What to do with £50k inheritance

WillChronology

The impact of a rise in interest rates does worry me. When we bought our house, that’s what motivated me to fix for 10 years.

Currently, we’re able to save a lot of money per month, so we could in theory absorb higher monthly mortgage repayments.

In reality, by the time rates rise, our combined income could be significantly lower, eg if we have children.

So the mortgage is my big concern.

That said, my wife says she doesn’t want me to use my inheritance to overpay the mortgage; she’d prefer us to jointly overpay, eg using our monthly savings, as she feels that would be fairer.

FatherAbraham

WillChronology wrote: »

I'd be comfortable using some of the inheritance to overpay the mortgage, e.g. £20k, if it was the right thing to do financially. I wouldn't want to put all £50k into the mortgage though, as I'd like the possibility of accessing the funds, potentially.

Overpaying the mortgage so that I can have it paid off before I am 60 is an appealing proposition.

What rate of return might you expect with longer-term assets? Or is it impossible to say?

It's perfectly reasonable to have an expected return rate from different asset classes.

It's also a good idea to never consider expected rate of return without simultaneously thinking about the expected variability of that expected rate return - the riskiness of the asset.

For peer-to-peer lending with a mainstream provider, you might expect a return of 4.5% to 5.2% annual currently - together with risks that an interest rate rise will make your five-year loans less valuable, or a higher-than expected default rate will you more loss than was planned. You should hold a diversified portfolio of loans, to reduce exposure to any single borrower's difficulties.

For equities, it's more variable than that. One might expect long-term returns of 5% to 7% per year - but any specific year is likely to deviate from that expectation quite a lot.

Not repaying the debt now is a gamble, which can give you options - against the risks.

Albermarle

I would at least start to think about some longer term equity based ( stocks and shares ) investment as part of an overall strategy for your finances. History says they will grow at a faster rate than any cash based investment in the long term. However timing is important and the general feeling is that markets are near a peak and there could be some kind of downward correction . So probably not the right time to make a large one off investment. One way to get partly around this timing problem is to drip feed money in . In other words start to invest a regular amount each month. Many stocks and shares ISAs or similar accept relatively low regular monthly investments .

Suffolk_lass

Albermarle wrote: »

I would at least start to think about some longer term equity based ( stocks and shares ) investment as part of an overall strategy for your finances. History says they will grow at a faster rate than any cash based investment in the long term. However timing is important and the general feeling is that markets are near a peak and there could be some kind of downward correction . So probably not the right time to make a large one off investment. One way to get partly around this timing problem is to drip feed money in . In other words start to invest a regular amount each month. Many stocks and shares ISAs or similar accept relatively low regular monthly investments .

I agree with this. You could do worse than moving your existing cash-ISA to a S&S ISA where you self-invest (Charles Stanley Direct or Hargreaves Lansdown are cheap platforms and easy to use). In this way you could learn about it with a relatively small risk to your overall position. Look at a tracker fund like Vanguard Life Strategy 60 or 80 (the number is the %in shares) and then look at shares for dividend income - maybe look at The Frugal Cottage blog where Nicola publishes her portfolio and dividends so you can see and maybe emulate her approach.

Also, be aware that many funds are acc (accumulate their dividends) while others are inc (where they pay them to you as income), and you can switch, as your circumstances change. At your age, knowing a bit more about the stockmarket and gaining confidence is a worthwhile hobby. It could be the difference between FIRE (financial independance, retire early) and working until you are 70.

FatherAbraham

Albermarle wrote: »

I would at least start to think about some longer term equity based ( stocks and shares ) investment as part of an overall strategy for your finances. History says they will grow at a faster rate than any cash based investment in the long term. However timing is important and the general feeling is that markets are near a peak and there could be some kind of downward correction . So probably not the right time to make a large one off investment. One way to get partly around this timing problem is to drip feed money in . In other words start to invest a regular amount each month. Many stocks and shares ISAs or similar accept relatively low regular monthly investments .

The "general feeling" is already reflected in asset prices - that's what asset prices are!

kidmugsy

WillChronology wrote: »

That said, my wife says she doesn’t want me to use my inheritance to overpay the mortgage; she’d prefer us to jointly overpay, eg using our monthly savings, as she feels that would be fairer.

Dismiss all talk of "fairer". Money's money. You should use it jointly to your joint best advantage.

I realise that you can hardly say to your wife "oh, do grow up, dear" but I'm sure you can find a diplomatic way to phrase it. Perhaps something along the lines of "marriage is an arrangement designed to protect wealth and those property rights that are necessary or prudent for raising children in security and comfort": you could paraphrase that as a start.

Then all you need to do is decide jointly how best to deploy the money, both the surplus income and the inheritance. Ditto if your wife should receive a windfall.

atush

Do you want to retire at scheme age? Or early?

If early, id be looking to a- boost savings in cash as 10K isnt enough, b- open S&S isas and DC pensions which you can draw on while leaving your DB pensions to pay out in full (if you are both fit and healthy, taking DB pesnions early can be costly)

jimmymc1

Good advice there guys... Ive recently started with the chip app savings which offers a great 3% right away. Its very flexible and your in total control which is very appealing. Also it allows you to get up to 5% ongoing if you recommend someone to it. For anyone considering it id be grateful if you used my code HV7PRR to get both of us an additional 1% .

Many thanks ,

Jim