To ask how you'd invest this money? I am clueless!

[Help19376]

Hi everyone

I'm getting divorced and should come away with around 30K out of our shared assets. This is enough for a house deposit in our area, which is what I'd like it to go on.

However, the split has ruined me financially. Without going into detail, I left with our child after domestic abuse and I'm taking much less than I'm entitled to just to get out from under him/because I can't afford legal fees to drag it through court. I've had to set up a debt management plan because I'm suddenly paying rent and bills on my own plus several other costs after having to leave, which means I can't make repayments on debts that were manageable before. This means my credit rating is fucked for 6 years. So unless I'm mistaken, this means in the worst case scenario I'll need to rent for at least that long because no fucker will give me a mortgage with a debt management plan on my file. I'm finishing my PhD next year so hopefully my income will go up and I'll be able to overpay, but in any case this 30K lump sum will be sitting around decreasing in value unless I invest it in something sensible.

I have no idea what a sensible investment is so thought I'd ask people who might! I just want something low-risk that will keep the money safe for when I am in a position to get a mortgage. Any help much appreciated!!

How much are your debts? Whatever they are the interest will be higher than you could get on £30k. Interest on savings is paltry. If you need to get at the money you can't lock it up for long.
It cannot make sense to have money invested while you are paying off debts.
While you decide, pop it in an instant access chase savings account at 1.5%. There are one or two accounts that will pay over 2% if you fix for a year.

Just read that back. To be clear I am saying pay your debts first.
Then save up.

Debts are around 8K. I'm already on a repayment plan, so all interest is frozen, the debts are consolidated and I pay less per month than I would just making minimum payments. The financial settlement hasn't been finalised yet and will probably take a while as we need to see a property to release the money. In the meantime I literally cannot afford to pay even the minimum repayments, so I needed to take action hence the management plan.

I will pay off the debt itself within 4 years but the fact I've been on the management plan stays on my file for 6 years, which is what affects the credit score.

Even if I paid off the remaining balance on the plan once I got the money, I'm scared of what happens if I can't then save enough up to afford a deposit - that would really shaft me!

*sell a property, not see it!

Thank you for the Chase account advice - will look into it.

Have you still got the debts? Or are they repaid now?

If you still have debt, use the £30k to pay your debt off, then start resaving a deposit, you'll get back to having the £30k soon enough when you don't have debts to repay and you'll also get on with putting your credit history issues behind you quicker.

If it's not enough, you could try a 'full and final settlement' but that depends on your circumstances and you should probably want to talk to whoever manages your debt management plan if that looks like an option.

As far as rebuilding your credit goes, you might not have to wait the full 6 years for your credit history to completely clean up. There are non prime mortgages available that aren't that much more expensive than standard ones, especially if you have a decent deposit and meet affordability. It's probably best talking to a broker when you're ready.

As ever, Moneysaving Expert gives advice on making your credit file look as attractive as possible to a lender.

www.moneysavingexpert.com/mortgages/boost-mortgage-chances/

Cross posted. If you have £8k of debt and £30k coming, it seems like a no brainer to pay all the debt off.

You will then be in a position to start saving and repairing your credit file as soon as possible and you might be able to buy in 2 to 4 years' time, you don't necessarily have to wait until your credit file is completely clear as there is the possibility of a non conforming mortgage that might only be slightly more expensive than a standard one.

I know the mortgage market has changed, but we remortgaged to get out of my IVA about 15 years ago that was for tens of thousands of debt and the interest rate was about 0.5% above the best normal rate, so nothing at all really. You could talk to a broker to see what might be available.

You'll need access to it, and it must be absolutely secure while retaining full flexibility.
I suggest you invest it in Premium Bonds.

I agree that it makes more sense to pay the debt right away and save like heck to regain the deposit. And don't be too sure about the DRP moving your chance to get a mortgage. My EX DH had 2 new/recent CCJs and terrible credit but managed to get a mortgage after just 12 months of settling 70% off his debts and repaying a small credit card and all commitments in full religiously every month. He went through an independent broker and ended up with nationwide.

Pay the debts. I’m a bit concerned you think it’s a good idea not to and remain on the DMP. Don’t do that.

As above. First thing to do to sort out finances is pay off debt as soon as possible. Obviously you mention using the lump as a deposit on a house - will you be able to get a mortgage if you're on/have been on the repayment plan?

I put all my savings into Vanguard Lifestrategy 100, with a view to stepping down the risk level as I get older. That's a long term plan though so wouldn't necessarily make a big return over a short period. Can generally get money out again within a week if needed, but obviously there's always risk with investing in anything.

Pay your debts off first. Then I’d put the rest in premium bonds as they’ll be quickly accessible.

Yup, definitely pay your debts off first. The most interest you’ll get even by shrewed investment in, say, a FTSE100 tracker fund is only 3.8% at the moment and the interest on your debt is prob way more than that. On £22K the management fee on any investment playform would prob exceed you interest (dividends) you earn, so not much point investing it. Honestly, after what you’ve been through, I’d spend it on an amazing holiday for yourself and try to pamper yourself.

If you really want to keep some for the long term and have a financial safetynet and want to avoid management fees I’d actually recommend you buy some physical gold. A one ounce 99.99 purity gold coin costs about £1650 and will keep its value against inflation. Buy a few of those on-line from a reputable dealer and find somewhere safe to hide them!

If you're on a debt management plan, surely you'll be forced to pay off the remaining balance if you receive a lump sum? I know someone who had a DMP and they reclaimed their PPI payments and got a cheque for around £3k, but had to hand most of it over to the DM Company. It's worth checking and finding out if there may be a way around it, if it does apply to you. Congratulations on getting out and best of luck for the future!

The six years on your credit file doesn't start from when you start paying it off, it starts when you finish paying it off. So if you stick to the debt management plan you've got 10 years to go before it's off your file