Is it better to clear existing morgage now or save it till I sell this property and buy my next house?

If I were you, I would use the money to pay off the mortgage, as the interest you're paying is almost certainly a higher rate than you would get by saving the money.

Then when you do sell the flat there will be no mortgae to pay off, so one less thing to deal with.

Hi Bluebell and welcome to Money.co.uk

I had a similar situation when my mother died and left me some money. I had a £43000 mortgage at that time and was toying with the idea of keeping my mortgage going for a further seven years and buying a holiday flat abroad or simply paying off the mortgage.

When I did the maths, it was clear that saving seven years mortgage interest payments was the financially the most efficient thing to do

In your case, you may sell your flat tomorrow or you may well wait many more months, even years, so the savings in interest charges may be greater than you think, even with the current low interest rates.

But I have to endorse Feline's answer that you will save the ongoing cost of borrowing someone else's money, your affairs will be that much tidier as your property will be officially 'unencumbered' and there is something really satisfying about owning your own home outright.

In a nutshell, it's all about minimising costs at this point in time. Don't forget to discuss the matter with your lender first to ask if any administration charges may apply and there is no early repayment penalty to take into account!

Hi,

What kind of mortgage do you have? If it's an offset mortgage or one that allows you to borrow back any overpayments at the mortgage interest rate, then definitely stash the cash to reduce your mortgage interest.

If not, do you mind telling us what interest rate you're paying on your mortgage? Many people on tracker rates are paying less interest than they could make by putting their cash in a savings account.

Also, now is quite a good time to buy - if you have the deposit. If you find your ideal home, you might be able to get it for a reasonable amount using the cash you have been given. If you wait too long, prices might start going up - although I can't see that happening for a few years yet, unless you live in London, Surrey or the west country.

Finally - do you have a pressing need to move? If it's taking a long time to sell you might want to pay off the mortgage anyway and sit tight for a little while (which is kind of mutually exclusive to the above paragraph, but these are times where if you've got the cash you can negotiate a real bargain, but if not then it could take months or even years to sell, depending on where you are in the country).

Hi Feline, sonnpy and G-man,

Many thanks for your advice. It does look like paying off the morgage is a good option.

However, can I also ask if I pay off the morgage now but needed to get morgage again for the new property. - it seems like it is much more difficult to get morgage nowadays, or is this only for the first time buyers?? I wonder what my situation would be...?

G-Man,
My morgage is variable rate and I think it is around 5.3% and I should be able to borrow back overpayments.
I live in South Bucks and I do see houses I really like but it seems like large deposit doesn't mean much unless you've already sold your property!
I am not desperate for the move but would like to settle by later this year if I can.