How best to spend this inheritance

[ellerman]

We are expecting £10k inheritance. Can't decide best thing to do, I have £5000 car loan with a credit union, paying £120 over next 4 years at 9% but its not compound interest can pay off with no penalty. Mortgage is £80k at fixed 5.89% until September 2012 with huge £3k penalty if we leave, been overpaying by £90 per month and can overpay up to 5% of balance each year. Also have unexpected third child who is sharing with other gender teenage sibling, feel i want to try to convert our loft to bedroom for about £5K doing as much as we can ourselves. How would others use this bonus?

pay off debts, so that's the car loan gone. Any more debts you've not mentioned? credit cards?

I'd leave the mortgage as you're already over paying so ahead with that.

I'd look seriously about spending the rest on a loft conversion. How definite is the £5k figure? (I've got no idea about prices as never done it ourselves)

Do you have any other savings?

Pay off £5K loan - £5k savings for a rainy day or £5K loft conversion.

I have a £20k inheritance on the way and it all has to go to debt repayment

thanks for your replies, no other debts. I had thought if i paid the car loan off, that would free the £120 every 4 week pay period to add to mortgage overpay, and then use the rest for loft conversion. Hope t do it for that, as its an easy loft , with no trusses, so "simply" insulation , electrics, board walls, heating from below come up, and then flooring, bet thats more than £5K!

You could pay off you loan, work out how much extra you would need to convert the loft, then ask you lender if they would give you a 'top up' for the amount you need.

You wouldn't have to borrow it over the same period of time as your current mortgage so you could ask them how long it would take to pay the amount off paying £120 a month (or less)...it would depend what the minimum is that they would lend, but it could be at a lower rate than 9%

Or you could work out how much you need for the loft and then put pay your £90 overpayment into a savings account along with the £120 that you have been paying for your car...it might not take that long to save the bit extra that you need. Once the loft is finished you could go back to paying the £90 onto your mortgage account.

I'd pay the loan off first.

Is there a proper staircase up to the loft already? If not you need to put one in and thats expensive.

We looked at a house when we were moving that they'd doen a DIY loft conversion. It couldn't be advertised as a 4th bedroom as it didn't meet building regs. I think they used it as an office.

£5K for a loft conversion, really? All the ones I have heard about seem to cost £20K minimum?

I'd pay the loan off and put the rest in the highest interest account you can find, while you get three proper estimates of the loft conversion work.

Loft coversion not that simple. Depending on the layout below, stairs/access etc you may need to put in different walls etc below, especially if they are only plaster board. Also how are you planning to get light into the loft space?