What to do with £50k inheritance
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WillChronology
Posts: 13 Forumite
Hi there - I'm a long time lurker, first timer poster.
I recently inherited £50k and I am wondering whether you could give me some advice about what you would do with the inheritance if you were in my shoes.
Here's my situation:
- I am a teacher in my 30s
- My wife is also a teacher
- We have a £340k mortgage, the largest component of which will be paid off when I am 60
- We have no other debts
- Prior to the inheritance, we each had about £10k in savings (in ISAs paying 0.75%)
- Due to recent pay rises, we can save about £1,000 per month and have been using some of this to overpay the mortgage
- We have no children but might do in the future
Options I have considered:
- Using a chunk of it to chip away at our large mortgage
- Putting the bulk of it in a 1-year fixed rate savings account (at about 2%)
- Putting the bulk of it in an easy-access savings account (at about 1.35%)
What I have done already:
- Setup a regular saving (£250 per month) paying 5% interest
I know I can earn up to £1,000 per year in interest tax free. I can reach this limit with some of the options above.
Is there anything else I should consider, e.g. anything I may have overlooked? Any advice at all would be greatly appreciated, as I want to consider all (good) options.
Many thanks for your help.
I recently inherited £50k and I am wondering whether you could give me some advice about what you would do with the inheritance if you were in my shoes.
Here's my situation:
- I am a teacher in my 30s
- My wife is also a teacher
- We have a £340k mortgage, the largest component of which will be paid off when I am 60
- We have no other debts
- Prior to the inheritance, we each had about £10k in savings (in ISAs paying 0.75%)
- Due to recent pay rises, we can save about £1,000 per month and have been using some of this to overpay the mortgage
- We have no children but might do in the future
Options I have considered:
- Using a chunk of it to chip away at our large mortgage
- Putting the bulk of it in a 1-year fixed rate savings account (at about 2%)
- Putting the bulk of it in an easy-access savings account (at about 1.35%)
What I have done already:
- Setup a regular saving (£250 per month) paying 5% interest
I know I can earn up to £1,000 per year in interest tax free. I can reach this limit with some of the options above.
Is there anything else I should consider, e.g. anything I may have overlooked? Any advice at all would be greatly appreciated, as I want to consider all (good) options.
Many thanks for your help.
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Comments
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WillChronology wrote: »Hi there - I'm a long time lurker, first timer poster.
I recently inherited £50k and I am wondering whether you could give me some advice about what you would do with the inheritance if you were in my shoes.
Here's my situation:
- I am a teacher in my 30s
- My wife is also a teacher
- We have a £340k mortgage, the largest component of which will be paid off when I am 60
- We have no other debts
- Prior to the inheritance, we each had about £10k in savings (in ISAs paying 0.75%)
- Due to recent pay rises, we can save about £1,000 per month and have been using some of this to overpay the mortgage
- We have no children but might do in the future
Options I have considered:
- Using a chunk of it to chip away at our large mortgage
- Putting the bulk of it in a 1-year fixed rate savings account (at about 2%)
- Putting the bulk of it in an easy-access savings account (at about 1.35%)
What I have done already:
- Setup a regular saving (£250 per month) paying 5% interest
I know I can earn up to £1,000 per year in interest tax free. I can reach this limit with some of the options above.
Is there anything else I should consider, e.g. anything I may have overlooked? Any advice at all would be greatly appreciated, as I want to consider all (good) options.
Many thanks for your help.
What is your mortgage rate?Thus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...THE WAY TO WEALTH, Benjamin Franklin, 1758 AD0 -
We have three mortgages:
1) £80k tracking at 1% above base rate (17 years remaining)
2) £80k fixed for 4 years at 1.89% (17 years remaining)
3) £180k fixed for 9 years at 2.59% (24 years remaining)
Note: I may be off by 0.1% - 0.2% on each of the mortgages rates, and the years might be out by 1 year.0 -
WillChronology wrote: »We have three mortgages:
1) £80k tracking at 1% above base rate (17 years remaining)
2) £80k fixed for 4 years at 1.89% (17 years remaining)
3) £180k fixed for 9 years at 2.59% (24 years remaining)
Note: I may be off by 0.1% - 0.2% on each of the mortgages rates, and the years might be out by 1 year.
You might enjoy the Accumulator's musings on repaying debt versus investing: http://monevator.com/investing-versus-mortgage-risk/
Is teaching a job with a lower-than-average risk of redundancy? Are you taking advantage of the excellent pension scheme?
Is there a specific reason why you haven't yet considered investing any of the windfall in share-based assets for long-term growth?Thus the old Gentleman ended his Harangue. The People heard it, and approved the Doctrine, and immediately practised the Contrary, just as if it had been a common Sermon; for the Vendue opened ...THE WAY TO WEALTH, Benjamin Franklin, 1758 AD0 -
WillChronology wrote: »I recently inherited £50k and I am wondering whether you could give me some advice about what you would do with the inheritance if you were in my shoes.
- Prior to the inheritance, we each had about £10k in savings (in ISAs paying 0.75%)
- Due to recent pay rises, we can save about £1,000 per month and have been using some of this to overpay the mortgage
- We have no children but might do in the future
Options I have considered:
- Using a chunk of it to chip away at our large mortgage
- Putting the bulk of it in a 1-year fixed rate savings account (at about 2%)
- Putting the bulk of it in an easy-access savings account (at about 1.35%)
What I have done already:
- Setup a regular saving (£250 per month) paying 5% interest
I know I can earn up to £1,000 per year in interest tax free. I can reach this limit with some of the options above.
(i) I'd spread the £1k p.m. over four 5% regular savers - two each.
(ii) I'd withdraw the money from the 0.75% ISAs and use it to earn more interest e.g. the interest-paying current accounts at Nationwide or Tesco or (if you feel daring) TSB.
(iii) If you are then both pressing on the £1k p.a. allowance I'd consider Premium Bonds - a tax-free nominal 1.4% p.a., consisting of around 1.25% on small monthly winnings (roughly regular if you have £50k in PBs) plus a tiny chance of a big prize.
These suggestions are made on the basis that you want cash available in case babies come along. If you think you'd like to invest on a longer view you could each consider transferring £4k p.a. from your ISAs into LISAs. Since you already own a house you'd be using LISAs for retirement provision, or for financial help for your children as young adults, or towards paying off the mortgage at 60.
Have you got your insurances sorted out? No doubt the TPS supplies some effective insurance, but would you want more in the case of babies?
http://monevator.com/life-insurance-and-protection-a-primer-or-why-you-should-buy-renewable-term-life-cover-most-of-the-time/
http://monevator.com/do-you-need-income-protection-insurance/
http://monevator.com/family-income-benefit-the-forgotten-policy/Free the dunston one next time too.0 -
FatherAbraham wrote: »You might enjoy the Accumulator's musings on repaying debt versus investing:
Is teaching a job with a lower-than-average risk of redundancy? Are you taking advantage of the excellent pension scheme?
Is there a specific reason why you haven't yet considered investing any of the windfall in share-based assets for long-term growth?
I will give that a read - thank you.
Yes, low risk of redundancy and excellent pension scheme.
Long-term investments are an option. However, one complicating factor is that we don't have children but might start a family. Therefore, my wife would potentially go part-time, and I worry that we might regret having the funds locked away long-term. I have not considered stocks and shares.0 -
WillChronology wrote: »We have three mortgages:
1) £80k tracking at 1% above base rate (17 years remaining)
2) £80k fixed for 4 years at 1.89% (17 years remaining)
3) £180k fixed for 9 years at 2.59% (24 years remaining)
You could use the annual maturity money from the regular savers to attack mortgage (1). You could save at fixed interest greater than 1.89% for four years to let you attack mortgage (2). Mortgage (3) you presumably will choose to live with. Or are you allowed to overpay it? If so, that would be the one to start with as it's the most expensive.Free the dunston one next time too.0 -
(i) I'd spread the £1k p.m. over four 5% regular savers - two each.
(ii) I'd withdraw the money from the 0.75% ISAs and use it to earn more interest e.g. the interest-paying current accounts at Nationwide or Tesco or (if you feel daring) TSB.
(iii) If you are then both pressing on the £1k p.a. allowance I'd consider Premium Bonds - a tax-free nominal 1.4% p.a., consisting of around 1.25% on small monthly winnings (roughly regular if you have £50k in PBs) plus a tiny chance of a big prize.
These suggestions are made on the basis that you want cash available in case babies come along. If you think you'd like to invest on a longer view you could each consider transferring £4k p.a. from your ISAs into LISAs. Since you already own a house you'd be using LISAs for retirement provision, or for financial help for your children as young adults, or towards paying off the mortgage at 60.
Have you got your insurances sorted out? No doubt the TPS supplies some effective insurance, but would you want more in the case of babies?
Spreading the £1k per month of savings over 4 x 5% regular savers is an excellent idea.
Withdrawing money from our ISA and putting it elsewhere is advice I have been given elsewhere and I agree makes sense, as long as I can access it (I don't want to lock away all of our savings/inheritance, as we might need some of it).
Our insurances are being sorted. We have some already but want more cover.0 -
You could use the annual maturity money from the regular savers to attack mortgage (1). You could save at fixed interest greater than 1.89% for four years to let you attack mortgage (2). Mortgage (3) you presumably will choose to live with.
Actually, we have been overpaying mortgage 3, since it has the highest rate.
If anything, I though mortgage 1 is the one to keep.0 -
WillChronology wrote: »Actually, we have been overpaying mortgage 3, since it has the highest rate.
If anything, I though mortgage 1 is the one to keep.
Oops, I've just seen this post after I edited mine. You are bang on; overpayment gives you a tax-free 2.6% return. Are you limited to monthly overpayment or can you knock off a big chunk annually?
One way to organise things would be to see whether anyone still offers a "flexible" mortgage. We had one; it was wonderful. Feeling flush? Overpay. Feeling skint? Borrow back.Free the dunston one next time too.0 -
Oops, I've just seen this post after I edited mine. You are bang on; overpayment gives you a tax-free 2.6% return. Are you limited to monthly overpayment or can you knock off a big chunk annually?
One way to organise things would be to see whether anyone still offers a "flexible" mortgage. We had one; it was wonderful. Feeling flush? Overpay. Feeling skint? Borrow back.
I can overpay by up to 10% per year, so I could overpay £18k this year if I wanted to, without charge.
Perhaps my best bet is to put the £50k in savings (a couple of regular savers and maybe a 50/50 combination of fixed 1 year savings and an easy-access savings account, so we can access about half of the funds if we need it), which would get me close to my £1k per year in interest (tax free).
And then use my monthly savings to overpay the 2.6% mortgage by as much as possible each month?
That might be the best 'compromise' between all my options?0
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