Question. I have been made redundant. My savings are £140,000 and my mortgage is £115,000. Should I pay off my mortgage, or use my savings to live off while I look for another job?
It could take years. My monthly outgoings are £1,400 including £400 on the mortgage. My current income, including Jobseekers Allowance, is £540. FG
Answer. Steve Laird, a certified financial planner at Carrington Wealth Management in Belfast, says: “You will be entitled to receive Jobseekers Allowance, based on your National Insurance contributions, for six months. After this, further entitlement will take into account other income and savings.”
Laird suggests you invest your savings for six months while you assess your prospects of obtaining new employment. “While you wait, try to get the best rate on your savings that you can without tying the money up — close to 3% pa should be achievable, which would provide £300 per month towards the mortgage costs.”
Danny Cox, a chartered financial planner at Hargreaves Lansdown, says: “I like the idea of repaying debt at the earliest opportunity. If you repay your mortgage you would be left with £25,000, an income of £540 per month and a shortfall of £460 per month. If you spend £460 of your savings each month to make up the shortfall, ignoring the interest on your savings, the remaining £25,000 would last you about four and a half years. Hopefully plenty of time to find another job.”
Both Cox and Laird stress that you should investigate whether there are early repayment penalties before you make a final decision on whether to pay off the mortgage.