Would you hypothetically pay off mortgage or new house with inheritance?
Posted by Funky_monkey2026@reddit | AskUK | View on Reddit | 49 comments
I'm 40m with 40f partner, no kids, unlikely to have any. Likely set to inherit around £1m in around 10 years, but due to my parents absolutely NOT meeting to set up a trust, this will be subject to IHT. Likely to get around £600k.
Mortgage on the house is £400k. Generally happy - not an amazing part of London/Essex borders, but 15mins drive from Epping Forest, decent road etc. I wouldn't say I'm frugal on purpose, but what makes me happy is generally free stuff like nature trails, perfectly happy doing a Lidl shop.
Would you pay off the house in full, and leave 200k in the bank, S&S ISA, Premium bonds etc? Or would you leave the identical mortgage and use some of the cash to get a slightly bigger house, nicer area etc? Ideally i'd like to not worry about HAVING to work, but I do enjoy working temporary contracts to give my day some purpose.
Candy_Lawn@reddit
pay off the mortgage 100% then reassess.
ClockAccomplished381@reddit
I used an inheritance (nowhere near that sort of money) to pay off a good chunk of mortgage such that the term was reduced to 7 years. It's now paid off since about 8 years ago, meanwhile income has increased a lot.
If I'm honest I do feel envious of people with nicer houses. I remember at one point a person two tiers below me at work (I was his boss' boss and about 10 years older) was buying a new house for about 50% more than mine was worth. Since buying the house we've had two kids and it's extremely cluttered. Obviously we've also missed on the bigger equity gains we'd get from having a bigger house, especially during the period of low interest rates.
On the flip side it does mean I'm not bothered about job security, during covid I quit my job without another one to go to, and my current employer seems to be gearing up for redundancies. I could be unemployed for a few years without impacting on my standard of living.
ControlExtension9062@reddit
Considering you’re already planning how to spend their money when they’re dead I’m not surprised they won’t “meet up” to talk about it..
Don’t expect anything because it’s not certain they may live another 20 years they may be in a home for a large portion of that time and that money will be quickly swallowed up.. or they may not even leave anything to you.
Enjoy your life now not expecting something when someone’s dead
Funky_monkey2026@reddit (OP)
We're Cypriots. We either move in with the family or they move in with us as opposed to putting them in a home.
Helicreature@reddit
I’m half Cypriot. Moving a parent in with you can be more expensive than a nursing home. I know because I’ve done it. Dementia; double incontinence; immobility; diminishing eyesight… My relative needed a wet room; hoists; a special bed; nursing; carers; bed linen and nightwear changes constantly. I could go on. We spent thousands a month, gladly and for years but your assumption that you’re going to inherit what your parents have now is deeply flawed.
Funky_monkey2026@reddit (OP)
You might be right about it costing more, but I wouldn't think twice about leaving my job to be with my gran or to look after my dad in shifts with siblings. Left a relationship and a good job, as well as spent all my money to be with my gran. She was (and aged 94 still is) able to look after herself luckily.
ControlExtension9062@reddit
How will you leave your job if you’ve a mortgage to pay?
You also make out like no British person would look after their family members.
Helicreature@reddit
You sound like a teenager. Your post was effectively ‘what am I going to do with the million quid I’m going to inherit?’. Now you’re saying ‘I’m going to give up my job to take care of them - because I’m Cypriot!’ Firstly - As a Cypriot/Brit - trust me, Ive met hundreds of people who’ve sacrificed everything to care for elderly parents- of all nationalities, in support groups. You obviously dont understand what that involves physically, emotionally AND financially. Many older people require 24 hour care. Incontinence/ falls/ insomnia/ dementia. Unless you never need to sleep night carers cost A LOT of money. If you’re not planning on changing incontinence pads/soiled bedding to retain the dignity of a parent of the opposite sex - that’s daytime carers too. Add on your lost income; hoists; a wet room; a specialist bed. The vast majority of my friends have had at least one elderly relative who needed care and however that looks it diminishes inheritance fast. I hope for your sake and theirs that both of your parents die in their own beds at great old age having endured no decline but the odds are that won’t be the case, so maybe concern yourself more with the love and support you can provide to them as they age and less with virtually spending their money, years in advance of their loss.
ControlExtension9062@reddit
People completely underestimate how difficult it can be to care for an elderly person and their might be two of them that need constant care throughout the night and day
Stunning_Hedgehog960@reddit
Agreed. Asking this hypothetical question seems pointless. And heartless. Also think that if OP inherits anything, life circumstances may have vastly changed come that time and may not have a mortgage anyway.
elvieevee@reddit
Same thing happened to me. I already had an amazing Covid era mortgage rate fixed for 10 years with another 8 years left to run at the time. Made no sense to pay off the mortgage when the borrowing is that cheap. Paid off debt (didn’t have loads - zero interest credit cards) and went on a couple of nice holidays with my family. Got a financial advisor and invested the rest - bonds initially so that we had cash easily available but will be changing the mix of the portfolio now that we’re in a calmer place as a family (it was 2 years of trauma so no big decisions). We have kids so it’s a bit different but for us the money wasn’t “life changing” in a big way - the income from the investments is definitely not enough to live on such that one of us could give up work. It has however given us security knowing that we could pay off the mortgage if we wanted to. We’ve also used some of the money to make improvements to the house; we didn’t want to move but we did need to make some changes to future proof the space. We live in the Home Counties so property is expensive here; I would rather tweak what we already know and love than pay through the nose to move somewhere new.
Dont-settle-for-him@reddit
Logic to consider..
How much interest could you get on that amount? Would it cover your mortgage?
Because if it did, then at the end you'll have the house AND the money. Which beats only having the house if you settled up.
Funky_monkey2026@reddit (OP)
Well there's only so much I could invest. S&S ISA is limited to £20k a year, average 10%. Premium bonds really don't get 4%, likely around 3-3.5. Good thing is value of property goes up in time, but my 400k I borrowed won't go up in line with the value of the property. Maybe just pay off enough to get access to a lower rate.
Ki1664@reddit
You’d be better off asking in r/ukpersonalfinance there are plenty more tax efficient vehicles like investment bonds that could be an option
DrLucianSanchez@reddit
I am surprised someone whose parents are worth that much doesn’t have access or knowa financial advisor!
Funky_monkey2026@reddit (OP)
Cypriots that got lucky with buying stuff when it was cheap. The fish and chip shop cost £70k, now worth £2m. Garage for £15k, now worth £300? House in 1999 for £180k now worth around £800k. Loads of assets bringing in next to nothing. The garage has been empty, not being rented out for about 15 years.
Ecstatic_Food1982@reddit
A Cypriot friend of mine ended up with loads of random bits and pieces when his granddad died. He'd come to London in the 50s and settled, obviously, around Palmers Green and then upgraded to Enfield. Thought he was going to get a couple of lock ups and a shop, turned out he had a load of stuff like 10% of a kebab place, a share in a taxi firm, something to do a with a florist and so on
Funky_monkey2026@reddit (OP)
My grandad bought a fish and chip shop, a house, another house for his son (MASSIVE one), and a final house for himself. Unlucky for us, the first house that was 4 storeys in Stoke Newington was given to one sibling (my uncle) who sold it to pay off gambling debts and enable him to gamble more. The massive house also went to him, and he "sold" it to his kids for bankruptcy purposes. Luckily my dad bought the chippy for £70k off my grandad (his father in law). We also bought the house my grandad bought for himself after he passed away, and gave the siblings their share of inheritance.
I've inherited some sentimental possessions - namely his prized air rifle which I maintain fastidiously, and a load of his gardening tools which I still use 26 years on.
Ecstatic_Food1982@reddit
You can't beat the older tools. I've got some of my dad's (he's still alive, he just doesn't do so much gardening now) a chunk of which were actually given to him by older relatives. My hoe is at least 70 years old.
DrLucianSanchez@reddit
Good on them!
No-Jicama-6523@reddit
Really? My parents’ net worth is hovering around that point, they’ve never seen a financial adviser.
Cultural_Tank_6947@reddit
£600k in your neck of the woods isn't much. You'll have to keep working anyway, so may as well let the mortgage keep running and earn more than what the mortgage would elsewhere.
Supercharge your private pension for 3-4 years, load up the ISA, etc.
Just one thing though, if your parents are married to each, have a house and they pass everything to the survivor, and the survivor passes on to kids, the tax free allowance goes to a million.
So you could potentially get the full million without any inheritance tax liability. That may change the maths a little.
Look up the r/PersonalFinanceUK sidebar for inheritance/lump sum advice too.
Funky_monkey2026@reddit (OP)
I tried to find this information, but couldn't. There's 3 siblings, and assets worth £3m total give or take. If it's equally split, do we still get £1m tax free each?
No-Jicama-6523@reddit
IHT is estate based. Sounds like you need to read some of the gov.uk pages, they explain it pretty clearly.
It’s likely your final parent to die will have 1 mil at 0%, so the estate would pay 800k on 2 mil, leaving 2.2 mil between three of you, so 733k.
Funky_monkey2026@reddit (OP)
Thank you.
Cultural_Tank_6947@reddit
Ah, no. It's the size of the estate not per beneficiary.
But the tax will be cleared first. And even the remainder will be disturbed.
Noon_Specialist@reddit
If I were you, make sure you have a safety net equal to a year's earnings, and invest the rest in an all-world index for the next 10-15 years. You should have enough money at that point to pay off your house and have a comfortable retirement. Use your capital gains allowance to move some of your gains to a S&S ISA with any surplus money from working. Most importantly, get a financial advisor.
Funky_monkey2026@reddit (OP)
I did have a safety net, but recently moved it to a S&S ISA (split, partly all-world, partly North Americas) Still have a smaller safety net of about 3 months expenses.
Noon_Specialist@reddit
Be careful with North America, when the tech bubble pops that puppy will tank harder than most. And as someone who has been made redundant, I can tell you that 3 months isn't enough.
Funky_monkey2026@reddit (OP)
Definitely not. I'm trying to up it again, treating my ISA as very long term/early pension pot that I don't want to touch.
squigs@reddit
I would. I'd also work and live frugally for a bit afterwards to make sure I have a decent financial buffer - which doesn't need to be a lot if you don't have a mortgage to worry about.
You still have the option to upgrade later. For now you're not having to pay interest.
Funky_monkey2026@reddit (OP)
Living expenses would fall from £1600 pcm to about £600. I'd still have income from rental abroad, investments etc. Food for thought. Thanks!
TrainingBike9702@reddit
I paid off my mortgage and I kind of regret it. I regret it because I knew it was not my forever home, but I felt I was lulling myself into a false sense of security by paying it off early. What I realized really gave me security was having cash reserves, not necessarily having a mortgage free home.
Cultural-Ambition211@reddit
On the other hand, we display off the mortgage and delighted to not have that outgoing every single month.
Our savings/investments increase by a good amount each month and we have pretty much zero financial worries which is a fantastic place to be in.
Additionally, we got extremely lucky and our fixed term came to an end just when Truss’ budget came out. Our mortgage would’ve gone from £1250 to around £1800 a month.
TrainingBike9702@reddit
I also paid off mine when my fixed term came to an end, but made the mistake selling a bunch of my stocks to do it only for them to increase in value 250% over the following 12 months. Stupid me
Funky_monkey2026@reddit (OP)
Agree. However, the mortgage is £400k but we pay back pretty much double.
Before I bought the house, almost all of my income was disposable. Saved £90k cash and blew it on a "2 week holiday to Cyprus". Built a gym from scratch, lived there for 7 years. At least I'm renting it out now and putting that into a pension there, as well as having £200-£250 left over each month. Whenever I go, I rock up without cash and tell my friend to bring me my money so I can spend it there and bring the leftovers back with me.
Kapika96@reddit
How on earth did you spend 90k on a 2 week holiday in Cyprus?
Funky_monkey2026@reddit (OP)
Built the gym. It was a patch of dirt and now 480m² 2 storey building. Lived there for 7 years.
Ecstatic_Food1982@reddit
I also want to know, I'm invested (so to speak) in this now.
No-Jicama-6523@reddit
You’re assuming inheritance tax on the entire sum, which is very unlikely.
If you want to work less you have to reduce your spending, so paying off the mortgage makes sense. A million is enough to live off the profits for the rest of your life, but not if you keep significant amounts as cash.
BillyJoeDubuluw@reddit
A few thoughts:
Feeling likely to gain an inheritance and actually gaining one are two different matters.
£1,000,000 isn’t as much as it used to be… You will be pushed to comfortably not work “just because you don’t want to” more than you might think…
IF you get the money then I would look at the state of play again closer to the time.
I don’t say any of this from a jealous stand point, I am financially comfortable… To plan what you would or wouldn’t do with a suspected inheritance ten years in advance is a bit grim…
Funky_monkey2026@reddit (OP)
100%. That's why I asked hypothetically. I have a good job, do my investments, and am not taking for granted I will get anything.
BillyJoeDubuluw@reddit
I wouldn't leave work, personally.
I might pursue a career change of some description… but a million isn’t enough to not need to work, in my honest opinion.
Both of my Grandfathers have about that figure and a bit of change but both have held down positions past retirement, in example.
It’s a comfortable sum. It can make life easier… but it doesn’t end the need to work.
undoneyet@reddit
I don’t think that 1 million is quite in range of inheritance tax, once you apply both parental allowances plus both family home allowances.
Lawrenceox16@reddit
Inheritance tax is 40% above 500k from family. You should get 800k (500k taxed 40%) = I'd make sure your happy in a house you will not want to move from and invest the rest with a view to becoming financially independent as early as possible. 4% rule of thumb for draw down only gets you £32k per year from 800k and that will be subject to tax as you can't put it all into ISA etc etc. so you will have a way to go depending on your current savings/pension and how much you want.
Funky_monkey2026@reddit (OP)
I'm sort of working on becoming financially independent now anyway. ISA, 50% pension (lived abroad for a while, really don't have much ATM, but do have 8/15 years paid abroad which will get me around £1k/month from age 60). Would like to retire aged 57-60 with mortgage paid off. Thanks for letting me know I'd get 800k from £1m.
Dont-settle-for-him@reddit
At the most, you'll be paying £270,000 in tax.
If you're clever, zero.
Funky_monkey2026@reddit (OP)
Thanks for letting me know how much tax will be paid! Unfortunately, my parents won't meet up so I'm prepared for the worst which is "only" £730k give or take.
AutoModerator@reddit
Please help keep AskUK welcoming!
When replying to submission/post please make genuine efforts to answer the question given. Please no jokes, judgements, etc.
Don't be a dick to each other. If getting heated, just block and move on.
This is a strictly no-politics subreddit!
Please help us by reporting comments that break these rules.
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.