What to do with my inheritance?

v360ce

I am a first time user of this forum so any views and opinions for you will be most appreciated.

I will soon be receiving inheritance of about £77,000 and I, not sure how best to use it. My situation is this?

31 year old single male. £164,000 interest inly mortgage. Steady job.

I intend to use a small amount of it for some home improvements (kitchen etc) and the odd personal present. But i imagine to have about £60k left to either plow into my mortgage or invest some how.

Any help here would be great. ISA's, high interest accounts, shares? I don't know. Or should i simply play the safe game of putting it into my mortgage?

Thanks

sjhunt69

Personally i would use the £60k to pay off the mortgage (Make sure that you are not paying out excessively for paying a lump sum first though) I would then see if you can change to a repayment mortgage. Obviously the monthly interest would have reduced after paying the £60k.
There is no point in having savings if the interest rate on your borrowings is greater!!
if you don't fancy this then i would advise opening an ISA although you are obviously restricted to you annual deposits. Plenty of advice around the site though.
Good luck

McSaver

Pay it off your mortgage. It will be the best investment you can make since your elimating some of your outstanding borrowings and you would then have less interest to pay on your mortgage. You could pay £60,000 off your mortgage and perhaps convert your mortgage to a repayment mortgage since you would only owe £104,000.

chesky369

If you pay off some of your mortgage and convert to a repayment, then you can start saving regularly some of the money you should have spent. Then you can think about ISAs, etc.

downs523

definatly pay off the mortgage mate

topher_2

I'd also be paying most of the money off the mortgage and changing to repayment if at all possible. However I'd put a couple of grand into a cash ISA to be available for emergencies.

sloughflint

I seem to think completely differently to a lot of people here.

Rather than simply advise to pay a lump sum off the mortgage ( repayment or interest only), I'd suggest a comparison of mortgage vs net savings rates at the same time as exploring better mortgage deals and what the overpayment penalties/restrictions are.

As long as one is disciplined, the money is saved tax efficiently at a higher rate than the mortgage rate, then paying a large lump sum off mortgages in general might not be the best way forward.

Similar topic here:
http://forums.moneysavingexpert.com/showthread.html?p=12740479

[Deleted User]

I must be the only person who thought a holiday might be nice... followed off by setting up an offset mortgage

sloughflint

ringo_24601 wrote: »

I must be the only person who thought a holiday might be nice... followed off by setting up an offset mortgage

The last time I looked into this sort of thing, I found offset mortgage rates unattractive. Things might be different now of course.

Good interest rate deals tended to come with penalties like restricted overpayment capabilities.

We are not going to be able to help OP definitively. It will boil down to attitude towards money, serious number crunching whether get out fees of current mortgage deal are worth it ( if wants to change the deal) and how long savings rates will be more favourable to mortgage rates vs yearly overpayment allowances ( if restrictions in place).

jeepjunkie wrote: »

As usual these things are down to circumstances etc ...

All I can add is every time I've come into money e.g. inheritance, cash gifts, investment profits, house sales, redundancy money etc every single penny has be been paid into the mortgage. As a result the last house was paid off and the current house has a <15% mortgage coupled with stoozing and offsetting this mortgage will be history soon too!

Money is to easy to fritter away so do the right thing and secure your future...

Again, I can't think like you. I just look at the pure Maths.
If the attitude is 'money is easy to fritter' then yes paying off the mortgage is wise but if someone is totally focussed on money saving then I disagree as long as the figures stack up.

sloughflint

jeepjunkie wrote: »

What is the maths...?

Savings/mortgage rates continually fluctuate and it is only in recent history savings rates are higher than mortgage rates so you do what is appropriate at the time. Coupled with all the T&Cs which limit how much can be saved where or minimum/maximum paid into the mortgage blah blah blah... Not only that there is tax efficiency to think of as well so everyone’s situation is different.


As for frittering cash, not something I do personally but most people I know seem to very good at...

My offset is certainly does not have an unatractive rate; it was simply an add-on with a one off charge which was waived, currently 5.58% with no booking/admin fees, no overpayment limits etc... All different now though...

You've pretty much explained the careful considerations needed yourself.
The best bit about your deal is no overpayment limits.Wish I had that deal.

Here's an example using Op's 60k figure:
Let's say you were hypothetically a basic rate tax payer and you'd managed to accumulate 30k's worth over the years in cash ISA's @6.25% and the other 30k in a 7.15% paying instant access account.
That 60k could be earning 0.5* (6.25 +0.8*7.15)=5.985% which is better than your offset deal.
As soon as the Maths for whatever reason makes the interest fall below 5.58% then the whole lot should be ploughed back into the offset.
The beauty of your deal is no overpayment penalties.

Not a huge difference but at the end of the day even if it worked out in the savers' favour just for a few months, the idea makes financial sense. You end up in debt for a shorter time.

I am merely highlighting that it is not automatically better to overpay at the moment which is what most posters in the thread seemed to be saying. I'd rather suggest to OP to look into it in more depth knowing his/her circumstances and attitude to money.