Adding a Lump Sum to my Portfollio

Cotta

Hi All,

I have recently came into a small sum of money £7k to be exact and this is the first time in five years that I will have some meaningful savings. Rather than just depositing this into a current account I was wondering if I could avail of some advice on how to make it work for me. My current setup before the £7k is added is as follows:

Outgoings

Debt

Mortgage - £64k
Loan from parents - £5000 (Paying off £300 per month)
Student Loan - £1200

Mortgage - £393 p/m at 4.69% (Balance is around £64k) renewal due on February 2019. 10% overpayments allowed and there is a 5% fee for early settlement. No overpayments made this year.


Savings/Cash

£3000 in Nationwide Regular saver @ 5%, 6 months remaining. Paying £500 pm into this account.


£600 in First Direct Regular saver @ 5%, 10 months remaining. Paying £300 pm into this account.


£2500 - in Halifax current account.


Notes

My net monthly income is £1780.

I contribute 8% of my salary towards my pension to which my employer pays in 11.5% of my gross salary.

Overall pension pot is worth around £26k and I am 33.


Thanks in advance

chiang_mai

I think I might be tempted to throw the 7k at my mortgage and reduce my debt and monthly payments, think of it as you earning 4.69% on your windfall.

Wookey

I would pay the 10% allowed overpayment and keep the repayments at a level that would allow you to hit that 10% per year. Put your mortgage numbers into an overpayment calculator to see how soon that debt would be cleared, every pound that you can pay of the bottom line means you can realise greater equity sooner in the event you want to move.

I'm not sure these days how that 4.69% rate stacks up but to me it seems a tad high considering there is only 10% op allowed plus an early redemption fee, i would look to negotiate something better when it's up assuming rates remain low.

Flobberchops

If it was me - I'd first take the opportunity to pay back the parents in full. Borrowing from family never sits well with me anyway, and £5000 presumably isn't pocket change for them; it could become a sore point if they found out you were splashing cash around on investments rather than paying them back.

Next, a mere £1200 balance on your Student Loan? Why not get rid of that too, then that's something you never have to worry about again.

That leaves you with £800 and, going forward, £300 a month better off (keep your current expenses the same but keep the money you'd usually give your parents). That would represent a very nice lump sum and monthly contribution to a S&S ISA. In my opinion your cash savings are doing fine, and as you don't mention an ISA this would be a neat way to get some exposure to funds.

xylophone

I think I'd do as suggested above - and repay the loans.

https://www.vanguardinvestor.co.uk/ might suit for the S&S ISA.

http://monevator.com/vanguard-direct-uk/

http://monevator.com/using-vanguard-lifestrategy-funds-life/

Cotta

I certainly think it would be a good idea to pay off some of the debt owed to the parents, however I want this to be staggered more so that I am not having to go back to them.

kidmugsy

Cotta wrote: »

I certainly think it would be a good idea to pay off some of the debt owed to the parents, however I want this to be staggered more so that I am not having to go back to them.

The way to handle your parents is simple. Ask them whether they'd rather you accelerated your repayments to them or overpaid on the mortgage, or a bit of both. Also your emergency cash sum could perhaps usefully be increased if you really fear having to borrow from your parents again.

What interest rate are you paying on your student loan?

edit: I assume the 10% overpayment is as described here. Yes?
http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

greenglide

I certainly think it would be a good idea to pay off some of the debt owed to the parents, however I want this to be staggered more so that I am not having to go back to them.

You are paying £800 per month into regular savings accounts but wish to delay repaying your parents loan so you don't have to "go back to them?

Paying the loan off would save you £300 per month and still have £2,000 which could be used as a emergency fund. Are you being fair towards your parents?

Cotta

I had a sit down with my parents and explained the situation. I had offered paying all or at least 50% of the £7k towards them. They have refused this and asked for no more than £1k to be paid to them with monthly payments continuing as normal.

Cotta

kidmugsy wrote: »

The way to handle your parents is simple. Ask them whether they'd rather you accelerated your repayments to them or overpaid on the mortgage, or a bit of both. Also your emergency cash sum could perhaps usefully be increased if you really fear having to borrow from your parents again.

What interest rate are you paying on your student loan?

edit: I assume the 10% overpayment is as described here. Yes?
http://www.moneysavingexpert.com/mortgages/mortgages-vs-savings

1.25% at present.

Alexland

In which case pay your parents the £1k and use the rest on your expensive mortgage if it will help you get to a better rate with increased equity when you find your next deal? Unless you are likely to need the money in the next few years (newer car, etc)