Do i pay off my mortgage or pay half off and extend my property???

Question

I have been left an amount of £ which will enable me to pay off my mortgage in full. What I need to find out off someone out there is; do I pay it all off in full with nothing left over, or do i pay half off and extend my property to add a garage and an aditional bedroom with more room downstairs? and give me more colatrual in my property than i do now. My mortgage company said what ever i pay will go on my account as a credit but will not go towards the amount still owing and it will still run the full 24 years still left on it? My life involves work work work just to pay my bills and large mortgage payments since my recent divorce, with no extra cash for anything and I have been in this rut since my late 20's and im 40 now with 2 children, the youngest being 9 years old. I need some valuable advice as im having no luck else where in my search for the best option.

Answer 1

First, realize that this is a great "problem" to have. You can actaully be mortgage free...

Second, for a good advice I would need to know some more stuff about you (for example your bank account #, just kidding). Starting with do you have other investments? do you have savings? do you have a rainy day fund?

If you don't have any of the above, I would advice to start building some of the up first. Set-up an online bank account with good interest where you can store aprox. 6 months of living expeneses (including mortgage). Then plan your purchases/outlays for the next year... will you be buying something big? would you owe taxes on the new money? what about payments for your kids? if there is somethig big, then you should set up a different bank account for those too.

Finaly, the money that is left should be invetsed. The question now is, what type of investments are you comfortable with? Do you have the time/energy/willigness to manage real estate? Can you tolerate the ups and downs of a stock market? or are you a no-risk investor?

Depending on your profile then you can decide what to do with the money. Some might argue that the most conservative thing to do is pay down your mortgage, but I think that is wrong. A diversified portfolio works better... so some money in equities, some in bonds and some in real estate (either by paying down the mortgage in your house) or investing in rental property should be the best options. For equities, look into low cost mutual funds that invest all over the world... don;t put all of your eggs in one basket.

Best of luck,

Answer 2

If your mortgage company claims that they would only give you a credit and that it would run the full 24 years, DO NOT keep this company!! This means they will charge you the full amount of interest even when you pay down the principle. This is NOT a good company to work with. They are charging you interest on money that you dont owe them anymore.

No loan company can/should continue charging interest if you pay them in full. Think about it-- You owe $150K. You pay them $150K in full. They claim this works as a 'credit" and that it will still take 24 years to pay it off-- the only way that's even possible is if they continued charging interest and asking you for payments when your "credit" ran out.

If you intend to only pay half, then refinance to a different company and pay cash at closing of the new loan to make up the smaller loan difference.

Think about your quality of life-- if it involves "work, work, work" just to pay your bills, then it doens't make sense to use all the money up to build an extension unless you REALLY REALLY need it. I'd pay off ALL debts first, and then start investing some each month and having a little more fun with life.

Answer 3

You should shop around and see if you can refinance your mortgage with a better company that allows you to make a lump sum payment with few or no penalties. What this company is telling you is that no matter what you pay them now, you'll still be stuck paying the full amount of interest on the loan just as if you had not paid them anything. This can cost you tens or hundreds of thousands of dollars over the life of the mortgage.

So go call up some new mortgage brokers and they will help you!! They'll also be able to show you the figures and facts to help you decide how much to pay down on the current mortgage and how much to put into home improvements. You really need professional one on one advice, start by calling some banks who will be only too happy to sit down with you.

Answer 4

You don't provide any figures, but I suggest you at least consider paying off the current mortgage and refinancing to get a new smaller loan with a shorter term of 15 years.

For example: let's say you had a 30-yr. mortgage for £200,000 at 7.5% with a payment of £1,398 per month. If you could pay it off and get a new 15-yr. loan for £100,000 at 6.5%, you would have a payment of only £927.

This would make your payments more affordable, shorten the term of your loan, and still leave you with some cash left for other uses. This seems like a reasonable approach, especially if you're strained to make your current payments right now. After you've refinanced, you might be able to also consider paying for some home improvements with cash and/or additional financing. But consider these carefully and only if you really need them - the increase in home value from the improvements will probably be less than the amount you spend on them, at least in the near term. Good luck.

Answer 5

I would speak to a financial advisor. First, with a mortgage still going you are getting tax benefits you wouldn't get if it was paid off and that might be worth it. Second, your mortgage might have a penalty if you pay it off early. I'd suggest paying off ANY OTHER DEBT you have first: chances are the rates are much worse than your mortgage. I'd try to put a little more towards your mortgage assuming you don't have a penalty attached to paying it off early. If you don't have money in retirement I'd suggest putting more into retirement accounts as well. I'd try to speak to a financial advisor at a non-profit institution (credit union, etc) that could run some scenarios and give you some free and unbiased financial advice.

Answer 6

That sounds a bit dodgy to me. If you have a 30-year mortgage, you should be able to repay the collateral at any time without penalty, and it should immediately go towards repaying the principal, not a credit for future interest payments.

Of course, your mortgage company has a vested interest in lying to you, because they wouldn't collect your interest otherwise. I suggest you make an appointment with a loan officer at your bank, or perhaps a financial adviser, and get some independent (and hopefully correct) advice.

Answer 7

My advice would be to bank the money and use it to pay your monthly mortgage payments, all the while, earning some interest. It is better to have the ability to pay it off than to actually do it. Make the money work for you. If that means adding on to the house to make it more valuable, then I would consider doing that as well.

Answer 8

Pay off half the motgage & then refinance to get your payments down. Add the rooms to your house.


Good Luck!

Answer 9

Don't pay off your mortgage. Invest the money and let it make more money that the percentage rate of your mortgage. Pick up the book Rich Dad, Poor Dad and you'll get some good ideas.

Answer 10

pay of mortgage