What to do with 50K

[goldpendant]

This post comes with a 'yes I know we are very fortunate warning':

We've inherited 50K and are a bit stumped about what to do with it.

Background:

No debts except mortgage (250K on a house worth £1m).

One student loan £9K outstanding.

We'd love an investment property nearby that we could manage ourselves but we don't quite have the 30% deposit required for BTL mortgage. A 2 bed flat around here is £300K.

We could put it in two ISA's but I feel there must be a better way to make the money work a bit harder.

We'd like to be able to access up to £20K of it in an emergency.

Appreciate any advice from anyone more experienced!

If you really wanted to get a BTL, you could release equity from your home to raise the deposit & stamp duty fees. However, the tax regime has recently changed to discourage btl + rental yields are poor in London so it's not easy to make it work.

For the emergency stuff, we just keep it in our current account. Santander is pays 3% interests on balances of up to 20k and it can obvs be accessed instantly.

Other options are:
Lifetime ISAs if you under 40 (up to 4k/year + 25% government top up)
adding to pension (at work or SIPPs and you'll get your tax refund)
stocks and shares ISAs
or if all of the above are full, then a dealing account and a few funds. The tax on those has become very favourable.

I'd buy. Am desperate to secure a holiday home to let currently but not looking hopeful. If you can't find something local, it is more difficult but not Impossible!

Isn't equity release for retired people? Or do we remortgage and borrow more? Not sure how that works, everything I've seen about equity release seems to be for older folks?

Put it into your mortgage.

Being a landlord is not an easy option. Even if with an agency managing it for you, it can still be a lot of stress and actually cost you money.

What's wrong with putting it into two ISA's and Emergency Fund?
You have control over the investments within the ISA wrapper so you could select multi-asset funds, which could contain a property fund.

Pension is usually the most tax efficient but you can't get the money back out if you needed it. So if ISA allowance has not been used then I would use that first.

Personally I would keep it in easy to access savings for the moment and see what happens with the property market in the in the next few months.

I am not a fan of BTL though for ethical reasons but understand it works for some people.

Sorry, yes I mean getting equity from your house by borrowing more to fund the BTL (not a scheme for OAPs )

I also agree with pp that having a rental can be stressful. I’ve always had decent enough tenants except a couple of weed-smoking party boys in one property. However, it’s things like leasehold and management company issues, problem neighbours in blocks or daft things like a 2yo boiler dying completely in winter. Share of freehold flats can be a pickle too as you need to deal with other sharers who might be difficult and unwilling to pay for proper repairs.

So it’s only worth it if numbers stack up and you’re prepared for dealing with situations often out of the blue.

I’d keep 10k back and pay the rest off your mortgage. Think of the thousands in interest you’ll save from early repayment of 40k. That’s what I plan to do eventually with an inheritance (hopefully not for quite a few years yet, rather than the people not the money) when I eventually get one.

Thanks all, we've decided to keep hold of it in ISAs and then save the rest for a BTL (ultimately a place for the kids if they want to work in London), or pay it to the mortgage in a year if we can't do the BTL.

Appreciate all your advice.

Forgive the bluntness, but I'm surprised that someone still playing student loan has accrued a 750k stake in a house, but doesn't know about remortgaging / equity.

You're ahead of the curve on equity by a mile

We're planning to buy to 'in case kids want to work in London'. Have started looking at areas.

@TeaForDad that would be thanks to DH. I'm not on the mortgage. He's a fair bit older and came to the relationship owning his place outright. I've never owned but am a reasonably high earner for my age.

"no debts except mortgage (250K on a house worth £1m).

One student loan £9K outstanding.

We'd love an investment property nearby that we could manage ourselves but we don't quite have the 30% deposit required for BTL mortgage. A 2 bed flat around here is £300K."

So take a new mortgage on the house - you have already paid of 75%! That is an awful lot. The extra £40k are nothing on the property value of £1m.