Where to keep inheritance?

patchyX2

I've been given 80k in inheritance from one of my grandparents and I'm not sure where to keep it.

Prior to knowing about this, we were planning to move house in a few years time but now we're potentially looking to move somewhere sooner. So the money needs to be relatively easily accessible. Nor do we want to do anything too risky (I'm not opposed to investing, but I don't think it's a good idea over a short term)

We have a mortgage of around 100k and we are nearly 2 years into a 5 year fixed rate at 1.49%. We can make 10% overpayments each year without any kind of penalty. The ERC would be just over 5k if we were to pay off in full. I'm not sure how much we would be charged if we overpay by more than 10%, but less than the total balance.

We have no other debt that needs clearing.

This also means we exceed the 85k FSCS protection (currently everything is in a single Santander 123 account), so at the very least we need to split it over multiple bank accounts.
 
Any suggestions with what to do with the money over this kind of timescale?

eskbanker

If the timescale is 'less than a few years' then, as you say, investing isn't sensible - the best bet would probably be to make your 10% mortgage overpayment and then put £35K each into premium bonds, as the expected 'average luck' return beats traditional savings accounts, for now at least.

Thrugelmir

As has been suggested overpay the mortgage by the maximum possible and deposit the remainder into premium bonds.  

There's no harm though in earmarking some of the money for the longer term and perhaps using a lump sum (or investing the money over a number of months)  to boost your pension schemes. Rather than sink in all into a property. 

pphillips

One thing to consider: you can't take your mortgage with you when you move home. Therefore, I think what's important is comparing the ERC with redemption.

Thrugelmir

pphillips said:

One thing to consider: you can't take your mortgage with you when you move home. Therefore, I think what's important is comparing the ERC with redemption.

Mortgages can be ported. 

pphillips

Thrugelmir said:

pphillips said:

One thing to consider: you can't take your mortgage with you when you move home. Therefore, I think what's important is comparing the ERC with redemption.

Mortgages can be ported. 

Not always, it depends on the terms of the mortgage. Some will require redemption, triggering an ERC.

george4064

pphillips said:

Thrugelmir said:

pphillips said:

One thing to consider: you can't take your mortgage with you when you move home. Therefore, I think what's important is comparing the ERC with redemption.

Mortgages can be ported. 

Not always, it depends on the terms of the mortgage. Some will require redemption, triggering an ERC.

I think nowadays the vast majority of mortgages can be ported, it’s only on the very rare occasion if a mortgage can’t be ported.

patchyX2

I've checked my mortgage and it is portable assuming you meet all their lending criteria at the time.

Looks like premium bonds it is then! Thanks for the advice all. 

patchyX2

I've spoken to my mortgage provider and they've confirmed any overpayments over the 10% annual allowance would result in a 5% penalty.

That got me thinking.... although 5% of 80k is certainly greater than the expected ~1% return on premium bonds, that would mean I'd be clearing off a huge chunk of my mortgage and thus my remaining couple of years of mortgage payments would be eating into the capital of the mortgage far faster than I am currently (as a big chunk of my monthly payments goes on just interst now).

I'd tried using the mse mortgage overpayment calculator to look at the numbers but I can't quite wrap my head around it. Any advice?

MX5huggy

Only pay off  up to the 10%. If you want to pay off more you can in 3 years. Keep the money in PB’s in the meantime. 

I’m not over paying mortgage, going hard at building pension.