lump sump investment advice

fluffyange1

Hi All,

I want to ask a bit of advice, we are about to inherit a lump sump of 100k and we want to make it work as hard as possible to allow us to change our lives.

Current situation and options:
We have already used 20k to make an early payment on our mortgage. (5.99% fixed until end of 2013 ....ouch)

And we are using a further 15k to clear some outstanding debts from a holiday of a lifetime (all currently on 0% c. cards)

So that leaves us with approx 65k, we have taken the decision not to pay any more on our mortage initially as we want to keep the captial available and our options open.

Our current plan is to rent out our flat from Dec 2012 - until end of our mortage term (Dec 2013) and drop it down to interest only, giving us £300 income a month or we could pay more of our mortage early repayment (18k) and change to interest only and give ourselves an income of £500 a month.

We are planning to travel the world during 2013 requiring a budget of say 20k (although we would hope to save more of this before we go).

So that leaves us with 40k to invest over the next year and half, and 25k (allowing 5k contigency) we'd need to access when travelling.

This is what I've come up with:
- my husband and I both put max allowance in ISAs (£5,640 each at 3.35%)
- open the post office instant access saving account (for the 25k - 3.17%)
- put the reamaining in a fix rate bond for a year? (Approx 30k ,Cahoot 1 year fixed at 3.6%)

Would really appreciate any thoughts and advice as I'm struggling a bit. Thank you so much!

poorgirl-54

wow wat a waste- im sure you can do it alot cheaper than £20k round the world.

open lloyds x 3 vanatage accounts with £7k each to get good interest, paid monthly, and is instant access

DiggerUK

fluffyange1 wrote: »

......And we are using a further 15k to clear some outstanding debts from a holiday of a lifetime (all currently on 0% c. cards).....

Daft....If you have a long time before you need to pay off, then stooze in best paying savings a/c.
Or have some fun with Premium Bonds...who knows.
..._






-

fluffyange1

DiggerUK wrote: »

Daft....If you have a long time before you need to pay off, ,,,,.

Sadly not they expire in July so probably better to clear than to transfer, thanks though!

calypso_rhapsody

Lloyds Vantage is a good suggestion but the top interest (3%) is only paid on up to £5k (£3k to £5k) not £7k now. You need to set up standing orders to move the £1k each month but can put £15k each in here.

Santander Esaver 5 is now paying 3.2% and is instant access.

My guess is that the fixed rates will only go down so i'd go for the Cahoot deal if you can - and if it's still available but do check the best buys before you commit.

fluffyange1

Thanks folks, much appreciated.

Thrugelmir

fluffyange1 wrote: »

Our current plan is to rent out our flat from Dec 2012 - until end of our mortage term (Dec 2013) and drop it down to interest only, giving us £300 income a month or we could pay more of our mortage early repayment (18k) and change to interest only and give ourselves an income of £500 a month.

Your lender may well not play ball in terms of switching to interest only.

Thrugelmir

fluffyange1 wrote: »

So that leaves us with approx 65k, we have taken the decision not to pay any more on our mortage initially as we want to keep the captial available and our options open.

If your paying 5.99% isn't it worth clearing the mortgage?

From what you've written there seems a great danger that you'll fritter away the once in a lifetime opportunity that you have to make yourselves financially secure.

Ultrasonic

fluffyange1 wrote: »

- my husband and I both put max allowance in ISAs (£5,640 each at 3.35%)

This will make a minor difference given the the total you're investing, but since it sounds like you could be certain you aren't going to suddenly be desperate for this money I'd go for a fixed term ISA that offers better interest. You can get 4% on a two year fix at the moment. Have a look here for some options:

https://forums.moneysavingexpert.com/discussion/401374

I also wouldn't bother with Lloyds TSB vantage accounts. These pay 3% interest but you can get 3.2% with a Santander eSaver, or if you don't fancy Santander there is 3.17% at the Post Office - both these accounts are instant access.

Once you've worked out your longer term plans you might want to think about paying for some professional financial advice. On £65k I would guess you should probably be able to do better than instant saver rates in the long run. Although they might well just suggest that you pay off your mortgage.

dunstonh

In the thread title, you said lump sum investment advice. Yet none of the options recommended are investments. Just savings/deposit based.

- my husband and I both put max allowance in ISAs (£5,640 each at 3.35%)

The ISA maximum is £11,280 each. Only the cash element is £5640.

Your timescale does indicate that you shouldnt invest. My thinking is along the lines of what Thrugelmir is going with.

tushingham

hi,

mortgage at 5.99% has surely gotta be paid off before putting money in accounts paying 3-3.5%?? Or at least pay as much as possible off on mortgage and keep minimum in savings account that you'll need.

I dont know all of your details or how much left on your mortgage etc but how about if the lump sum is enough....
- 1) pay off your whole mortgage (taking into account the size of any penalties for doing this)
- 2) Take out another mortgage straight after at a much better rate and do with the cash as you've suggested above?
All depends on your current mortgage of course but i note you're paying off a big chunk anyway?

t
ps- im very envious of your round the world trip. yes you can do it cheaper as suggested above but that wouldnt be the same trip and you should spend on all the things you want. have a great time!

pps- investements in stocks and shares (isa) have been mentioned above indirectly but i agree that they may not be suitable for your particular circumstances.