Inheriting 100k - What would you do ?

Nitrous

Hi All,

This is my first post so hello to the board !!

My dad is selling some land & if the sale goes through I will hopefully be getting 100k from the sale

This is like winning the lottery for me :beer: & now I don't know what to do with it, hence why i'm posting on this board.

At first I was thinking of investing some of the money in a high interest account & having a go @ house flipping, but with the recent climate change in the market I think it may be safer to see what happens...

So my options are:

Pay off my £97,894.17 mortgage + £1,200 early repayment charge so £99,094.17 & be MORTGAGE FREE !! :rotfl:

or Invest my money into a lock-in high interest account, like the 12% 6yr offered by Nationwide, or even the 10% 5yr offered by Nationwide. My current fixed rate mortage is 5.59% so investing in a 10% or 12% interest account would surely be better than paying off my 5.59% mortgage, even after tax on the earnings ??

My 5 yr fixed term ends in Aug 2009, I could take out another 5 yr fixed then at the end of that period pay it off with with the money I have invested.

What would you do ? & what is the best way to make that money work for me ?

Advice appreciated !!

Look forward to your replies...

Kind Regards
Nitrous

fraser

do you have any dependants that you would want to benefits from the generous grandfather?

if yes, then a fair provision for uni fees etc could be done (even if you do not have any dependents maybe the future will give these)

after that I guess your dad has given you money this money to sort out either existing debts or your future... so I personally be looking to remove mortgage debt and do more leisure stuff with family etc

hard to say unless you tell us more and what your priorities and what ties (if any) are attached (consciously and unconsciously)

Fr0sT

Congrats! :T Your mind must be exploding with lots of ideas of what to do with the money. I would defiantly set some aside for reckless, shameless spending probably go on a holiday. The rest I'd probably put on the mortgage and then put the money that normally goes on the mortgage each month into a savings account.

I'm sure it'll be put to good use whatever you decide to do with it.

Martinslovechild

Fantastic News!!

Without sounding like the harbinger of doom, given the current banking climate, it's worth bearing in mind that only the first £35,000 of deposits per bank are fully protected so it's worth spreading the money around in 3 lots of £35,000 if you're planning on saving.

Alternatively - I'd go with Fr0sT's suggestion of using a small amount of the money towards something nice and the rest towards clearing your mortgage. After all, the temptation to spend some or all of the £100,000 if it's deposited in savings accounts is obviously far greater than if you've already spent the cash by clearing your mortgage.

I can say from experience that clearing your mortgage makes a massive positive difference to your life. Go for it.

Jonbvn

The products you mention with the Nationwide are Guarenteed Equity Bonds. Details here. Generally speaking, these products are a shockingly poor method of investing and should be avoided, since you get none of the dividends from the stockmarket.

It appears that you have completely misunderstood the 12% guarantee. This is over the full term and is equivalent to an AER of only 1.9%, which is much lower than any mortgage rate. To show you how poor this is, an average savings account paying 6% AER would return more than 40% over the same period, disregarding tax.

Given the above, I would suggest you proceed as follows:

1. Fill up your cash ISA's for you and your OH. GBP7.2k. Tax-free.
2. Consider Index Linked Saving Certificates (max GBP60k for 2 people). AFAIK, given the slightly higher rate of inflation now, these should be paying more interest than your mortgage - BTW they are tax-free!
3. Pay the rest against your mortgage.

scottish_lassy

Is it possible for you to pay most of your mortgage (but not quite all) and therefore save yourself the £1,200. My capital balance is £7.67 costing me 6p per month!!!(don't know whether I can call myself mortgage free??)

I agree, you have to spend some, fill up your ISA so that you have cash in an emergency. Hey, enjoy being able to sleep at night!!!!

autismmum

i have also just inhereted just over 100k, i put mine into land and property in scotland, as its still going up in value and im looking to relocate from england in 4 yrs but then what to do with the profits from the sale of this house... cycle starts again... hmmm, i think id spread it carefully with the building society.

Nitrous

Thanks for your replies people !!

My term ends Aug 2008, if I pay early between now & then I will have to pay an erc, but if I leave it until to pay off I will end up paying 10k in interest, my monthly payments are 769 but I overpay 500 with any erc's.

Obviously if I pay my mortgage off I will have 1250 to save every month = 15,000 a yr !!

I don't actually need to spend any really apart from a new kitchen but I can do that with my new savings after 6-8 months.

Thanks Jonbvn, I couldn't find all the info on the website, you have to apply for it before you get the terms & conditions. I will look into what you have mentioned.

I'm a married man with no debts apart from my mortgage. I have a boy of 3 who already has over a 1200 in the bank already, all his birthday & Xmas money goes into his account. Don't worry he does get lots of presents & toys, infact too many !!

Martinslovechild, thanks. I was aware that each institution was only liable of #35,000 so 2 banks that I possible invested in could be in the same instatution & I would only get 35000 in total, so it's not per bank but institution.

I will have to reply to the rest @ lunch, I didn't expect so many replies.

Thanks again.

letitcomedown

You need to be aware that if your father dies within 7 years, you could potentially be liable for inheritance tax retrospectively. See here:

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/DG_10010612

Nitrous

Thanks Fr0sT & Martinslovechild - My sensible side is thinking pay off the mortgage, then I have no worries, no more stumping up 1250 every month! I can then put that 1250 into the best interest accounts available, making use of my ISA allowance. Like you say it must be such a weight off your shoulders to know you have NO mortgage & everything you earn is for saving & spending !!

Scottishlassy - I will deffo end up paying more in interest if I wait until my term ends as I will be paying 5.59% on the 99k I owe for another 15 months.

autismmum - Is you money safe in land & property ? how have you invested ?

letitcomedown - My dad was aware of this & gave the land to me quite a few yrs back. Effectively it is really his but it's in my name & he will be giving me the money.

Jonbvn & fraser - thanks again !!

Have plenty of info here, thanks I will let you know what I decide.

Kind Regards
Nitrous

shepasme

Pay off the mortgage and any liabilities first.

Best of luck