Lump sum

[Winningz]

Longterm poster, NC for this thread.

I’m due to receive a £50,000 lump sum soon and wanted to utilise the money for different needs. For context, I’m in my late 20s, no children and my DP and I are two years into a 35 year term mortgage.

This is how I’m thinking of allocating the money:

• Home Reno - We need wall ties, new bath and shower, new front door, new staircase and hardwood flooring in lounge £22,000

• Invest a lump sum in S&S ISA (for early retirement) £9,000

• Mortgage overpayment £6,000. This will knock almost 3 years off our mortgage. Even if we don’t overpay a penny more at any other point, our mortgage will be paid off when I’m 58, rather than the current trajectory of 62

• Holidays for DP and I £5,000.

• Deposit £4,750 to my Emergency Fund.

• Trip to visit best friend abroad (we’ll be staying at friend’s house) £2,000

• New handbag £1,250

What’s everyone’s thoughts on how I’ve planned it out?

I doubt that the £22k will cover all of the home reno that we want done, so I expect we’ll have to save up to have a new staircase or hardwood flooring separately (since we want the flooring done last.)

Nice balance. Do you have any debt to pay off other than the mortgage? If so, I’d prioritise that. I assume you and your DP aren’t married. If you are now contributing disproportionately to household renovations do you want to draw up a legal agreement adjusting your shares in the house?

Maybe I’m a bore, but I wouldn’t spend £7,000 of it on two holidays.

Do you plan on having children? Have you thought about maternity leaves and childcare?

See it’s funny because I definitely would spend that much on holidays- but there’s no chance of me buying a bag for £1k plus! Not if I could have a nicer trip and/or new flooring.

also not sure if I’d go down a S&S route right now- I know mine is plummeting in value. But maybe that means it’s the perfect time to invest…👀

Agree a nice balance although I'd probably do more into the mortgage (if its allowed at that higher level without penalty) rather than the ISA as I still remember the day we repaid our mortgage as a life highlight! Not having a mortgage has allowed me to go part time early.

Make sure your house investment is protected. How did you buy the property? Joint tenants or tenants in common?

Yes. You’re absolutely right. We’ll have to get that drawn up before I overpay!

I am sure you could get those house reno items much cheaper. Get quotes. Any handbag over £50, maybe £100 if you must, is a rip off and purely to impress people who don't care about you. The rest seems sensible.

I think we’re joint tenants… I’ll definitely get a legal arrangement drawn up before overpaying the mortgage. My partner is in agreement too.

I think it’s called a Declaration of Trust?

I completely understand. For us, we were thinking of a once in a lifetime holiday. We have never been abroad together before despite being together for seven years.

I won some money a couple of years ago and still.have my 10k to go to.japan waiting! Sadly, in the meantime, my elderly fathers had to come to live with us so things like that are delayed. But hopefully we will do it one day! Don't blame you treating yourselves to some of it

Thank you. The reason why I am receiving this money has been incredibly stressful (it’s not an inheritance btw)

I hope you’ll be able to go on your holiday soon. We have been thinking about going to Japan too!

I'd also cover the £22K house renovation you're paying for and not just the £6K mortgage pay off. If you broke up or you passed away (or separate circumstances for each) you would want everything you put in, not just the £6K..if you put in £22K you could change the home from a £100K to a £175K asset so as the very least would want your money back if you split and sold the home.

Does this £6K pay off take your LTV lower or some big benefit?

Thank you. That didn’t occur to me, so I’m glad I posted!

I believe it will take us to below 80% LTV, we currently at 82% LTV.

@Winningz no problem!

Also I'd ask a mortgage/financial advisor about their views on the £6K and the £22K improvements and how to balance them out and whether to do it at the same time.

I'm sure the fact you've bought a home together means you're in a serious relationship (and not everyone wants to get married!) but be mindful that your £6k will take down monthly payments for you BOTH so you're really benefitting you both by doing it. I have a friend who put most of their home deposit down and is paying £25K+ in renovations and they have a child together and I've advised her the same thing. (Perhaps how you hold the home now eg JT or TIC says a lot about both your mind sets?) Are you both beneficiaries to the others DIS or life insurance?

At a certain point in a relationship, you do have to accept taking the highs with the lows eg you'd also expect to benefit too if he was the one that got a wind fall, BUT just because you've done this with yours doesn't mean he would do the same and he doesn't have to. Perhaps don't open that deep convo can of worms and just protect yourself on paper if it were to go wrong - if you don't break up, it's a piece of paper in a drawer!