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  • FIRST POST
    • Cotta
    • By Cotta 14th Sep 17, 11:05 AM
    • 2,502Posts
    • 987Thanks
    Cotta
    Adding a Lump Sum to my Portfollio
    • #1
    • 14th Sep 17, 11:05 AM
    Adding a Lump Sum to my Portfollio 14th Sep 17 at 11:05 AM
    Hi All,

    I have recently came into a small sum of money £7k to be exact and this is the first time in five years that I will have some meaningful savings. Rather than just depositing this into a current account I was wondering if I could avail of some advice on how to make it work for me. My current setup before the £7k is added is as follows:

    Outgoings

    Debt

    Mortgage - £64k
    Loan from parents - £5000 (Paying off £300 per month)
    Student Loan - £1200

    Mortgage - £393 p/m at 4.69% (Balance is around £64k) renewal due on February 2019. 10% overpayments allowed and there is a 5% fee for early settlement. No overpayments made this year.


    Savings/Cash

    £3000 in Nationwide Regular saver @ 5%, 6 months remaining. Paying £500 pm into this account.


    £600 in First Direct Regular saver @ 5%, 10 months remaining. Paying £300 pm into this account.


    £2500 - in Halifax current account.


    Notes

    My net monthly income is £1780.

    I contribute 8% of my salary towards my pension to which my employer pays in 11.5% of my gross salary.

    Overall pension pot is worth around £26k and I am 33.


    Thanks in advance
Page 1
    • chiang mai
    • By chiang mai 14th Sep 17, 11:44 AM
    • 88 Posts
    • 17 Thanks
    chiang mai
    • #2
    • 14th Sep 17, 11:44 AM
    • #2
    • 14th Sep 17, 11:44 AM
    I think I might be tempted to throw the 7k at my mortgage and reduce my debt and monthly payments, think of it as you earning 4.69% on your windfall.
    • Wookey
    • By Wookey 14th Sep 17, 11:59 AM
    • 804 Posts
    • 404 Thanks
    Wookey
    • #3
    • 14th Sep 17, 11:59 AM
    • #3
    • 14th Sep 17, 11:59 AM
    I would pay the 10% allowed overpayment and keep the repayments at a level that would allow you to hit that 10% per year. Put your mortgage numbers into an overpayment calculator to see how soon that debt would be cleared, every pound that you can pay of the bottom line means you can realise greater equity sooner in the event you want to move.

    I'm not sure these days how that 4.69% rate stacks up but to me it seems a tad high considering there is only 10% op allowed plus an early redemption fee, i would look to negotiate something better when it's up assuming rates remain low.
    Norn Iron Club member No 353
    • Flobberchops
    • By Flobberchops 14th Sep 17, 12:00 PM
    • 584 Posts
    • 421 Thanks
    Flobberchops
    • #4
    • 14th Sep 17, 12:00 PM
    • #4
    • 14th Sep 17, 12:00 PM
    If it was me - I'd first take the opportunity to pay back the parents in full. Borrowing from family never sits well with me anyway, and £5000 presumably isn't pocket change for them; it could become a sore point if they found out you were splashing cash around on investments rather than paying them back.

    Next, a mere £1200 balance on your Student Loan? Why not get rid of that too, then that's something you never have to worry about again.

    That leaves you with £800 and, going forward, £300 a month better off (keep your current expenses the same but keep the money you'd usually give your parents). That would represent a very nice lump sum and monthly contribution to a S&S ISA. In my opinion your cash savings are doing fine, and as you don't mention an ISA this would be a neat way to get some exposure to funds.
    I work for a UK bank, but any comments made on this forum are solely my personal opinion. Caveat Emptor!
    • xylophone
    • By xylophone 14th Sep 17, 12:17 PM
    • 23,446 Posts
    • 13,633 Thanks
    xylophone
    • #5
    • 14th Sep 17, 12:17 PM
    • #5
    • 14th Sep 17, 12:17 PM
    I think I'd do as suggested above - and repay the loans.

    https://www.vanguardinvestor.co.uk/ might suit for the S&S ISA.

    http://monevator.com/vanguard-direct-uk/

    http://monevator.com/using-vanguard-lifestrategy-funds-life/
    • Cotta
    • By Cotta 14th Sep 17, 3:45 PM
    • 2,502 Posts
    • 987 Thanks
    Cotta
    • #6
    • 14th Sep 17, 3:45 PM
    • #6
    • 14th Sep 17, 3:45 PM
    I certainly think it would be a good idea to pay off some of the debt owed to the parents, however I want this to be staggered more so that I am not having to go back to them.
    • kidmugsy
    • By kidmugsy 14th Sep 17, 3:54 PM
    • 9,850 Posts
    • 6,641 Thanks
    kidmugsy
    • #7
    • 14th Sep 17, 3:54 PM
    • #7
    • 14th Sep 17, 3:54 PM
    I certainly think it would be a good idea to pay off some of the debt owed to the parents, however I want this to be staggered more so that I am not having to go back to them.
    Originally posted by Cotta
    The way to handle your parents is simple. Ask them whether they'd rather you accelerated your repayments to them or overpaid on the mortgage, or a bit of both. Also your emergency cash sum could perhaps usefully be increased if you really fear having to borrow from your parents again.

    What interest rate are you paying on your student loan?

    edit: I assume the 10% overpayment is as described here. Yes?
    http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings
    Last edited by kidmugsy; 14-09-2017 at 3:58 PM.
    • greenglide
    • By greenglide 14th Sep 17, 3:56 PM
    • 2,897 Posts
    • 1,867 Thanks
    greenglide
    • #8
    • 14th Sep 17, 3:56 PM
    • #8
    • 14th Sep 17, 3:56 PM
    I certainly think it would be a good idea to pay off some of the debt owed to the parents, however I want this to be staggered more so that I am not having to go back to them.
    You are paying £800 per month into regular savings accounts but wish to delay repaying your parents loan so you don't have to "go back to them?

    Paying the loan off would save you £300 per month and still have £2,000 which could be used as a emergency fund. Are you being fair towards your parents?
    • Cotta
    • By Cotta 14th Sep 17, 4:28 PM
    • 2,502 Posts
    • 987 Thanks
    Cotta
    • #9
    • 14th Sep 17, 4:28 PM
    • #9
    • 14th Sep 17, 4:28 PM
    I had a sit down with my parents and explained the situation. I had offered paying all or at least 50% of the £7k towards them. They have refused this and asked for no more than £1k to be paid to them with monthly payments continuing as normal.
    • Cotta
    • By Cotta 14th Sep 17, 4:38 PM
    • 2,502 Posts
    • 987 Thanks
    Cotta
    The way to handle your parents is simple. Ask them whether they'd rather you accelerated your repayments to them or overpaid on the mortgage, or a bit of both. Also your emergency cash sum could perhaps usefully be increased if you really fear having to borrow from your parents again.

    What interest rate are you paying on your student loan?

    edit: I assume the 10% overpayment is as described here. Yes?
    http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings
    Originally posted by kidmugsy
    1.25% at present.
    • Alexland
    • By Alexland 14th Sep 17, 9:10 PM
    • 673 Posts
    • 422 Thanks
    Alexland
    In which case pay your parents the £1k and use the rest on your expensive mortgage if it will help you get to a better rate with increased equity when you find your next deal? Unless you are likely to need the money in the next few years (newer car, etc)
    Last edited by Alexland; 14-09-2017 at 9:16 PM.
    • Dird
    • By Dird 15th Sep 17, 8:10 AM
    • 2,608 Posts
    • 1,558 Thanks
    Dird
    however I want this to be staggered more so that I am not having to go back to them.
    Originally posted by Cotta
    You're making almost £1.8k/month net...why would you need to go back to them? Unless you have dependents you should have about £600+/month to play with/save for emergencies

    Is the £6k in savings/cash separate from this £7k?
    Last edited by Dird; 15-09-2017 at 8:17 AM.
    Mortgage (Nov 15): £79,950 | Cashback sites: £900 | Current accounts: 16
    Mortgage (Sep 17): £75,229 | £30k in 2016: £30,300 (101%) | £25k in 2017: £16,996 (67.9%)
    • Cotta
    • By Cotta 15th Sep 17, 9:27 AM
    • 2,502 Posts
    • 987 Thanks
    Cotta
    You're making almost £1.8k/month net...why would you need to go back to them? Unless you have dependents you should have about £600+/month to play with/save for emergencies

    Is the £6k in savings/cash separate from this £7k?
    Originally posted by Dird
    It's separate.
    • cloud_dog
    • By cloud_dog 15th Sep 17, 10:35 AM
    • 3,254 Posts
    • 1,816 Thanks
    cloud_dog
    I certainly think it would be a good idea to pay off some of the debt owed to the parents, however I want this to be staggered more so that I am not having to go back to them.
    Originally posted by Cotta
    I'm lost. You appear to have bigger problems than worrying about what to do with a spare £7k. You don't appear to want to grasp the fundamentals of finance.

    I know that sounds harsh but I cannot reconcile the concept of:
    1. Not repaying family debt when you can
    2. Thinking that you may need to borrow more from your parents when you are also saving a significant amount.

    Did you start your regular savings plans before you got in to financial difficulty, i.e. borrowed from your family? Is the need to borrow because you have started regular savings and it takes you above your outgoings?

    I'm a little lost.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Cotta
    • By Cotta 15th Sep 17, 10:48 AM
    • 2,502 Posts
    • 987 Thanks
    Cotta
    I think I agree with the general theme of the thread, I will be using the funding to pay off the family loan.

    Thanks to everyone for your help.
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