What to do with £90k

cef

I will soon receive £90k as divorce settlement from the sale of my marital home and I need to invest it for a couple of years or so. My mother invested in the Coop Platinum Bond Plus which she is pleased with, so I had considered something like that

I also have the opportunity of keeping the portable mortgage of £70k which is on the marital home which is a tracker mortgage of .18% above the bank rate and at the moment is £400 per month, and so exploring the idea of buying a small property to rent out, paying off as much of the mortgage as I can afford until property market rises and then sell.

I would appreciate your thoughts

kidmugsy

(i) I'd be in no rush to pay of a mortgage that charges just 0.68%.
(ii) I'd be lothe to tie up the money in a bond that made it hard to get at.
(iii) If I were buying to let, I'd be keen to buy a property that I could imagine living in myself if my plans changed.
(iv) I wouldn't assume that a rising property market must be imminent.

Anyway, let's be positive. What's your income tax position?

cef

I only work part time earning £850 per month, but once the house is sold I will receive half of my ex husbands pension which will be another £700 per month

kidmugsy

So £18600 per annum - you'll pay tax at 20%.

Things to think about.
(i) Are you clear of all debt, bar the mortgage? If not, you probably want to be.
(ii) Have you got all the insurance you want - do you want health insurance, unemployment insurance, life insurance in favour of children....?
(iii) Have you got a decent emergency fund, one that you'd want to keep even after you've bought a property? An instant access cash ISA would be suitable - for instance, if you already bank there or have a branch handy, the Barclay's Golden ISA. You can put in £5340 and it pays 3.25% pa tax free, and the interest rate will follow the Bank of England rate upwards. If the deal becomes disappointing in a year's time, you just transfer it to a better deal elsewhere.

Thereafter it's probable that you want one or two tax-exposed accounts with a similar deal - decent interest rate that "tracks" the BoE rate, and instant access (one account, say) or on short notice (the second, say). Or you might opt for the second to be fixed rate, fixed term. It's probably best for you to read the threads devoted to this topic elsewhere on this website.

Remember that deposit protection stops at £85000, so don't have over £85k invested at the same bank or BS: be careful not to invest in two banks that appear to be different but which count as one under Deposit Protection rules - I'm sure there must be advice on this elsewhere on MSE. Personally I'd also rule out banks whose deposit protection is provided by foreign governments - e.g. ING; the prospect of trying to unravel something with the Dutch government just doesn't appeal to me.

cef

Wow, maybe more to think about than I first thought. I don't have any insurance at the moment as this was dealt with by my ex. I am debt free and at the moment living in a small rented property. I get the impression you are in favour of savings rather than investing in property? Obviously there is a lot more to my story which is too complex to explain here, but you have given me more to think about and I thank you for your comments.

kidmugsy

"I get the impression you are in favour of savings rather than investing in property?" I may be biased by my sister being wiped out financially in the last great property crash. But really, like anyone else, in the end you have to guess at what the future might bring. If buying a property were to give you great satisfaction and peace of mind, then do consider it. But the one thing you can be sure of is that property prices can't go on growing forever without a downturn. Of course, you might be happy if all they were to do was stay still - only you can know.

As for insurance, my guess is that just as some people are under-insured, some are over-insured. I can see the case for health insurance, for instance, but I've never had it myself. The one time that lousy service from the NHS was really handicapping me at work, I paid for treatment out of my savings. So I am recommending that you consider insurance; I am not urging you to buy it. But I certainly bought life insurance when my daughter was young and my wife would have struggled without my income. Now that we're older neither of us has any.