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Original poster

if you inherited £100k...

104 replies

ruddynorah · 30/07/2010 13:59

if you inherited £100k what would you do with it? or rather more to the point, what should i do with it as my head is just spinning with it all?? situation- after my gran passed away i inherited about £100k (will get it early next year i think).

there's me, dh, dd aged 4 starting school september, and ds 8 months. i'm due back to work in 2 months.

we have a £150k mortgage currently on standard variable, so no penalties for overpaying.

i work back to back with dh. he pays all bills and mortgage. my income is spending money, about £800-£1000 a month depending what hours i go back to work on. we have no childcare costs due to work opposite each other (him earlies, me lates).

do i.....

A) pay off large chunk of mortgage, maybe £75k, and keep repayments the same which will mean mortgage is totally paid off in 10 years ie by the time i'm 40. other £25k will pay off £5k car loan, £5k aside for each of the dc, £5k for some stuff to the house and £5k into savings for next years holidays.

B) as above but keep mortgage term the same, so half the monthly repayments. means more in our pocket each month, nicer hols etc etc. though we aren't massively fussed for this, we like uk hols while the children are young really.

C) take 5 years off work. (will have to go back short term until money comes through though) 5 years x £800 a month = £48k to fund the 5yrs off. so would still leave £50k (allow for 'pay rise') to make maybe £25k overpayment to mortgage plus £25k to do as above. so, mortgage would carry on over longer, but would have career break, though of course impact to think of 5 years off career ladder/pension etc etc blah blah. would probably do some volunteering actually to keep some semblance of activity out of the home as it were.

D) something else..

i don't exactly love my job, i do it because the hours fit and it's good money for what it is iyswim. as it stands, i'm with the children all day, then go to work while dh does tea and bedtime. i won't see much of dd as she'll be at school all day, though i'll be there for drop off and pick up. it would be nice to be home each evening.

but we'll save an absolute fortune if we overpay massively on the mortgage and be mortgage free in 10years.

thank you for reading all this.. soooo...tell me what you think?? i just want to make sure i do my best with this money. dh will go along with whatever i decide

OP posts:
justabit · 31/07/2010 21:50

the sensible thing has to be to pay off as much of the mortgage as you can. Then if you need money for something else (including taking time off work in the future) you simply increase your mortgage again. In the meantime you won't be paying interest on the debt. Gives you maximum flexibility.

TeaandCake · 31/07/2010 22:33

Something similar happened to us a couple of years ago but on a much smaller scale.

DH inherited £35k and we had no other debts so decided to put it into our off-set mortgage/bank account. We owed a little more than this so paid a tiny amount of interest. We also decided to over-pay the mortgage repayments every month.

The outstanding capital of the mortgage is now less than the savings so we effectively have a free mortgage (the bank now pays us a little interest!) but the capital is still liquid so if we needed to take some money out, we still could.

As we are, the mortgage will be paid off in 5 years from now, 9 years 10 months early.

My point is that we just put the money in there and forgot about it, we're just mooching along the same as before but we will benefit massively in a few years' time. Reducing the mortgage is always a good idea, I vote for option A.

trixymalixy · 01/08/2010 00:41

I was made redundant recently and got a large redundancy payment of a similar amount. A third of it went into my pension to be tax efficient (obviously not relevant to your situation). We paid off a few debts and the rest is currently offsetting the mortgage.

I can't tell you how great if feels to have basically paid off a huge chunk of our mortgage, but at the same time have the cash available if we need it at any point in the future.

I would go for A, but get an offset mortgage so you do have access to the money.

trixymalixy · 01/08/2010 00:45

Oh and now I'm going back to work, we are going to up our mortgage payments to what they would have been so we can get the mortgage paid off as soon as possible.

BaggedandTagged · 01/08/2010 03:53

Pay the mortgage off- interest rates are only going one way.

BUT, keep, say, £5k back and buy yourself something nice (some jewellery/a watch or something else as a reminder of your dad and a treat for yourself.

Sariska · 01/08/2010 08:45

Mortgage - pay off as much as you can. The relief of having no mortgage / only a small one, especially in the current financial climate, is indescribable. Plus it may well open up better work/life balance options in the future.

Original poster
ruddynorah · 01/08/2010 11:55

oh lots more input thanks everyone!

No inheritance tax to pay thankfully. There's just me and my sis100k each.

my head hurts!

OP posts:
serin · 08/08/2010 14:02

A

No contest really.

Although I would also treat the family to something special to remember your gran by, eg.caravan (cheap holidays forever after) or niceweekend in London.

wigglybeezer · 08/08/2010 15:19

This happened to me, i have yet to spend much of it, as we had already payed off our (smallish)mortgage. I don't have a pension and have only worked at freelance and part time jobs so DH reckons I should pay to get my NI contributions up to a respectable level. If we spent it on a bigger house round here we would spend the whole lot for the sake of one extra bedroom and a utility room so we are staying in our modest dwelling and Using the money as a safety net as we are self-employed.

TBH I use it as a bit of an excuse not to get a job just yet even though DS3 has now started school.
Mortgage free life is worth it IMO.

turkeyboots · 08/08/2010 15:21

I vote A

Meglet · 08/08/2010 15:24

A with a few £££ left over is a good idea.

tuggy · 13/08/2010 14:09

A. pay as much off mortgage as possible. Cant put a price on security of a roof over familys head. Not to mention the money you'll save in interest! I'd pay £95,000 off mortgage and keep repayments the same level. And pay £5k car loan off.

Honestly thats the best answer I promise!

FoghornLeghorn · 13/08/2010 14:22

I'm with Pavlov - be half sensible Grin

Seriously - you never know whats around the corner and if I was in your position I would want to alot of what Pavlov said

snoozathon · 16/08/2010 13:34

95k to mortgage, 5k on a total treat for your family, a fab overseas holiday or whatever your dreams are.

Then you're hitting both the sensible financial side and the 'you could be hit by a bus tomorrow' argument.

5k is a lot of money for a treat, but in this scenario guilt-free and the 95k on the mortgage is worth 10x that in the long term.

PLEASE don't use it to take time off now, imagine the long mortage-free years ahead when you won't need to work if you do the right thing with the money now.

tartyhighheels · 16/08/2010 13:45

I would buy a couple of buy to lets tbh - i have two, started with a tiny (and i do mean tiny) amount of money and after mortgages they have a decent income. This will enable you in the longer term (as it has me) to stop working outside the home and eventually they do provide good stuff for your retirement.

100k is a lot of money and the housing market is depressed so you will get a lot for your money. It does take balls to start it up the nerves do pass and they always bring a great long term return.

Myleetlepony · 16/08/2010 15:14

I have a lot of experience in the buy to let market(good and bad). I have seen people do extremely well, and also be destroyed. So if you consider this option you are very welcome to contact me and pick my brains. Smile

HerHonesty · 17/08/2010 21:41

what would your grandmother have wanted you to do?

gomummy · 17/08/2010 22:48

Another vote for A, but slightly modified.... I would put probably 99% of it on the mortgage, but keep a little bit to purchase some tangible object (piece of jewelery, something for the house, etc.) that reminds you of your grandmother that you can keep.

tefal · 22/08/2010 09:08

Pay your mortgage but also keep some back to enjoy yourself and as a family. A fantactic once in a lifetime holiday would be good, especially as the children are young enough.

nappyzoneloveschinesefood · 22/08/2010 09:13

I would take 8k and put it in an account for treats, holiday etc, use the remaining 92k to firstly pay of small debts eg visa, car loan etc and then rest of mortgage. Then breathe a sigh of relief and enjoy .

ivykaty44 · 22/08/2010 09:17

I would use £95k to pay of the mortgage and leave me with a £55k mortgage and continue to pay of at the same rate so that the mortgage is payed in much less than 10 years Grin

I would use the £5k to have a holiday for all of you.

Don't put any money away in building society accounts as it will depriciate and be worth much less - therefore pay as much of it off your mortgage instead.

In one years time your £5k put away for the children will be worth around £4780

and the following years again much less - in 4-5 years time it oculd be worht only £3kSad

nappyzoneloveschinesefood · 22/08/2010 09:24

ivykaty i dont understand how can savings go down - thats like theft?

jacksgrannie · 22/08/2010 09:25

Ok. This is advice from the other side (children long grown and now retired and mortgage free).

  1. Pay off any unsecured debts first (and don't take on any more).
  1. Pay off as much of the mortgage as you can.
  1. Do not reduce your mortgage payments but continue to pay down mortgage, thus reducing the mortgage period.

In 10 years you will be mortgage-free. Believe me, there is nothing like the feeling of being debt free. Anything else does not come close. When I started working full-time (after being very poor) I used the extra income to save bits and pieces and paid off the mortgage in chunks. Then there was an inheritance and insurance payout.

Paying off the mortgage 10 years early has transformed our lives (and our children's and grandchildren's). I have friends who did the opposite and they are still struggling with mortgages in their sixties.

chimchar · 22/08/2010 09:43

everyone here speaks a lot of sense.

i'm tending towards pavlovs thinking. my mum and dad have scrimped and saved all their lives. payed for things only when they had enough money to do so, worked up to retirement and were debt free, ready to reap the benefits of working so hard. my mum died last year very suddenly aged 64. now my dad has money available for him to do whatever he pleases, but no one to spend it with....

i think that whilst the future is obviously important, you should live for the moment as it were...i would do something with the money that gives you benefit NOW...things happen, life changes etc...its an unexpected gift, and you have a bit of time to consider how it would suit you best...i think whatever you end up doing, it will be a wisely made decision. Smile

ivykaty44 · 22/08/2010 11:06

ivykaty i dont understand how can savings go down - thats like theft?

Its called inflation Grin and it means that what you can buy today for £50 you will need to have £60 next year to buy the same.

Think about shopping in the supermarket and how last year you could spend £50 on a weekly shop and now this year buy the smae goods and food will cost you £60

So as you put £1000 in the building society and they pay you interest of 3.75% and inflation is at 5% this means that next year even with the interest on your money making it £1014 but really you need to have £1025 to be staying at the same level of inflation.

If inflation continues to rise as is suggested - then in 5 years time savings of £1000 or £5000 will be out of pocket

If you brought a years worth of shopping and it cost you £5000 for the entire year. In three years time that £5000 would only buy you 9 months worth of shopping and not the entrie 12 months a prices have gone up - that is inflation.