[USER]

I am 48 and would love to get your feedback on my following situation. I’m currently living abroad and have a mortgage of 90k.

The sum is divided into two ‘tracks’. 1/3 is fixed at 3.1% (11 years remaining), and 2/3 at 4.84% (15 years remaining), which is fixed for the next 1.5 years. Right now I’m able to cover the monthly mortgage quite easily.

I have been very fortunately to have received a gift of 120k and am thinking of what to do with it.

The options I have thought of are as followins:
Pay the 2/3 sum fixed at 4.84% and invest the rest;
Pay the entire mortgage off; or

Put the sum I would have paid the 2/3 off into an easy accessible money fund earning around 3.8% interest and invest the rest.

This would ensure that if I were laid off in the future or had money issues or the interest rates were to go up, I could simply pay off the 2/3 amount without having ot pay tax on withdrawing the sum from my investments.

[Jeremy]

Depending on the rest of your financial picture, I like option 1. You take half of your 120 and pay off the higher interest portion of your loan and you invest the other 60 according to your overall investment strategy.

Your mortgage payment would drop dramatically and give you a huge amount of flexibility with your monthly costs.

Ideally you’d have a plan for what to do with that money you are saving everything month from the reduced mortgage; don’t allow lifestyle creep to just gobble it up without thinking about it.

[Eric]

I would pay the entire mortgage off and start investing the money that was going to monthly payments.

There is still $30k if you need to increase your EF.

The overall balance is small enough that I value simplicity over the potential additional benefit of investing that money sooner.

[Aura]

Paying off a loan that is at 4.84% is far preferable than investing that money at 3.8% interest since that means you are losing money every month.

I personally would be stressed about what happens in 1.5 years and would pay off the 2/3 loan even if I got a 5% investment.

would then take $5000 and do something on my bucket list and invest the rest in that 3.8% money fund or something a bit more risky or – if I had credit card debt or debt that was higher than 3.5% I would pay that off.

If I didn’t have an emergency fund, I would put money there.

The possibilities are kind of open since the info is limited.

[Ra]

I like your idea of putting $60K towards paying off the variable mortgage. Then use the rest to (as applicable):

pay off credit card debt or other high interest debt

Establish or boost your emergency fund

Invest in VTI or VOO (account will depend on your situation: traditional or Roth IRA, or taxable investment account).

[Author]

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