Inheritance money advice please

Albermarle

Leeslady said:

Thanks Albermarle. Yes of course you are right about pension age, I meant to say state pension age. I *think* my public sector pension mirrors that routinely, although can obviously take it early if I want/need to. 

I think I’ve probably answered my own question, thanks to those on here for the space to talk it through. 

I suspect I’ll liaise with the mortgage people once the money comes through, with a view to clear half the mortgage or so, keeping payments the same, so that’s clear when I’m 60. I may invest the money until our fixed rate comes to an end in a savings account if necessary.

I will free up several hundred pounds a month (I have a car loan that I’ll also clear) and will liaise with the pension people to start to plough some of this extra money into the pension. This should then reduce my tax liability and stop me tipping into the higher tax rate.

Will also keep 3-6 months worth of income in a savings account long term. 

Does this sound sensible? Thanks all 

Yes it sounds sensible. As you say you will need to speak to the mortgage company, to be clear how much you can pay off early, and when and what effect it will have on future payments. There are often restrictions on how much you can pay off without early redemption penalties, or similar.

jimjames

Leeslady said:

I suspect I’ll liaise with the mortgage people once the money comes through, with a view to clear half the mortgage or so, keeping payments the same, so that’s clear when I’m 60. I may invest the money until our fixed rate comes to an end in a savings account if necessary.

Does this sound sensible? Thanks all 

If you're in a 5 year fix then paying anything that triggers redemption penalties doesn't seem like a very good idea. Far better to put the money into a savings account that's paying more than the mortgage rate and clear whatever amount once the fix ends.

silvercue

Hi,

You might get a lot of advice to put lots in a pension and this can be a wise decision, but people are not all the same and I always think options are great.

For context I was in a not too dissimilar position to you about 3 years ago.

My priority was always paying off mortgage early to save on the overall interest payments, but also to get the burden of debt away from me.  I did time this to avoid early payment charges though. Some people will point out that there are ways you can do better with money than reducing/removing mortgage payments, but I wanted the mortgage gone.  Party becuase in much of the private sector job security seems to be a thing of the past and not having the pressure to get  anew job at a certain salary reduces stress (for me anyway).

I also like ISAs.  You  have a £20k a year limit, so if I can I like to use that.  The reason I like to use an ISA before lump sum into pension is that I can take the money from the ISA anytime if there is some need to.  Personally, I like S&S ISAs, but there are savings ISA's too.

I am in a position now to increase pension payments, due to reduced debt burden.  This should be something you consider, especially if you are freeing up money from car loans etc.  Pension monthly increases also can keep your tax burden down.

I like some riskier investments, but I don't think they are for here.

As for the holiday let.....I also wanted to do this and with £120k I simply don't think you could do much...certainly not in the South, where I am.     You can't buy a second home without a mortgage for that and the Stamp Duty is much higher for 2nd homes.    It would have taken me years of rental profit to start to break even.  I also looked into buying "lodge" but they lose value over time, so are a bad investment generally.

badger09

jimjames said:

Leeslady said:

I suspect I’ll liaise with the mortgage people once the money comes through, with a view to clear half the mortgage or so, keeping payments the same, so that’s clear when I’m 60. I may invest the money until our fixed rate comes to an end in a savings account if necessary.

Does this sound sensible? Thanks all 

If you're in a 5 year fix then paying anything that triggers redemption penalties doesn't seem like a very good idea. Far better to put the money into a savings account that's paying more than the mortgage rate and clear whatever amount once the fix ends.

Agreed

@Leeslady
What is the Early Redemption Penalty on your mortgage? That would be a major factor to me. 

Is it possible to make overpayments without triggering a penalty. Many lenders (most?) allow up to 10% annual overpayment. 

Also agree that additional pension payments at least for yourself, would be sensible if you’re approaching HR level. 

As a (very happily) 2nd married person with both a son & stepson, I understand your comments. Both you & your new husband need to be very clear from the outset about your financial arrangements both now & in the future
Good luck

Leeslady

Thanks all. Have checked mortgage and only 10% repayment allowed fee free, so will pop it in savings for a few years when it eventually lands and then pay a chunk off when we re-fix.

I will need to explore the tax implications of sitting 120k in savings for 3-4 years as suspect this will cost me though.

Will explore AVC pension options once money lands and loan is cleared, my current pension payments bring me under the 40% threshold, but I go to top of my pay band in 18 months which will take me well above the threshold so even with my current pension payments I'll be into high rate tax.

Anticipating keeping 20k in an ISA anyway, as a rainy day fund. 

Flugelhorn

silvercue said:

As for the holiday let.....I also wanted to do this and with £120k I simply don't think you could do much...certainly not in the South, where I am.     You can't buy a second home without a mortgage for that and the Stamp Duty is much higher for 2nd homes.    It would have taken me years of rental profit to start to break even.  I also looked into buying "lodge" but they lose value over time, so are a bad investment generally.

I did this for a while, (it was a while back - tax situation was different - there was also a surfeit of properties in some UK holiday areas) no profit at all on letting but did OK on the profit when selling. It was hard work even with lettings company involved and endless expenses. Wouldn't do it with 120K now, in fact wouldn't do it at all unless very local

Bigwheels1111

Having read the comments on here, I’ve thought of a question. 

What’s your mortgage interest rate, plus as above what is the fine to over pay.
At 5% on 100k interest in a year is 5k plus a fine of X.
Fine minus interest = £

Leeslady

Bigwheels1111 said:

Having read the comments on here, I’ve thought of a question. 

What’s your mortgage interest rate, plus as above what is the fine to over pay.
At 5% on 100k interest in a year is 5k plus a fine of X.
Fine minus interest = £

Yes, I'll have a look when the money lands. Mortgage interest rate is 4.78%
We're only six months into life of mortgage at the moment so fine is about 10 grand iirc. I think it tapers off quite quickly so in 12 months when probate/house sale is all sorted then it might be less I guess.

BooJewels

@Leeslady - if I may ask - were you offended by the post I made yesterday afternoon and complain about it?  I wondered why it had been removed?

Leeslady

BooJewels said:

@Leeslady - if I may ask - were you offended by the post I made yesterday afternoon and complain about it?  I wondered why it had been removed?

I didn't see a post? Was at work so didn't check that often. Am curious though....I'm not easily offended!