Gift received. What should we do?

Anonymous3

Hi

Long time poster on these boards but don't want anyone knowing about this (friends who use MSE) so opened new account.

Any advice would be much appreciated, the figures are accurate and honest and I will answer any questions in the hope of getting the best advice possible. Our scenario is as follows. Thanks in advance

House bought for £197,500 in market low of 2008. Put £13k into refurbishing it and house would now achieve sale price of £250k.

We placed £30k deposit down when we bought it and our mortgage is now £159k meaning equity of £91k.

My wife finished work this week to go on maternity leave (we already have a 20month old) and we made the life decision that she would not return to work so she will receive full maternity/occupational pay while also receiving a voluntary redundancy figure of c£4k. I earn c£30k a yr and neither of us have any loans/debt and live within our means and are sensible with money. I'm aware 30k a year isn't sufficient for our mortgage but we have also built our savings up to £25k and planned to use small amounts of that per month to subsidise my wife not working.

Completely out of the blue today we received a gift of £150k and it's blown our minds. What should we do with it?

My initial thought is have in high interest accessible account and use to pay and overpay the maximum we can on our mortgage each month. We are on a 4yr fix at 2.59% paying £641 per month, expiring in March 2017. We have 29yrs 9months left on our term.

Any advice appreciated and if you need anymore info please just ask. Thanks in advance.

Anonymous3

Daddy942

I would overpay the maximum amount then pay off the mortgage when you no longer have any early repayment charges

Anonymous3

Daddy942 wrote: »

I would overpay the maximum amount then pay off the mortgage when you no longer have any early repayment charges

Which presumerably in most cases is when the term ends correct? Glad I'm along the right kind if lines......?!

Thrugelmir

Anonymous3 wrote: »

Which presumerably in most cases is when the term ends correct? Glad I'm along the right kind if lines......?!

Yes, when the product term ends.

Also worth spending some time thinking about the longer term.

Isa's, pensions etc.

As if this gift is a once in a lifetime one, then you should maximise it to secure your futures. Don't let it fritter away.

getmore4less

Is the house a keeper or are you going to move?

L|x

Anonymous3 wrote: »

Which presumerably in most cases is when the term ends correct?

when the 4-yr fix rate ends, not when the mortgage term ends

Anonymous3

getmore4less wrote: »

Is the house a keeper or are you going to move?

It's absolutely fine for the next 10years or so but could indeed be a keeper.

L|x wrote: »

when the 4-yr fix rate ends, not when the mortgage term ends

Great. That's what I thought. Thanks.

Thrugelmir wrote: »

Yes, when the product term ends.

Also worth spending some time thinking about the longer term.

Isa's, pensions etc.

As if this gift is a once in a lifetime one, then you should maximise it to secure your futures. Don't let it fritter away.

Thanks. Will do that. We are both under 30 and certainly don't plan to be frittering. When I see I'm paying £1.9 for every £1 borrowed, it makes me want to get it out of the way quick sharp!!!

I don't believe this will be 'once in a lifetime' but obviously wouldn't be banking on that or even expecting it! Anything else that we received could be 20yrs down the line etc.

getmore4less

As the house is a keeper for 10 years I would start thinking about long term investment and retirement.

The rate is good so depending on the penalties it is probably best to overpay to the max and save the rest for now plenty of time to think about things.

Do the numbers

You could investigate a shorter term to up normal payments.

If there is the remotest chance you will want/need to upsize in the future keep saving(paying a virtual mortgage).

jsaver

Some lenders will let you vary the term down from your 29 years, so your monthly payments could be increased a lot out of your windfall, without incurring penalties....

kingstreet

Tanqueray, the Gordon's export brand.

I'll PM you my address.

PeacefulWaters

Overpay the maximum allowed penalty free each year. Put the balance into the highest easy access / short term fixed rate savings / current accounts.

Reduce the term, assuming this can be done for free, and pay higher mortgage payments. Care to ensure any payment after the money runs out is affordable.

When the debt is zero recycle the monthly payments into pension planning and other longer term investments.

Good luck.