what to do with redundancy money

[mandimoo]

i can just about pay my mortgage off with my redundancy settlement.... but it will wipe out any savings i have (which are diminishing in real value anyway). to slightly complicate things, that property is rented out and i live with my partner. is there any reason NOT to pay off my mortgage? are there any benefits to having a mortgage?

[paddywak]

When I was made redundant from the mining industry, I was lucky enough to be retained for about 18 months on the salvage and shaft fill contracts which gave me breathing space.After a lot of discussion we decided to pay off the mortgage and blow the little bit that was left on a holiday (3 weeks in the Dominican Republic). Now everybodies circumstances are different but it worked for us, for a start I could take jobs that paid less but suited me. its surprising how much differance it makes not having to find that �3-500 per month Also though the money might sound a lot it soon just drifts way in everyday living if you don't watch out, many of the lads I worked with have ended up with nothing. What ever you do please think long and hard about it discuss it with your partner and family but remember what works for one may not be the best for you

[gilf]

"are there any benefits to having a mortgage?"

Only circumstance I can ever see for not paying off debt is if the money would earn more interest elsewhere, can't see in the current climate that it would be the case.

So lets say you have a fixed mortgage rate of 2% but a savings rate of 5% then the money would be better off in the bank earning the interest rather than paying off the debt*, however currently savings rates in general are terrible.

* There is a tax implication on that as you will pay tax on the earnings so the ratio of the different interest rates would need to be large to account for the tax payable.

[Verix]

Usually paying off your mortgage is a good idea but if you're renting the property out I think things are slightly different.

My dad and his girlfriend have done very well for themselves through renting out properties. As i understand it if you have a mortgage on a house that is being rented most of the rent will be going on paying off the mortgage and bills etc, any money left over you probably need to set aside for contingencies. If you were to pay this mortage off however the money you were pulling in from rent would be clear profit opening you up to a world of tax.

You'd be better off keeping the mortage on the house, avoiding the extra tax and start viewing this property as an investment for the future.

[Velvetee]

I'd probably pay it off then all the rental income you receive will be profit, you can then start to rebuild your savings and if there is a time where your property does not have tenants, you won't have to worry about paying the mortgage yourself.

[craft1948]

I did some work for a USA company for 2 years on the promise of a huge bonus if targets were met, and I received the largest single amount of money I'd ever seen. First thing I did was pay off my mortgage and it was the best feeling ever!!!!

[R1Geezer]

Pay off debt if you can, beleive me cash on the hip is a liability.

[rov1200]

With your savings in the bank it will go against you if claiming for a rebate on council tax and other benefits. Have a clear mind and pay it off!

[tamborine]

the mortgaged prop is earning its keep - so no need to pay it off. There are tax benefits to having a mortgage - should the tax man enquire.

Use the redundancy towards another prop to earn more income?

[factor-fiction]

These answers to a similar query may help.
http://www.theanswerbank.co.uk/Business-and-Fi nance/Question713693.html

Bear in mind there may be a penalty to pay for paying off your mortgage early.

I agree that getting rid of savings can help with DWP benfit claims. On the other hand, if you are claiming benefits isn't some help with mortgage interest available after a period? If so, you need to take that into account.

Depending on your age and tax band it may be worth paying a lump sum into your pension.