you don’t know what the tax implications might be in 20 years so take the money now.
omniflow said:
Or, you could take the £200K now, keep the mortgage and keep working. Invest the £200K - £20K / year into a S&S ISA for the next 10 years. A 10% return compounded will take you to the million in 20 years. Do something sensible with the balance that sits outside the ISA wrapper so you're not paying tax on ALL of the growth of this portion.
Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
This one. Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
£200k mortgage isn’t a lot a month, being mortgage free is not exactly a game changer with those numbers. Get £200k invested now and pull be a very wealthy person relative to your earnings in 20 years time. Let inflation deal with the mortgage.
omniflow said:
Or, you could take the £200K now, keep the mortgage and keep working. Invest the £200K - £20K / year into a S&S ISA for the next 10 years. A 10% return compounded will take you to the million in 20 years. Do something sensible with the balance that sits outside the ISA wrapper so you're not paying tax on ALL of the growth of this portion.
Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
An offset mortgage maybe?Along the way, your focus / priorities / goals / desires might change. You will have the flexibility to adapt.
I think you guys are all looking at it in terms of how rich he could be when he is 60.
That £200k mortgage you're paying off in 20 years time based on a 30 year term now will cost you something like £400k at todays rates, so it's not a difference of £800k you're looking at, it's £600k.
Pay off the mortgage. Work a couple more years to build up some savings, then drop down to part time, invest what you can and enjoy the rest. You will still be able to retire at 60 with a reasonable sized pot and you will have had the benefit of working part time for the next 20 years.
Saving two working days a week for 20 years is like buying yourself extra life. That said, I'm not sure I'd cope on a part time average salary. Say £25k, that's only a take home of £1,793, which doesn't stretch very far, even without a mortgage.
That £200k mortgage you're paying off in 20 years time based on a 30 year term now will cost you something like £400k at todays rates, so it's not a difference of £800k you're looking at, it's £600k.
Pay off the mortgage. Work a couple more years to build up some savings, then drop down to part time, invest what you can and enjoy the rest. You will still be able to retire at 60 with a reasonable sized pot and you will have had the benefit of working part time for the next 20 years.
Saving two working days a week for 20 years is like buying yourself extra life. That said, I'm not sure I'd cope on a part time average salary. Say £25k, that's only a take home of £1,793, which doesn't stretch very far, even without a mortgage.
okgo said:
This one.
£200k mortgage isn t a lot a month, being mortgage free is not exactly a game changer with those numbers. Get £200k invested now and pull be a very wealthy person relative to your earnings in 20 years time. Let inflation deal with the mortgage.
Nearly half your monthly income if you're on £35k.£200k mortgage isn t a lot a month, being mortgage free is not exactly a game changer with those numbers. Get £200k invested now and pull be a very wealthy person relative to your earnings in 20 years time. Let inflation deal with the mortgage.
I know this sounds too Pistonheads, but, you need to do a little more detailed calculations.
In 20 years time £1m won't be that much. It actually is not that much today. I think that £2m to £3m today provides the lifestyle that many believe that £1m does.
Start by working out the discounted true future value of that £1m. It will be a lot less than you think. You will need as least £1.8m, probably more, to buy what £1m will get you today. If you work on those calcs a bit more you will conclude that you should probably work another 10 years or more, but at least without any angst or worry of long term finance.
You won't be as rich as you imagine if you stop work early, but if you carry on working an doing what you are doing, alongside investment or paying the mortgage, the future could pay off. 10 years further pension contributions from work, salary and perhaps growth and promotion etc. Stopping work kills all that potential.
Also, take your optimistic 10% recurring returns, less an element of tax.
In 20 years time £1m won't be that much. It actually is not that much today. I think that £2m to £3m today provides the lifestyle that many believe that £1m does.
Start by working out the discounted true future value of that £1m. It will be a lot less than you think. You will need as least £1.8m, probably more, to buy what £1m will get you today. If you work on those calcs a bit more you will conclude that you should probably work another 10 years or more, but at least without any angst or worry of long term finance.
You won't be as rich as you imagine if you stop work early, but if you carry on working an doing what you are doing, alongside investment or paying the mortgage, the future could pay off. 10 years further pension contributions from work, salary and perhaps growth and promotion etc. Stopping work kills all that potential.
Also, take your optimistic 10% recurring returns, less an element of tax.
CraigNewmarket said:
Hi All,
Im a average earner with a 200k mortgage, im in the postion through inheritance where i coild have 200k now and be mortgage free meaning I could just go part time at work or step back to a basic minimum wage job. Or i could wait 20 years plus still have a mortgage but would then inherit over 1mill plus minus any taxes.
I have 30 years left on my mortgage and im aged 40. I do have a private pension ive paid into since I was 16 which I can draw at 58.
Thanks for any advice/opinions
I thought you have just been made redundant?Im a average earner with a 200k mortgage, im in the postion through inheritance where i coild have 200k now and be mortgage free meaning I could just go part time at work or step back to a basic minimum wage job. Or i could wait 20 years plus still have a mortgage but would then inherit over 1mill plus minus any taxes.
I have 30 years left on my mortgage and im aged 40. I do have a private pension ive paid into since I was 16 which I can draw at 58.
Thanks for any advice/opinions
I'd take the lower value and pay off my mortgage (which would clear it, and some).
Why? It's my biggest outlay and I'm young (43). At 63 I'd be less able than now so I can enjoy the next 20 or more years with lots more energy and ability with the new found increase in monthly income, than when I naturally retire.
In the other scenario I can imagine getting the million (which is worth the equivalent of 500k now) and thinking that I could've done a lot more with this 20 years ago.
All the calculations are, to me, like one of my favourite quotes:
Great things are not done by those who sit down and count the cost of every thought and act. [William Gooch]
Why? It's my biggest outlay and I'm young (43). At 63 I'd be less able than now so I can enjoy the next 20 or more years with lots more energy and ability with the new found increase in monthly income, than when I naturally retire.
In the other scenario I can imagine getting the million (which is worth the equivalent of 500k now) and thinking that I could've done a lot more with this 20 years ago.
All the calculations are, to me, like one of my favourite quotes:
Great things are not done by those who sit down and count the cost of every thought and act. [William Gooch]
Monkeylegend said:
I thought you have just been made redundant?
It's complicated, ive been left 200k inheritance but been told i cant spend it or benifit from interest etc until another member of the family has died which could be 20 years plus away. I am able to invest it or just put it in savings etc but I cant touch it or any of the intrest until the other family member has died.
If I do spend it they will write me out of there will which will be 1m plus
They dont want me to just pay the mortgage off and not work full time etc
okgo said:
This one.
£200k mortgage isn t a lot a month, being mortgage free is not exactly a game changer with those numbers. Get £200k invested now and pull be a very wealthy person relative to your earnings in 20 years time. Let inflation deal with the mortgage.
He’s an average earner. Of course being rid of a £200k mortgage would be a game changer.£200k mortgage isn t a lot a month, being mortgage free is not exactly a game changer with those numbers. Get £200k invested now and pull be a very wealthy person relative to your earnings in 20 years time. Let inflation deal with the mortgage.
We had a similar decision, but with savings/investments.
The financially savvy decision in most cases would be to keep the mortgage debt (often the cheapest debt most of us have access to) and with the money you keep make it work hard for you. And it ought to grow at a rate that covers the mortgage debt, and then some.
We chose to pay off the mortgage. The day we did this felt like an anticlimax. But, for us, it has been the absolute best decision. Having no debt was so freeing and allowed us to make other financial and career decisions we might not have made.
Go with your gut
The financially savvy decision in most cases would be to keep the mortgage debt (often the cheapest debt most of us have access to) and with the money you keep make it work hard for you. And it ought to grow at a rate that covers the mortgage debt, and then some.
We chose to pay off the mortgage. The day we did this felt like an anticlimax. But, for us, it has been the absolute best decision. Having no debt was so freeing and allowed us to make other financial and career decisions we might not have made.
Go with your gut
2 GKC said:
He s an average earner. Of course being rid of a £200k mortgage would be a game changer.
Average means all sorts to all people. It’s a grand or so a month, not insignificant but if he lives with another earner I don’t personally think that’s worth giving up a lump sum that he’ll never come into again which could actually sort out his retirement in one fell swoop. Gassing Station | Finance | Top of Page | What's New | My Stuff