What would you do with lump sum?

[sandybeaches74]

If you got a significant lump sum of over 300k, what would you do with it on the basis that:

1. Your outstanding mortgage balance was 360k with early repayment fees. House worth 600k

1. You had no debts but no savings either due to a divorce

1. Your house could do with 100k spending on it for decorating and significant updating

1. You are 40 and plan to continue working for another 20 years potentially on a 100k annual salary

1. You haven't got much of a pension built up.

Use part to reduce mortgage
Use part to upgrade house
Use part to put on pension fund

Id move to somewhere cheap to run in a lovely location. Low, low maintenance. Or make improvements that significantly reduced my running costs. Id budget for that and over pay the mortgage as much as I could each year.

Do all necessary bits to the house.

Plan to pay off a good chunk of mortgage, but wait till it's when you won't get charged a early repayment fee.

Keep 3 months salary in savings.

Sort pension - get proper advice if necessary - to bring contributions up to date. (And arrange future contributions from salary.)

If any money left, £10k rainy day fund and pay balance into mortgage.

Use salary (mortgage savings) to pay for house redecoration and updating. (First, consider selling house.)

@Georgeskitchen

Use part to reduce mortgage Use part to upgrade house Use part to put on pension fund

This basically!

I would look where it would work hardest for me, whether that be overpaying the mortgage, pension or investment.
I definitely wouldn't allocate to upgrading or decorating unless I intend to move imminently and it would increase value. That can be done gradually from earnings.

Spilt it and do everything.

A significant chunk off the mortgage maybe 150k.

Some of the most needed updating on the house.
Some into isa.. Low cost tracker funds, vanguard.
Some into sipp pension.

PS with investing, once you hit 100 grand it's faster to accumulate to a million.

I would work hard to make sure I did house renovation as cheaply as possible.

Do the decorating and upgrade (assuming you are intending to stay in that house/it will increase its value).

Pay off enough of the mortgage so you don't trigger the early repayment charge. Look into longer term savings to pay off what you can in future years.

Maybe put some into pension

Have a lovely holiday.

Thanks all. Some food for thought there!

Reduce mortgage and renovate the house in the first instance because not having much of a mortgage will allow you to maximise the tax benefits of paying more into your pension every month/year you choose to continue working at your current pace.

Paying the lump sum into your pension means that you won't reap the pension/vs income tax benefits you would otherwise.

Not having to worry about a sizeable mortgage will allow you to make work/life decisions if you feel you need to.

Mortgage
Car
Kitchen
Bathrooms
Holiday

OP rev the mortgage I’d see if you can remortgage (maybe see if there’s a better rate while you’re at it) and significantly reduce the term (by paying a lump sum). That way you get the benefit of overpaying but without the penalty. There may be an admin fee but likely less than the penalty would be.

Worth looking at.

I’d do the above, and split the funds, mortgage, renovations, pension.

MN loves paying off the mortgage, but the mortgage payments you save would take forever to build back that money.
If this is your forever house, spend whatever you want to make it wonderful. Do it because it makes life better not because you’re trying to upscale to sell. Buy a caravan/camper van and travel if that’s something you like, or take a 6month work sabbatical and go travelling for 6months (covid allowing!) then reduce the mortgage a little bit after that.
But seriously, life is short and enjoy it. Unless you always wanted to start a property portfolio, by a seaside flat etc.

My partners mum inherited £300k about 20 years ago. No pension as she had been a sahm. She bought three properties and rented them out. The income is her pension.

100k on improving the house (or less if you can find some creative ways to diy)
50k savings (premium bonds, unless interest rates increase)
150k off the mortgage - speak to an advisor about fees etc and when is best financially to pay it and how much etc
The extra (over 300k?) Holiday, car, something nice for you!

Do work required in house
Overpay what you can for free each year on your mortgage (don’t waste paying early repayment charges, but most lenders allow 10% pa overpayment which will help erode your overall interest costs)
Use money saved on mortgage payments to pay more into pension
Lock part away in other investments (rainy day money, don’t invest all into pension as you can’t touch that until x age)
Use some for a nice holiday / trip. Something special. Something you would like.

I’d look at it spread out over two years:

• Repay 10% of mortgage each year to make a dent in it. (70k)
• Repairs to improve house (100k)
• stocks and shares ISA, two years allowance (40k)
• keep back 10k as an emergency fund
• top up pensions for two years (80k)

Hope there is a little bit more to have some have fun with. Pocketing away 300k was too easy!

@BrotherHelp

MN loves paying off the mortgage, but the mortgage payments you save would take forever to build back that money. If this is your forever house, spend whatever you want to make it wonderful. Do it because it makes life better not because you’re trying to upscale to sell. Buy a caravan/camper van and travel if that’s something you like, or take a 6month work sabbatical and go travelling for 6months (covid allowing!) then reduce the mortgage a little bit after that. But seriously, life is short and enjoy it. Unless you always wanted to start a property portfolio, by a seaside flat etc.

Paying down the mortgage saves an absolute fortune in interest. That to me = choices and freedom. I’d always do it given the chance. Have a play with the calculator www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/

Yes but invested that money could, accumulate far more than what the mortgage is worth.
So she would have the peace of mind she can pay off the mortgage in an instant but also grow it far much more.

I'd never put money into pb unless it literally short term parking it.
I put it into pb for tax.... Each month pay the tax into it. Whilst I am amazed I've won something... 4 x £25 and its fun... It's not comparable at all to the money generated in my stock and share isa which has been averaging about 30%.

@JanuaryBluehoo

That's interesting! How much can I put into ISAs annually, is it 20k? Also how quickly can you access the money if you need it?

I'd pay off a chunk of mortgage, do some of the main repairs, put some aside as college funds/house deposits for DC and have a once in a life time holiday. Spread it around a bit. It feels like more money that way.

Yes max is 20 at the moment.
I can get mine within a few days.

Obviously if you get some into a self invested personal pension, sipp stock and shares usually vanguard then you will give it good few decades to grow.

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The simple path to wealth book or podcast.. Jl Colins and
. Research Jack bogle vanguard.

100k on doing up the house
100k on reducing mortgage then renegotiate to long term fixed if poss
20k into a stocks and shares ISA
15k into pension for this year
5k for a holiday
60k into stocks and shares tracker to gradually get transferred each year to ISA
20k in bonds

20k in 3 month notice savings account.