How best to spend £450k

[Moneymaybe]

Apologies for the slightly goady title, rest assured I’d very much prefer not to have inherited this money and instead still have my parents but this is the situation I find myself in.

We have around £280k remaining on our mortgage and our fixed rate ends in late 2026.

I will speak to an IFA, but so I’ve got some ideas of my own - can anyone suggest how they’d invest the money? Is paying off my mortgage always the best plan? We’re still young (ish), earning well and retirement is a long way off.

Paying off the mortgage is the best plan if you can't get a better return on your investment elsewhere. Usually you can get a better return elsewhere.

But there is also non-financial value in the security of knowing it's paid. It's not a simple calculation.

It may be an idea to pay off some of the remainder - especially if that takes you over one of the threshold levels that means you can get a better rate on what's left - but not necessarily all of it. Also consider what you have in your pension, what short-and medium-term savings you have for emergencies and planned expenditure, and what your overall life plan is.

I would pay off the mortgage, leaving £170k, which I'd use to buy a better house, upgrade the cars and plan some great holidays.

A lot of people would do the same. Which is exactly why so many get a nasty shock when they reach retirement age.

We paid off our mortgage. Upgraded one car. Invested a fair bit.

How old are you? Are you in your forever home? How many kids, or do you plan to have kids? Is your marriage secure? Are you higher rate tax payers? Hard to say without a bit more info about your situation…

For me - we are 50ish, two grown up kids so if someone handed me 450K it’d be house deposits for them, our mortgage is paid off.
in general I’d say 20k each for you and DH into an ISA each year, pension contributions, and something, holiday maybe to remember your parents.

If you've got kids, consider starting a pension for them, also junior ISAs.

I'd pay off mortgage and then invest in stocks and shares. Make sure you have protected the money in case of divorce first though. Usually inheritance doesn't count as marital assets but once you have invested it it might. One can never be too careful.

Whilst not always the best investment don’t underestimate the security and freedom that having no mortgage brings. You can’t artificially reduce then use cash you would have spent on the mortgage on securing your future (via pension and ISA’s) and if needed improving your quality of life (eg holidays, part time working, family gifts etc). However I would try not to fall into the trap of spending at a level you can’t sustain if things don’t turn out as expected.

I would pay off the mortgage if I was 100% sure my marriage was solid as a rock forever more. Otherwise, invest it in your own name and continue the mortgage.

I would:

• pay off my mortgage £280k
• put some into savings £20k?
• put the rest into pension

Are you married OP?

To answer a couple of the questions, I’m married, two kids that I’d like to provide a deposit/lump sum for and about 20 years from retirement.

The idea of being mortgage free is very tempting, my husband is a massive saver and covers the mortgage each month (it works out fairly), and wo ideally we’d use the money to go on some lovely holidays. But in the same vein, we can afford our mortgage so would we be better investing the whole lump and getting much more interest? It’s so hard to decide.

How old are you and how much have you got saved in your pension?

I would look to maximise on my pension contributions with a SIPP. You can pay in up to 60k per tax year and claim the tax back. Particularly good if you're a higher tax payer.

Max out premium bonds and go on a holiday to start with.

In a similar situation, I paid the majority again the remainder of the mortgage. I know it would have pleased my mum to know that she had made me mortgage-free, and we can divert the monthly payments to pensions for us and our DC. We’ve also got a significant family holiday planned.

Interest on investments (unlike savings) is uncertain and should be considered as a long term thing with a 5-10 year horizon, given the value could go down and it may take time to revert.

Savings rates will be lower than the rate most people will be paying on a mortgage. Most fixed term savings are c.4.5% (tops) for a 1 year savings bond.

Personally I would pay off the mortgage and divert the money you would have spent on mortgage payments into investments - ideally in an ISA if you don’t do this already. There is a very good sense of security in knowing the mortgage is behind you.

I would pay off my mortgage and take out a buy to let mortgage and save to buy a second one - one for each child

We had a similar issue, Op. Paid off our mortgage and sought out high interest accounts for the rest. Considered buying a property to rent out but realised that we didn't want to be landlords.

I would definitely not do a buy to let with a mortgage. There are a lot of expensive legal requirements now and a relatively high risk of a bad tenant. If you have some you want to invest an S&S ISA and/or a SIPP is far simpler.

Do your research before paying off your mortgage. It’s a knee jerk response but often a poor financial decision. Whereas pension - up to £60k this year - and the last two years, and claim back higher rate tax. I wouldn’t pay off our mortgage but it is at 1.69% for seven more years.

We were in a similar position a couple of years ago. Paid off the mortgage and invested the rest in long term stocks and shares based savings accounts. Put the max into a stocks and shares ISA every year and keep a good amount in cash savings as well. Over pay into pensions as don’t need the money in earnings now.

We are older than you (nearly 50) so are planning to retire at 60 rather than spend big on home improvements etc. We do have nice holidays every year.

Financial Advisor was clear that paying off the mortgage is not the best use of funds from a purely financial point of view. However, we wanted to do it to have that feeling of long term security. Certainly don’t regret it.

I disagree with everyone saying pay off your mortgage, investing is likely to be more lucrative over time. But with that amount, tax is a big consideration and definitely worth talking to a financial adviser.

In any case, don't do it until after your fix runs out, due to early repayment charges.

But if you can easily afford your bills and lifestyle each month and save well, it's unlikely to significantly change how your finances feel day to day, you're already very comfortable.

When your rate runs out, you could look at an offset mortgage that is significantly or fully offset, if it means your savings are effectively tax free because they're offset against the mortgage interest (check it works like this because I'm not sure).

1. Pay off your mortgage - unless you’re on an excellent rate, you will struggle to out earn the interest payments when your fixed deal ends
2. Max out your pension allowances going back 3 years
3. Whatever is left put into stocks and shares ISAs this year and next.
4. You’re also young so do enjoy life and have a nice holiday or two. My personal rule is to buy a good solid car but never from brand new and never on finance.

When you’re young it’s hard to see what the world will bring but aim to be financially independent or close by mid 50s. Ageism in the workforce is a real thing and the potential to slow down or leave mid/late 50s is peace of mind.

1. Max out pension going back three years if any allowance not used.
2. Max out ISA allowances in stocks and shares.
3. Invest over paying off the mortgage. It's a good idea in its own right but with 20 years to retirement you can benefit hugely from the compounding.