What to do with Cash Lump sum?

wendfd

We are lucky enough to be getting a lump of inheritance money soon. (Roughly £45 ). We thought we would pay £15,000 off mortgage (10% of 150,000 outstanding. Then £15000 to clear credit cards. The remainig £15,000 was going to be a toss up between new car or putting it in a high interest saving account until next year when we can pay another chunk off mortgage when our existing agreement comes to an end.

Looking at the interest rates you can get on savings at the moment ie 4.5%, would it be better to put the whole lot in a high interest account for a year, as we are currently paying 1.59% mortgage and have 6 month at 0% on our cards.

g_attrill

If it were me I would clear the cards for peace of mind (and cut them up!) and pay the rest off the mortgage (putting the £15k into savings). I'm not a car snob so I would say get a < £5k Jap car that will run for years and years and enjoy the lower mortgage payments. (If you already have one, then ignore this, but why are you looking to change a reliable motor )

wendfd

Yes, but would it be better to put the money in a high interest account for a year as that seems to be paying a higher interest than our borrowing is costing, just at the moment!

happybroker

remember a) the interest you earn is taxable so you would need to net down the 4.5% you have found, b) that the mortgage rate could rise and c) you would need access to the cash once the 0% on the cards finishes as the rate from then on will be wild I would imagine.

stoozing can work but you need to plan it very carefully and from I can see (and I'm not an investment specialist) the higher rates of interest on savings will require you to commit your money for a year or so.

dimbo61

Yes you might well be better off putting the whole £45k in savings until xmas and then clear £15k off the mortgage and also clear the credit cards when the 0% rate finishes.
after xmas you can then pay another £15k off the mortgage.
Try and keep an emergency fund of 3/6 months of income in ISA,s or regular savers.
Dont forget any interest on savings will be before 20% TAX