Not sure if this is the right place. I have 5K to use.

mollyisthedog

Sorry if this is the wrong place to put this. Am very confused by all the different forums !
Me and H have been gifted 5K in lieu of an inheritance. The giver wants it to be used to improve our financial life, possibly mortgage-related and not frittered on cars, holidays etc
Saving in a cash ISA sounds ok (of course) but would really prefer something that will say "we have done this, with this effect IYSWIM"
We owe 14k on our home mortgage with a term of 3.5 years remaining and also a mortgage advance still owing just under 8K with the same term. Both at 2.5% variable interest rate, so low (for now)
Credit card debt about 1K between us (wouldn't use the gift for that, though)
What would you wise guys do with the 5K ? Something different or clear the bulk of the mortgage advance (would consider topping up the full amount by withdrawing from a current stocks and shares ISA currently worth about 15K ie taking about 3K out of it and paying off all the advance)
Hope this makes sense, find it all very confusing

RosieTiger

Whatever you choose, I'm sure the interest rate your paying on your credit card will be higher than anything you can save. So, I would pay that off first!

HappyMJ

Seconded....Pay the credit card off before saving anywhere. What are you going to do with it anyway? For how many years are you going to hold on to this money for? I'd spend it on something useful now no need to save it unless you have a purpose for it.

originalmiscellany

Thirded!
Look at your APR and clear the biggest numbers first. Put simply, whether you clear your mortgage or credit card, you're clearing your debts, and it'll be silly to clear stuff at 1% APR when you have credit cards at say 29%!

philhews

Just to add to the weight of opinion, I'd clear the cards, then you still have 4k to take a good chunk out of either the mortgage or the advance (at the same rate on both it would make no difference). As the giver wants you to improve your financial position then this way will improve it the most.

Lois_E

mollyisthedog

I wonder if perhaps the reason you don't want to use the gift to clear the cards is because that would feel like frittering the money on all the stuff you bought on the card, and that doesn't feel like what the giver wants you to do with it. If that's the case, then here's a suggestion. Clear the cards (and put the rest to the mortgage or advance) and then set up a DD to pay your cards off in full every month, or cut the cards up, or whatever suits you. (If you keep any cards, make sure they are the kind where you pay no interest at all if you clear them every month.) Then you can tell the giver that you have used their money to set yourself free forever from paying interest on cards. That's a huge deal, and not frittering at all. Paying off the cards only to run them back up again in a year's time would be frittering, though, I think.

(Well, that's how I would feel about it if I were the person giving the money and saying that's what it was for, anyway. Maybe you could ask them what they think, if you're not sure.)

Rebob

Clear the credit card and pay the rest off the mortgage. Will then be able to say its had a big impact on your life.

getmore4less

Use the money to clear debts

BUT the key is the monthly payments it saves are saved not spent otherwise you might as well send the money now.

So pay off the highest rates first.

You can say we used the money to reduce out debts and now we are saving an extra £xx pm which will make us mortgage free sooner.


Stop spending money on CC that you can't clear each month.