Saving Inheritance Advice

maxsaver_2

Hi, I have recently inherited around £105k and was planning to use it as follows:

Debts
£2.5k - Credit Card/Overdraft
£7k - Mortgage reserve account
£3k - Maximum mortgage repayment (without penalty)
£10k - Car

Total: £22.5k

We looking into paying off the mortgage (around £32k + £2k penalty), but decided that it probably wasn't worth it?


Saving (~£80k)
£7.2k - ISAs (£3.6k × 2)
£15k - Kaupthing Edge 12 Month Term 7.15% Gross
£15k - Kaupthing Edge 36 Month Term 7.67% Gross

Total: £37.2k

I was planning on putting another £30k into premium bonds but after looking at the MSE article it doesn't seem worth it.

Would the best option be to put the rest into a normal high savings account (perhaps with Northern Rock?) -- I'm trying to avoid having over £30k with any one bank just in case!

I don't really mind the money being tied up as long as it is safe! :rolleyes:

Thanks in advance, any advice is appreciated!

Farway

Not sure of your age, but clear the mortgage including penalties first

I cleared mine early, and just ask anyone who owns their house outright on the feeling of shackles lifted, the freedom this gives, and ignoring the news everytime mortgage rates are mentioned, plus should the worst happen and you lose your job at least you will not lose your house

That still leaves you with enough for a rainy day

Jake'sGran

I too would clear the mortgage but I do hate that penalty :mad:
My son managed to rearrange his mortgage last year with the Woolwich and there is no penalty for early repayment.

I have had a few winnings this year with Premium Bonds, last month and this month. I reinvest it immediately so that it goes back in the draw for the following month i.e. does not miss a month. I started with £10k and now have £14600. Kaupthing Edge's 12 month bond is good.

pandora205

You can increase your mortgage repayments as well as pay off a small amount (10% I think) without penalty. I had this problem so I paid off as much as I was allowed (5k I think) plus doubled my repayments. That will reduce the balance quickly until next May when my fixed deal ends. You are also allowed to pay off a lump every year, so I'll pay off another chunk in January.

I also put 20k in premium bonds in April and have since won £650 already, which isn't bad so far though of course there is no guarantee with this. I also put any winnings into my savings account (also with K-E).

foxybabe

can i just hijack this thread. I have got approx 60k in savings and was deliberating whether to pay off the mortgage. Approx 38k. The only thing I am worried about though is that the 400 per month we pay on the mortgage at the moment will just get frittered away. We have about 12 years left on the mortgage. Any advice would be appreciated.

pandora205

foxybabe wrote: »

can i just hijack this thread. I have got approx 60k in savings and was deliberating whether to pay off the mortgage. Approx 38k. The only thing I am worried about though is that the 400 per month we pay on the mortgage at the moment will just get frittered away. We have about 12 years left on the mortgage. Any advice would be appreciated.

What I'm planning to do (if I ever get to that stage) is to keep paying the amount that would have gone into the mortgage into savings. I've already increased my pension (or at least AVCs). My order of priority with the rest would be ISAs then high interest savings account, though I know bonds are also an attractive option.

foxybabe

pandora205 wrote: »

What I'm planning to do (if I ever get to that stage) is to keep paying the amount that would have gone into the mortgage into savings. I've already increased my pension (or at least AVCs). My order of priority with the rest would be ISAs then high interest savings account, though I know bonds are also an attractive option.

The only thing that worries me is my willpower to do that. At the moment I have put 30k in a fixed rate with the nottingham for 18 months. there is approx 20k in isa's and 10k in a high interest acc.

runciblespoon

Tell us what your mortgage rates are! If you're on an old fixed rate then maybe nowadays you can make more by having money in your savings account. If you're on a post-credit crunch rate then maybe it's worth paying it off. It all depends on what your rate is, how many years you have left, and what the payoff penalty is.

foxybabe

The interest rate is 6.9. We have 12 years left. Not sure whether we would have to pay any penalty. We are with C&G and have been for the past 8 years.

maxsaver_2

runciblespoon wrote: »

Tell us what your mortgage rates are!

We're on a fixed rate of 5.69% until 2012. Thanks for all the replies so far. :cool:

Lokolo

Have a look at savings accounts. ISAs are tax free and you can easily get over 5.69. Eggs is 6.05%, HSBC 6.25%, Barclays 6.08% monthly/6.25% annually.

Regular savings accounts, assuming you are a normal tax payer (20%) you will need at least 7.12% as after tax this rate would go down to 5.69%.

As you have already said the ISAs will be full. Good. 15k in each savings.

I am worried about the 2k penalty though, thats £2000. Why would you want a penalty like that?

Put more money into the normal savings.

Also, never buy premium bonds. Waste. Of. Money.