What to do with £500k+ (mortgages, moving)?

[CityDweller]

I'm going to try go keep this brief, but it's a bit complicated (or perhaps just complicated to me). Short story is, we're about to come into some money. It'll leave us with about £500k cash plus an additional monthly income of about £800 (before tax). We own and live in a flat worth £650k on which we have a mortgage of £250k. I earn about 40k a year, DH a little less. We have one DC and another on the way. Ultimately we would like a) to move house and b) for DH to become a SAHD. We'd also really like to keep hold of our flat (we could rent it out very easily for about £2k a month).

So, what's the best thing to do? Pay off mortgage on current flat and rent it out? Keep mortgage on current flat and rent it out (rate is currently v. low, but presumably will go up in future and/or if we have to switch to a buy-to-let mortgage)? Is it possible to do either of these things and also buy somewhere bigger to live? How much house could we afford if so? We don't want to tie all of the £500k cash up in property as that makes me very nervous. Especially as the plan is for DH to stop working/ earning and he also doesn't have a pension (I do). We'd also like to have the option of private school fees in our back pocket, for senior school years. Or should we tie it all up in property and then we'd have income from renting flat??

I'm really overwhelmed by all the options available and I'm not sure how to do the sums to work out what we can afford.

no right answers, of course, but do your sums with the rental. Factor in:

• BTL mortgage if applicable
• permission to let (and can you do it in your block?)
• insurances: landlord buildings/contents, malicious damage, rent guarantee, legal expenses
• fixes and maintenance
• agency fees
• void times
• aggravation
• tax

if you pay off the flat mortgage you then have £250k, which as you are probably near London won't buy a broom cupboard. Elsewhere in the country it will buy a lovely place, and it doesn't mean living miles from anywhere.

what else to do with the money? Savings rates are near zero and below inflation. Pensions would be good, think long term. Stock market - obvious risk but also think long term.

while you are thinking, open the several separate accounts you'll need for the money. Each joint account can have £170k in it to be safe, and they must be with separate institutions.

Thanks for this. If we keep hold of our flat we'd need to get a mortgage to buy 2nd property as we are restricted to living in SE (work, family). So not looking to buy 2nd property outright. Wondering how much a bank would lend based on having, say £300k to put down but also keeping hold of our flat and renting it out. I don't even know if banks lend out mortgages on those sorts of terms...

Go and see an IFA, buy to let us not the only answer to income from investments! They can help you formulate a plan that looks at your short, medium and long term objectives.

So if you sold the flat and combined it with the £500k you would have £900k plus if you both earn about £40k you could probably borrow £160k? so why not just buy one new house which is rather nice worth about £1.1m? That is what I would do. No capital gains tax as it's your home and no complications of having to deal with tenants.