Inherited money- pay off some of mortgage or invest?

teamscottbarnes

Hi, i've just inherited £10000 and i'm not sure what to do with it.

We have a mortgage of £138000 currently on SVR with Halifax. Would it be worth paying off £10,000 of this or is there a better option, say investing it???

We don't have credit cards and the only other debt i have is a student loan of about £5000.

What do you think?

Cheers FB

UselessMoney

Recommend get independant financial advice from reputable local source, get to check mortgage details to see if and when you would benefit, (my friend changes mortgage provider every year to get best deal and save thousands in long run). Might be worth linking current account to mortgage to reduce interest but be wary of your spending. Could be worth using half (£5k) to pay off student loan (again depending on interest rates and early repayment terms).

teamscottbarnes

Just spoke to mortgage company- because i'm on SVR i can repay as much as i like without penalty. If i paid off £10000 it'd save me £43 per month on my repayment. Over term of policy it would save me roughly £14,500.

Mojisola

If you go ahead with paying off some of the mortgage, open a savings account and put £40 a month away. You shouldn't miss it as it's already going out as part of the mortgage.

Rupinder_Khurana

Hi teamscottbarnes,

That sounds pretty good that you would save roughly £14,500. However, it would be advisable to use the money in the best possible ways and hence you should seek advise from financial adviser.

Regards,

jimmyjones_2

Personally I wouldnt be paying a financial advisor to help make this decision.

First, think about your rainy day fund... people typically suggest having 3 months+ net salary in instant access savings.

After that it is a pretty simple equation: if your interest rate is higher on your mortgage than you can get in a savings account - pay off the mortgage.

Typically, your mortgage overpayments can reduce the term or the monthly payment - depending on your situation you might prefer to reduce the term if you decide to overpay.

vax2002

How much will it cost you to pay this £138000 not how much have you borrowed, what is the total cost of the repayment of the mortgage, most people dont know this figure themselves.
Until you know this figure you should not take any advice from investment experts on commission.
The ask for a total repayment figure minus the 10K
The difference will make your eyes water.

getmore4less

UselessMoney wrote: »

Recommend get independant financial advice from reputable local source, get to check mortgage details to see if and when you would benefit, (my friend changes mortgage provider every year to get best deal and save thousands in long run). Might be worth linking current account to mortgage to reduce interest but be wary of your spending. Could be worth using half (£5k) to pay off student loan (again depending on interest rates and early repayment terms).

Very much doubt it fees will eat up any savings.

Once on a low rate there is little to save by changing again.

getmore4less

teamscottbarnes wrote: »

Hi, i've just inherited £10000 and i'm not sure what to do with it.

We have a mortgage of £138000 currently on SVR with Halifax. Would it be worth paying off £10,000 of this or is there a better option, say investing it???

We don't have credit cards and the only other debt i have is a student loan of about £5000.

What do you think?

Cheers FB

Lets face it £10k is a tiny amount compared to the debt.

What do you currently do with surplus cash?

how much surplus do you have?

How big are your emergency savings?

Do you have any long term investements now?

Whats the term, rate and monthly payment of your current mortgage

LTV and income multiple?

£43pm for £10k @ 3.5% that would be a term over 33.5 years

misscousinitt

It all depends on how much you have in savings at the moment.

If you have an emergency fund already then I would pay off the student loan, pay £3k off the mortgage and treat yourself with £2k!

Any money you are currently paying towards your student loan can be thrown at the mortgage as you won't miss it, plus if you still make the same mortgage payment as you are now the balance will start to come down nicely.

If you don't have savings then you need to put something by and have less of a treat!

Its all about balance. I'm no expert - just offering my 2p's worth.

Good luck.

Sepa74

For me priority 1 would be the rainy day fund of 3 - 6 months expenditure (NOT salary) depending on your circumstances (ie more if your job is insecure).

Once that's sorted, I would use the £10K to pay off the most expensive debt... which is probably NOT the student loan!!

If your mortgage interest rate is low, you may find a savings rate where the interest is higher. You need to beware of tax, though - there is too much to put it all in an ISA, which is tax free, so you will probably be paying at least some tax on the balance, unfortunately.

It's just a case of simple maths - where will the money work for you the hardest. All the best with figuring it out!