If you were given £20k

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if you were given £20k inheritance what would you do?

If you generally struggle in very hand to mouth existence, better off than many, I have no pension, we own a mortgaged house that isn’t really big enough, house also needs a fair bit of work done to it, DH has loan to pay for his car, I have student loan, my car is 13 years old.

Would you do up the house, move, or put aside to move? I’m worried DH will want to pay off his car loan to be debt free or just overpay mortgage, but I’m desperate to move so kids will have a bedroom each, and maybe even a second bathroom! I’m fed up with living on top of each other!

Generally the best advice is to get rid of any debts frst - especially any ones that a e expensive. Then think what to do with any money that is left.

Speaking as someone who has owned several camper vans and motorhomes, this is a terrible idea. A decent motorhome will cost at least £40k. For £20k you'll get an old one that's seen better days. You may be able to rent it out to people for a few weeks in the summer but that's the time you and your family would probably want to use it. And every time someone rents it for a day or two you'll have to clean it out and wash it down. If you're already living hand to mouth where will you find the money to fix it? Because it will invariably break down, being driven by different people who don't own it so don't care about it. Don't buy a new house and don't buy a motorhome, either.

Pay off the debt (assuming no early repayment fee) then transfer the money that was servicing the debt into savings each month. That way you get triple benefit
. The money that you were paying as interest is instead being used to bolster your savings (eg if you debt was £200 per month but £10 of that was interest you were only repaying £190 per month of actual debt, you would now get the full £200 into your savings)
. you are getting interest on the savings
. your affordability calculation for a mortgage is now better, because you have savings and no debt, so you’d new mortgage rate when you do move will be better

Unless you're married, never pay someone else's debt off. You could break up in a couple of months and lose any claim to the money.

Didn't you pay any stamp duty?

they live in a cheaper area of country so probably no stamp duty

I'm crap at money so I would put it in premium bonds as a gamble for a year mainly to stop myself frittering it

Why are people still wittering on about stamp duty? We've bought 2 houses and not paid any on either. The OP has said it will be minimal, and you don't pay any anyway on purchases up to £250k, which buys quite a decent house in many places.

I don't think you can move with 20k. You will need to pay stamp duty, solicitors fees, estate agents fees, removals. Plus when you move in there are always little jobs to do. Your money would be eaten up before you could do much with it.
Are you managing all your financial commitments ok? If so, I would probably pay down the mortgage with a view to reducing interest rates. 20k sounds lots, but when you actually get down to what things cost, it doesn't go very far.

No. But I live in an area where you can buy a 3bed semi with a drive, garage and garden for under 250k. My own homes have cost 97k and 112k. So nowhere near stamp

We don't all live in places where 250k buys you a share in a studio flat.

Is it a reasonable car loan? Or has he taken out a loan on a car he can’t really afford just because he wanted to? I would put it aside to move, how old are your children? Is the lack of space likely to get worse as they get bigger or are they already grown/teens?

I do get that you are a partnership but it is your inheritance. Your loved one wanted you to have it. My husband will likely inherit a lot more than I will but I don’t expect to dictate exactly how he spends it. I would be annoyed if he bought some 200k car and left us with a massive mortgage though so maybe I do have expectations!

You don't have a pension. That should be where the bulk of the money goes.

Why don’t you have a pension??

Not necessarily a private pension can be an absolute disaster and push them a couple of pounds out of the criteria to qualify for housing benefit in pension credit when the time comes.

Good financial advisors will point out the little pension is worse than no pension.

It's a bigger problem that you're actually worried what you DH wants to happen. No is an easy word to say.

Does it save you anything to repay the car early? If not it makes no sense to pay it off - let your money earn some interest.

Agree to get it in a high interest account ASAP while you decide, but beware the ISAs with 5/6% interest are usually locking you in for a year. There are a few instant access accounts at around 4% if you're unlikely to exceed your £1000 tax free allowance.

I think i'd investigate overpaying the mortgage to reduce the monthly payment if things are as tight as you describe. Save the difference for house repairs?

I just don't feel that if you're living 'hand to mouth' a move to a larger property with associated increase in energy costs, council tax etc. is the best idea right now.

The OP doesn't say she claims any benefits.

I would stick it in a high interest savings account for now.

I would go on money saving expert and draw up a budget and cut what costs I could. I would decide with DH if you want to keep his car and if you do then I would work together to get this paid off along with any debts.

In the meantime I would speak to a mortgage broker to see what the situation is for a new mortgage and I would get the house as ready as possible (on a budget) To sell.

When the debt is gone a bigger mortgage will be more affordable and then you can use the inheritance to move (ring fenced if possible)

There is no urgency to spend the money, take your time and consider the options carefully. If in doubt do nothing with our other than keep it safe and earning as much interest as possible

If you live 'hand to mouth' and have no pension, I would say that you can't afford a bigger house, even with this inheritance.

Council tax and bills would be higher on an ongoing basis, even if the £20k fully funded the capital cost of buying and moving to the bigger house (unlikely).

This needs to be used to pay down debt, create a savings pot, or go towards pension. (Or a combination of the three).

@BernadetteRostankowskiWolowitz she didn't say she doesn't either. It was just a thought.

£3k would wipe out 15% of that £20k gift.
Then add EA fees to sell your current house, conveyancing fees, and moving costs....

Then work out how much extra council tax and utilities you'd be paying on an ongoing basis in a bigger house. Plus the bigger mortgage will cost you more in the long run, even if you can keep payments manageable by extending the term.

I know a bigger house seems attractive, but you have to cut your cloth and it really doesn't sound as though you can afford it. You will be better off staying put and increasing your financial resilience.

I think this is the best advice. You don't have to spend it immediately. It's your money and you have probably lost someone you loved. Take your time, add to the money a bit each month if you can, watch it mount up each year including the interest you will get. Maybe you can afford a bigger house down the line. I'd wait for interest rates to come down a bit first.

You’re right - we are living within our means, and whilst we are hopeful DH will have a good promotion in the next year or two, it isn’t guaranteed.

I’m a sole trader - self employed so no company pension. I had about 4 years of previous employer pension and my state pension contributions are well on track. I was severely ill through all my 20’s and it scuppered my earning potential. I’m just now beginning to earn reasonable income, but it’s a tough industry and earnings can vary year to year. I’m meeting a financial advisor soon to get best pension options in place.

Debt is very low interest so at the moment it costs us less than we’d earn on the same amount in savings. My big concern is if we paid it off we’d never get round to saving again.

Not student loan.

If the interest on the car loan is high is it a bad idea? Then roll the payment you were making into home repairs, then overpayment.

Overpayment Vs saving for next house is all the same thing (unless you have a very low mortgage and very high savings account). If you overpay your mortgage you can use the equity for the next house.

I'd put it into savings, it can earn 5% while you decide. That's an extra £80+ a month income.