Invest or buy house mortgage free?

[cleanhousewastedlife]

Dh has recently had a large inheritance. Dh and I (both our 40s) were already thinking of moving to a nicer house when this happened.

At the moment we're thinking of investing the inheritance, and buying new house with a 50% Ltv mortgage, as the mortgage rate would be lower than the growth rate we would be likely to get if we invest. This would leave us with the investment as funds for our retirement when we would plan to have paid off the mortgage.

My head says this plan makes sense but I'd appreciate any other opinions - would you rather be totally mortgage free now (the inheritance would cover this) or risk having / building a healthy lump sum for later life? I'm wary of the state of the market.

We currently live entirely within our means, ok salaries, no other debts, no children.

Investment would be via the firm who had previously looked after the money for my relative. Would appreciate any thoughts.

It depends on what other financial assets you have. One problem with real estate is that it's highly illiquid. There's also the risk of having most of your net worth tied up in one asset class. You should be diversified across real estate, stocks and bonds if possible. In your 40's you should be invested in stocks. The ups and downs can be a little unsettling but that's where you'll get long term growth.

If you already have plenty of liquid assets then just buying the house makes sense. If you don't your plan makes more sense.

Thanks missconductus, that's good to hear (and we don't have any other liquid assets). Really appreciate your opinion. A last question if I may - would you be wary of getting into stocks right now (Brexit etc) or is it a case of simply getting stuck in and settling in for the long term?

I think the stock market probably has priced brexit into current prices. You should avoid individual stocks and buy broadly based stock market index funds. If you want to be cautious about the timing, buy some stocks now and some later after the brexit dust has settled.

An alternative would be buying a stock fund now that follows one of the US indexes like the S&P 500, then a UK based index fund later. Brexit is mostly upside for US stocks as the UK will probably be importing more goods from us in the future.

Many thanks again missconductus for your good advice.

cleanhousewastedlife you are certainly most welcome.

I understand your skittishness about stocks. It never seems like a good time to buy them. DH bought Apple and Amazon shares in 2008 after the big market crash. I thought he was daft at the time. It turns out he wasn't and we'll have a much more comfortable retirement because he did.

We are 'mortgage neutral' but have a mortgage for about 25% of the value of our house and have slightly more than that invested in the stock market (which I manage myself) and some more in cash. I'm expecting the investments to perform better over the long term but we are overpaying the mortgage slowly too.

I ran a mortgage for many years with investments alongside. I think the alternative is to save the ‘mortgage’ payment IYSWIM, but that requires steely discipline.
We are in the same boat now, big inheritance after buying our dream home. I’m tempted to mortgage just to ensure

... ensure we don’t spend all our income.