What to do with £50k inheritance
Comments
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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.
If you're considering paying down mortgage, youd be better off getting a 5 year fix at 2.7% then using interest to over pay. Of course also maxing out as many high interest current accounts & regular savers as possible.0 -
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WillChronology wrote: »Good point.
Although, I anticipate savings rates could rise, so fixing for 5 years might be regretful.
The last increase of 0.25% only realy lead savings rates to increase by 0.05% so no gaurentees. But at least you're getting more than mortgage. You could of course stagger it a bit. Stick a bit in for 2 years at about 2.2% a bit at 3 years & a bit at 4 & 5 years. Do it that the average rate is pretty close to your 2.59% then if they start going up, in 2 years time your 2 year bond becomes a 5 year bond earning 3%+ then repeat each year.0 -
If savings rates rise, then mortgage rates will too, and you're 9 year fix might look a lot better than your 1% above base rate currently does.0
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If savings rates rise, then mortgage rates will too, and you're 9 year fix might look a lot better than your 1% above base rate currently does.
Yes, you're right. That's why we set it up that way - so we aren't putting all of our eggs into one basket. I know by fixing for 9 (originally 10) years we're paying a higher rate, but at least it gives us some security if rates go up.0 -
The last increase of 0.25% only realy lead savings rates to increase by 0.05% so no gaurentees. But at least you're getting more than mortgage. You could of course stagger it a bit. Stick a bit in for 2 years at about 2.2% a bit at 3 years & a bit at 4 & 5 years. Do it that the average rate is pretty close to your 2.59% then if they start going up, in 2 years time your 2 year bond becomes a 5 year bond earning 3%+ then repeat each year.
This is why I came here, for good advice like this. For some reason I wouldn't have thought of that.0 -
WillChronology wrote: »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.
But if you don't want to lock funds away long term, why would you repay any the mortgage?
Better to invest that money in mid-term (for example, peer-to-peer loans) or longer-term (equities) assets, surely? If you don't need to withdraw, then you'll probably make a decent return. If you do need to withdraw, then most of your capital will probably be available.
If you repay/overpay the mortgage with some capital, then the capital is gone, possibly irrevocably.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 -
FatherAbraham wrote: »But if you don't want to lock funds away long term, why would you repay any the mortgage?
Better to invest that money in mid-term (for example, peer-to-peer loans) or longer-term (equities) assets, surely? If you don't need to withdraw, then you'll probably make a decent return. If you do need to withdraw, then most of your capital will probably be available.
If you repay/overpay the mortgage with some capital, then the capital is gone, possibly irrevocably.
I'd be comfortable using some of the inheritance to overpay the mortgage, e.g. £20k, if it was the right thing to do financially. I wouldn't want to put all £50k into the mortgage though, as I'd like the possibility of accessing the funds, potentially.
Overpaying the mortgage so that I can have it paid off before I am 60 is an appealing proposition.
What rate of return might you expect with longer-term assets? Or is it impossible to say?0 -
WillChronology wrote: »What rate of return might you expect with longer-term assets? Or is it impossible to say?
There's no guarantees. Though investments need to be viewed long term, i.e. 10 years or longer. With a £340k mortgage I'd personally like to see that reduce quickly. Anything you overpay is a guaranteed return. As you could still have a mortgage balance as and when interest rates rise in the future.0 -
If savings rates rise, then mortgage rates will too, and you're 9 year fix might look a lot better than your 1% above base rate currently does.
Agreed. I'd just had second thoughts on my earlier comments and returned here to say much the same thing as you. The OP must decide whether the risk of much higher base rates worries him. Maybe his best bet is to earn high interest on as much money as he can, and wait to overpay mortgages when his ability to get a higher interest rate on savings than he pays on mortgage interest has vanished.
OP, if you live in East Anglia also check the regular savers at the Ipswich and Saffron BSs.WillChronology wrote: »... which would get me close to my £1k per year in interest (tax free).
Then exploit your wife's £1k limit.Free the dunston one next time too.0
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