What to do with £10k.

[CPHB2021]

Hello!

Looking for some advice on what to do with £10k. We have recently been gifted this by a family member but confused what would be best to do with this, though very generous gift, not life changing sum.
We are home owners of a shared ownership property, our mortgage situation is really complicated but due to DH recently moving to self employed work, we have just moved to a standard variable mortgage on the share we own. We plan to sell as soon as we have enough years on the books for DH.
We don't have a huge amount in savings so was thinking that probably best to just put the money into our premium bonds account and build on what's in there to put towards deposit for our next home, but are we missing something? Can anyone think of any better ideas for the next few years until the money is likely to be needed?

Thank you if you read this far!

I wouldn't do premium bonds at the moment. If you have a timescale, find a high interest savings account. The longer you lock it away the better eg 5years but if you need it sooner you can get 2-3 year accounts

Thank you. I will look into this. Why would you not recommend PB at the moment?

Because you get better rates with savings account due to the higher interest rates at the moment.

But I can't predict if you would win on the premium bonds of course!

Monthly saving accounts, sometimes called regular savers.
Set up a DD for the maximum (usually £300-500 per month).
They last for a year and some pay up to 7% interest.
I had a similar (less) lump sum but I need it for emergencies, so I opened accounts with First Direct / Nationwide/ Yorkshire Building Society/ Lloyds.
Check Martin Lewis for reg savers.

If you're on a SVR mortgage isn't the rate now quite high? Can you make overpayments without penalty? If so that is tempting for at least part of the 10k as the mortgage interest you save is very likely to exceed any interest you would get in the bank.

We're in a shared ownership property too. We've been trying to overpay on the mortgage and have a S&S isa and 2 year cash isa account which we regularly pay into.

In your shoes I'd probably split the money- £6k overpayment (assuming you can on your mortgage), £1k per isa and £2k on a nice all inclusive holiday somewhere 😁 oooo I love hypothetically spending other people's money 😂

1st rule is make sure you have 6 months income in a savings account.

Then mortgage overpayments - especially if you have a lot of years left on the mortgage.

E.g. if you have 25 years left on the mortgage a £10k overpayment will also save you over £20k in interest if your mortgge rate is 5% by doing this you can turn that £10k into £30k.

Lots of good ideas here, don't disagree with any of them. Initially my thoughts swing towards paying off a chunk of your mortgage being mindful of the fact most only allow a maximum per year of 10% of original loan amount without penalty. Nice as it is to get a mortgage / own place it isn't long before your mind turns to being glad to be rid of any debt on your property. Equally I've always liked Premium Bonds for many reasons. First it's government backed, money is about as safe as it can be from an investment point of view. Second if you need the money for any reason withdrawing it is a fairly quick / painless process. Finally while I agree it's on average possibly not the highest paying investment (prize pool increased as of Jan 23) it's a fun investment. Got an email earlier this month, I'd won something, quite exciting logging in to discover the amount. Probably the most sensible thing to do is pay off debt, this is what I did prior to considering any savings. But once you do the mortgage provider will not offer what they once did, overpayment reserve. That is the ability to readily withdraw any overpayment balance should the need arise. Ultimately there is no right answer here, both have positives.

Not a huge amount, you could get 400 a year interest on it. I would use it a buffer in case I needed a new laptop, washing machine , car service, broken boiler etc