?what to do with lump sum

beckc1506

Hi. 

Looking for advice. 

Wage- £42k a year 

Mortgage-£64k left 2.5apr till next year. 

House worth about £230k 

I’m single (dating someone not looking to move for a year or so) 35, recieved some inheritance, 120k. I don’t know what to do with it. I’ll be buying a car outright and getting of my lease car. So that’s 100k left. 

Ideally I’d like my mortgage to be covered by interest (as much as possible) or do I pay my mortgage off? 

what would you do? No idea on whether to pay the motgage off or keep the lump sum and use it to help with the mortgage. 

Albermarle

What someone else would do is not really relevant, as everybody is different and in a different situation.

Do you have any current savings or investments?
Presume you are paying into a workplace pension? How much 5%?. 

Would you like to use some of the money for the long term, for maybe early retirement, or keep it more ready to use in the shorter term ?

eskbanker

Whether or not to pay off a mortgage is always a difficult but personal decision - in strictly financial terms it often doesn't make sense, especially where the rate is low like yours and/or if there are early redemption penalties, but psychologically it's widely cited to be beneficial!

Archerychick

I’d probably put enough into cash savings (£20k into an ISA if you haven’t used your allowance) to cover the mortgage at the end of your currnt deal - there’s no point paying that off before your deal ends because the rate is so low. 

What’s next depends on your provisions for emergency fund, and pension - I would max out pension provision, to get the tax benefit and then invest the rest - but that’s just what I would do. 

Cisco001

Current saving interest rate is something like 4.3%

Don't pay off mortgage straight away. Pay it off in one go when current terms end. Do a 6 months fix rate saving for 64k. Or just put it to a high interest rate easy access/ notice saving account

£20k to ISA, and at the mean time you could consider increase pension contribution.

beckc1506

My pension is NHS I pay in 10% not sure I need to increase my pension contribution. 

Cisco001

beckc1506 said:

My pension is NHS I pay in 10% not sure I need to increase my pension contribution. 

I did a simple add up of my own contribution + employer % + government pension and determine if increase contribution necessary.
(Still hoping the pension would match the inflation and we will get government pension when we retire in 30 years)

I end up uplifting contribution to 18%.

Albermarle

beckc1506 said:

My pension is NHS I pay in 10% not sure I need to increase my pension contribution. 

You are probably right, as the NHS pension is fantastic and it will be costing the employer a lot more than 10%. 

El_Torro

If you are planning to move in a year will you sell what you currently own? Will you need a mortgage for the new place? Paying off the mortgage in April isn't a bad idea, you can then use the equity for the new place. 

You may want to invest some of it. If you're not comfortable locking more money up in a pension then a Stocks & Shares ISA is an option. 

Dazed_and_C0nfused

Cisco001 said:

beckc1506 said:

My pension is NHS I pay in 10% not sure I need to increase my pension contribution. 

I did a simple add up of my own contribution + employer % + government pension and determine if increase contribution necessary.
(Still hoping the pension would match the inflation and we will get government pension when we retire in 30 years)

I end up uplifting contribution to 18%.

That is irrelevant really though as far as the NHS pension is concerned.

It is a defined benefit scheme so how much the op or their employer contributes doesn't mean anything really.  They get a pension based on the scheme rules.

They could buy additional NHS pension or open a personal pension/SIPP but that is a separate thing to the (very generous) pension they are already building up.

Jami74

beckc1506 said:

My pension is NHS I pay in 10% not sure I need to increase my pension contribution. 

If you are in the 2015 scheme the normal age to get it is state pension age. If you had a SIPP you could put some money in to cover if you wanted to retire before state pension age. It's not something you have to rush into doing but might be worth thinking about once everything else has settled down. It's also good to understand how the NHS pension works (if you don't already) because all of your non NHS friends will talk about pension pots and increasing contributions etc will not be relevant to you.