Unexpected £500k Inheritance

jgd12345

Hi, i have recently inherited £500k and i have no idea what to do with it.

I currently have a £85k mortgage standing on a original £100k property. I now believe the value of the property to be around £90k as it was purchased whilst property values were high. While i was unfortunate in that regard i was lucky to get a mortgage based on my earnings. However i have been on the banks variable rate for the last year as i haven't been able to move to a new mortgage supplier due to the fall in value of the property.

I would like to move sometime within the next few months and have been looking at properties for around £250k. My current property is not currently on the market.

Therefore i'd like to know what you would adise i should do. One option is to pay off the remaining mortgage on the property immediate to save me £420 each month until i find my new property. Then look at investing the remaining amount (minus the amount i set aside for my new property). Once i've found my new property, purchase that in cash so i am mortgage free. I would then either look to renting or selling my existing property.

I'd really appreciate the help as dealing with this sort of money is completely new to me.

Thanks

lisyloo

i have recently inherited £500k and i have no idea what to do with it.

Go to see a few IFAs preferably ones with personal recommendation from friends/family/relatives/neighbours/colleagues.
If you can't get any personal recommendations try the people that advise on you or your partners company pension schemes. My personal experience is that if they have a decent sized account with the company they will want to provide decent service to an employee.

It's MUCH better long term to pay a few Ks in fees/commission and get a GOOD result long term than to skimp on the advice and make bad decisions.

However i have been on the banks variable rate for the last year

What's the rate?
Are there any redemption penalties?
Ring up and find out.
It may be worth you paying this off but you need to check the rate/fees.

Then look at investing the remaining amount

You probably don't want to invest ALL of it. You need some emergency/available cash.
What about your pension/retirement savings? Do you have any?
If you are a higher rate tax payer you should definitely think about using all your higher rate tax relief and this is very tax efficient.
You would need advice on the investing part.
An IFA would advise something suitable based on how risk averse you are and your goals.
But try several and find one you like, there is no rush. Better to take your time and make a good long term decision. Most will advise for free.

oldvicar

Your basic plan sounds good to me. I would not hurry to 'invest' before you are certain about how much you will spend on a new home. Take some time to try to understand about the sort of investments people on here discuss. Maybe then take professional opinions/advice if you feel that will help decide about more complex investments - but please never invest in something you don't understand the risks (which a qualified adviser ought to be able to guide you on)

In the meantime you will need to keep a lot of money on deposit. In these uncertain times, the first step is to be sure you understand the FSCS compensation scheme guarantee limit of £85K per licenced bank. National Savings and Investments (NS&I) is fully backed by HM Treasury (but only pay 1.75% interest on instant access), and arguably some banks may be a little safer since the government owns them although they are still covered by normal FSCS rules.

atush

You need to look at ALL of your finances, not just property and investments. Such as, do you pay tax? Do you have a pension? Do you have dependants? Do you have a spouse? What age are you now, are you working and when do you think you will retire?

Lots to think about here, and yes you need to spread it around. You need to keep 6 months spending in Cash (but can be in ISAs etc) for emergencies then think of investing the rest.

Ifts

Depending on if or how much of an early redemption charge you will have to pay the mortgage company I would pay of the mortgage on your existing property, and save the £420 you are paying out for the £85K mortgage each month.

If you can rent out your existing property, it might be worth keeping it and renting it out as you are currently in negative equity and will also occur more losses in selling fees.

If you pay off your existing mortgage and buy another property in cash for up to £250K, you will still have approx £165K left over from your inheritance.

Also if you have any other debts, it might be worth paying them off as you will most probably be paying more for them than what you would get on your money on deposit.

jgd12345

Thanks guys, i currently earn £27k a year so i'm a basic tax payer. I think i'll speak to an IFA but my general plan seems like the way forward.

atush

You need to ask your IFA to set up a pension for you.

gadgetmind

atush wrote: »

You need to ask your IFA to set up a pension for you.

I suppose that contributing full taxable income each year, and making up for this using dividend income from investments, might make sense.

oldtoolie

You don't need to ask an IFA to set up a pension -- A SIPP -- self invested personal pension is just that and available from a variety of providers.

Even if you engage an IFA, you still need to educate yourself on investments -- otherwise you won't know what questions to ask. Do look in the library and bookshop for a good book or two on financial planning and investment.

For me, the problem with the IFA is that they are (or at least the one's I have dealt with are) narowily focused on helping you to invest your money. You are in a fortunate situation and need to work out a plan for your life. That is something only you can do properly. So take your time, think it through and don't invest in anything you don't understand. And enjoy yourself.

property.advert

If you walk up to an IFA green as grass with this (comparative) huge amount, they'll be licking their lips and ordering business class upgrades. You won't know what has hit you.

Spend 6 months looking for property and researching all manner of investing. Then when you are ready to see an IFA, you won't get shafted.

ultrarunner

This is likely to be a once in a lifetime situation, so take your time, take as many soundings and do as much research as you need and make sure you make the right decision.

Good luck.