Best way to maximise inheritance please!

Leponge

We are fortunate to be shortly getting £100,000 inheritance from my mum (though I'd much rather still have her around). The Estate is not yet finalised, this is an interim payment, we may get an additional £30,000 or so when everything is completed. We are currently mortgage free having lived in our house for 25 years, but are currently on the market looking to up size and potentially buy a property requiring a £199,000 mortgage (to include moving costs - Estate Agents, Solicitors etc). What advice would you give on how much of the inheritance we put towards getting a lower mortgage? We are older parents with 2 dependent sons currently, our mortgage offer is for 13 years when my husband will be 75. We don't have great pensions so I would like to invest some of the money to use for that if needed and also for our sons in the future. I feel some should probably also go in savings to increase our emergency funds. Looking forward to hearing your views please... thank you!

silvercar

My priorities would be:

1. The kids. How long are your dependent sons likely to be dependent? Kids seem to get financially more dependent as they get older, until it hits a cliff edge, when they are off the books.

2. Your pension. Do the calculations, see what you need to do.

3. Reducing your mortgage. A mortgage is the cheapest form of borrowing, if you can afford the repayments. Although it would be nicer to have lower monthly repayments, this comes third in the line, in my eyes. Plus you can always make payments to reduce the mortgage, but once you’ve lowered the mortgage you don’t get it back.

Those are my views, others opinions will vary.

(adding a zero:
0. Some rainy day savings.)

ACG

Sorry to sound negative but I think you might be stretching yourselves. 

At 62 you want to take out a £200k mortgage - that will likely mean bigger bills, higher council tax, bigger mortgage payments - and the only way this is affordable is to work until 75?

What happens if one of you needs care? My gran went into a care home at 83 - £1,500 a week it costs and that was 5 years ago. Anything less and I would not have trusted them to look after the in laws, let alone my gran. 

This is the time where you should probably have a rainy day fund and be increasing it in readiness for retirement. 

The same goes with investments (I am not a qualified adviser btw) but I you are probably approaching that age where most people would be looking at lower risk investments, those tend to have more steady returns but nothing that is going to make or break your retirement fund. 

j2009

Hi

Firstly, sorry to hear about your mum - I wish you and you family well.

Based on the info you've given buying a bigger house sounds like a bad idea. But I'll give you my reasons and maybe you'll agree or perhaps there's more info that will support the decision.

Firstly, 199,000 repaid over 13 years is c.£1650 per month, or £825 if you only borrowed £100,000. Do you have at least £1650 saved each month or could you realistically reduce your lifestyle to find that money every month?

I note you mention boosting your emergency fund, for that reason I'd suggest £1650 or even the £825 is going to be a stretch or you'd likely have savings.

75 years old is a long time to work, and you don't say if you work also. However, to repay such a big mortgage repayment will you and your husband want to be working full time to repay it?

Bear in mind a bigger house has bigger running costs.

I would suggest a better approach is to stay put, maybe spend a little of the money sprucing up your current home and invest the remaining money either into your pension pot to get tax relief of ISAs.

Whether you buy a bigger house or not, you may be able to use equity release at some point which could help fund your retirement.

If you do go ahead with buying a house the most efficient approach will likely be to invest the money and not use it for a lower mortgage because in all likelhood you will get a better return on the money than the interest on the mortgage (however it also carries risk as the investments can go down).

I hope this gives some reasonable food for thought and I apologise in advance if I've been clumsy with my words and caused any offence. 

kevinqq

I thought the cut off was £1m? 

lfc321

kevinqq said:

I thought the cut off was £1m? 

Did you read the question?

poseidon1

More to the point is there any indication the OP is taking any of the responses on board and adjusting their thinking/ intentions on this upsizing venture?

 Seems to me the most significant part of the question is ' we don't have great pensions', which begs the question why take on significant later life debt to plough significant ( potential) income producing cash into a non income producing asset.