What to do with £250k inheritance????

Sprinkles86

Hi All,
Background: I’ve recently inherited £250k and have been chasing bank savings rates for the last year as I’m cautious about investing in the stock market, particularly as it’s at such a high and there’s probably only 1 way it’s going to go!

I have a £60k mortgage and have paid off as much as I can without penalty. It’s fixed for 2 more years at 2.23%.

Should I look to clear this and pay the £1900 ERC? Anything else I should be considering? Is it the no-brainer it seems to be?

Many thanks!

skintpaul

I would think any interest you save, by paying down / off the mortgage, would far outweigh any you earn from putting in a savings account..

Go for something 'safe' short term (maybe even premiums bonds? at least capital is returned,but no interest- some possible wins too), until you find something more suitable..

really need some proper financial advice, so your bases are covered! (Funds for family, loss of income etc)..

Audaxer

Sprinkles86 wrote: »

Hi All,
Background: I’ve recently inherited £250k and have been chasing bank savings rates for the last year as I’m cautious about investing in the stock market, particularly as it’s at such a high and there’s probably only 1 way it’s going to go!

There might be an equity crash soon and there might not. But if there is and the value of your investment falls by a lot, it should bounce back in a year or so if you don't panic and sell. You don't need to invest it all and the bit you do invest should be diversified in a mix of stock and bonds to your preferred risk level, so that you don't panic and sell. There are various well known global diversified low cost multi asset funds that can be considered if you want to DIY your investments, or if not then consult an Independent Financial Adviser. The one certainty is that if you keep it in cash savings for a long time, it will lose value to inflation.

sixpence.

You could buy a property (pay in full) and rent it out.
What if your goal for this money? It's easier to think of what to do if you know what you want.

You could even start a business

bostonerimus

If you have any debt other than the mortgage pay it off.
Then put 6 months of spending in an easy access bank savings account.

Now sit down, have a rest and then learn something about investing.

Do you have any immediate (ie less than 5 years) needs for the money or can be be used
to long term investing?

Using your new knowledge about asset allocation and risk and making sure you have access to enough money that you might need quickly, max out your workplace pension and ISA contributions until all the inheritance is in tax advantaged accounts.

CommyTooper

Sprinkles86 wrote: »

.......I’ve recently inherited £250k.............!

Difficult experience, hope things work out for you.
Market seems to be in a boom phase for now, no way of knowing when the bubble will blow up. If you have a crystal ball, or fancy your chances, take a gamble. Your call.
All my support to clearing the mortgage, have you visited the Wannabe Mortgage Free board. Won’t you be able to clear mortgage penalty free when intro offer period ends?
For now put it somewhere secure while you consider options, NSI is what I would go for. Good luck to you

CatLady13

I'm in a similar position and I did pay off my mortgage as it made the most sense for my circumstances. I paid £2,500 in early repayment charges and paid a total of £98k. My mortgage was fixed on some silly rate of something like 4.5% and I'm self-employed and prior to my inheritance I had a bad time of it in terms of finances (through being made redundant and being forced down the self-employed route), so the security of paying off my mortgage was a priority to me. It is a great feeling and also saves me having to find £600 a month which gives me so many options. It does however mean I have £98k less in cold hard cash to spend as that money is now tied up in my house, but I have a roof over my head and am no longer at risk of losing that so it's no bad thing.

I also cleared all my debts.

I'm currently splitting my money between:
- living for the now (by buying things like a new car and other bits that I want)
- putting some away for short term security (scattering money into various accounts that will mature in 1 or 3 years like some of the NS&I products)
- investing in my house by doing some home imrpovements
- putting some away for long term security such as a S&S ISA, and my pension
- I've also maxed out my Premium Bonds account while I consider what I'll do with that money longer term.

The thing is, you could tuck it all away for a rainy day but when is that rainy day? I'm 43 this year and over the last year lost 3 people all under the age of 45. I could live for another 43 years but then again I could not, so the way I see it, I need to spread my money out to hedge against all bets. I'm going to use the money to improve my life and that means now but also (hopefully) in the future. My point is, don't forget to spend some of the money on things you enjoy in life!

Good luck

ValiantSon

Work out how much in interest it will cost you to keep the mortgage until the end of the fixed term. If it is less than the ERC then hold on to the £60,000 at the best possible rate you can get for those two years and then pay off the mortgage. If the interest payments work out at more than the ERC then you'd probably be best off paying it and getting rid of the mortgage now. Whichever of these situations applies that's £60,000 gone.

Next look at a cash fund equal to c.6 months spending and put this in the best paying easy access savings account. Be prepared to move this around from time to time to get the best rate. I'd also recommend drip-feeding from this into some regular savers to maximise the interest you get. (It may also be worth splitting some of this lump of money across interest paying current accounts as they will pay you a better rate than a straightforward savings account). This money is primarily there to tide you over should you find yourself out of work and while you look for a new job. If you have to make use of this money then be sure to start building it up again with money from your income once that is back on an even keel.

I'd then set up a second cash reserve to cover big cost expenditure, e.g. need for a new car. Decide how much you would realistically spend on this. Save this money as well, but this time you might benefit from a fixed rate bond to get the best interest. You shouldn't need to touch this unexpectedly, and immediate needs can be served by the "easy access" cash fund. Again, when you've bought the new car (or whatever it may be) build this fund up again with money from your income.

With the remainder, give serious thought to investing it. Depending on your pension arrangements a fair proportion may well go into that. Additionally a S&S ISA invested in multi asset passive tracker funds, investing across equities and bonds, would be a reasonable option. It is true that there may be a fall in the market in the near future, but there may not. Either way it doesn't actually matter too much because this money would be a long term investment and the markets will, given time, recover and you will regain what you have lost and make more. The key is not panicking and selling as that would turn a paper loss into a real loss. Continue to fund this investment with top ups of spare income, as the savings are taken care of and adding to them won't benefit you, but rather cost you.

If after reading about investing and asking questions/following discussions on here you still are uncertain, then speak to an IFA. It will cost you more, but if you lack the confidence to act then it will also cost you more because your wealth will be eroding due to inflation.