What should i do with inheritance

duncanvale

Hi,

I have recieved £60,000 inheritance and i am unsure how best o use it.

My situation is:

32 yr old

Married, mortgage £171,000 (5yr fixed @ 5.14%) 3 years left on this rate.

No other debts.

Should i pay max 10% lump sum of mortgage every year (above 10% = 3% additional charges)?, should i pay the whole amount against mortgage and pay 3% charges?

Should i place money in savings account and pay 10% lump sum of mortgage every yesr?, if so which savings account would be best.

Thanks in advance for your help

sloughflint

sloughflint wrote: »

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.

Your situation is not quite so clear cut as an offset mortgage with no overpayment restrictions.

I certainly wouldn't recommend you pay the whole amount and 3% charges.There is no point since you can get 7.15% ie 5.72% net which is better than your 5.14% mortgage rate if you are a basic rate tax payer ignoring any cash ISA usage.

The tricky decision you have to make is whether to overpay the 10% when savings rates are more favourable than your mortgage rate or put the amount in savings and lose a year's overpayment window if in the future savings vs mortgage rates swing the other way.

The trouble is none of us has a crystal ball.

downs523

if i was in your shoes i would put it all in a high interest savings account and pay the 10 percent each year, that way ur knocking loads from your mortgage and also gaining interest on the rest in the savings account