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Not sure what to do with a big windfall - can you help?

50 replies

crossedfingers · 22/11/2005 15:32

Not to spend it
We have had a long term financial committment which finally is coming to fruition and in the first quarter of next year dh and I will hopefully have £200k.
We have a £100k mortgage a fairly modest house 3 bed semi in dire need of decorating and 2 second hand cars, comfortable by some standards not so well off by others, pretty mediocre really!
We haven't discussed what we will do with the money and my head is spinning at the thought. I would like dh to get a really fantastic car as that really means alot to him, he loves his toys and has been working his b&&ks off for the past couple of years. I don't know what would be the best scenario with the rest of the cash - I have a feeling that dh will want to spend the other £100k on a house with a view to renting it out, I am not so keen
I'd be interested to hear what you would do to get another perspective on our situation. Would you pay off your mortgage with some left to spare, or put the money towards a really fabtastic house that you always thought was beyond your reach and then carry on as before?

I hope you will appreciate I have changed my name for privacy reasons.

OP posts:
Mercy · 22/11/2005 20:41

tbh if you have this amount of money coming your way I think you can afford independent financial advice

crossedfingers · 22/11/2005 20:47

Oh for goodness sake I know that. Perhaps I want an opinion not from a grey suit. Is that ok with you Mercy?
Go back to talking about your green tea perfume

OP posts:
Mercy · 22/11/2005 21:17

there's no need to be so condescending

notasheep · 22/11/2005 21:52

HI crossedfingers,pay off the mortgage,the freedom feels so good,invest £30,000 in premium bonds(income is tax free and return can be way above interest rate) and have some fun!!!
Or purchase second property and rent out for income?
I have had experience with some of above!

Linnet · 22/11/2005 22:12

If I had a mortgage I would pay it off. I'd put some money away for the children, maybe buy a car and have a holiday. And if there was some left over I'd maybe buy a small house or a flat with a view to renting it out.

Or maybe Dh and I would give up work, take dd1 out of school and go travelling the world for a year.

grumpyfrumpy · 23/11/2005 14:22

This reply has been deleted

Message withdrawn at poster's request.

finefatmama · 24/11/2005 21:54

If I had a mortgage, I wont bother paying it all off. It has tax advantages. A bigger house will cost you more and bring you no income. a new car will lose value (minimu 17.5% vat) once you leave the showroom. fuel and insurance costs are high. with a new house, you will pay 3% stamp duty, a lot more council tax esp with olympic coming to london. More utility bills, higher insurance costs. and the money dwindles as it is being spent.

Try to invest in property(Do not invest more than 20% of your own money in any single property and interest only mortgage),gilts and trust funds. your property doesnt have to be managed by you. Well invested, you can generate regular income of up to 3,000 per month (after mortgage payments) in a couple of years to pay off your current mortgage and other expenses whilst still having the original amount intact and working hard.

notasheep · 24/11/2005 22:02

finefatmama,how about some fun,all sounds very sensible!

starlover · 24/11/2005 22:04

finefatmama sounds like she knows what she is talkinga bout!

it may not sound like "fun"... but think about it... would you rather splash out on a load of new stuff, or have a regular HUGE income each moneth forever?

i know what i'd choose!

notasheep · 24/11/2005 22:07

I did put an earlier sensible message on here too!

aloha · 24/11/2005 22:34

We bought a bigger house in an area we liked, right next to a school we wanted ds to go to and had a smaller mortgage - the arrival of dd and my working at home meant we needed at least one more room and we got one and a half really. Also paid off a car loan and some credit card debts and funded my extended maternity leave. We have a small lump sum left -were planning to convert the loft but think it isn't quite enough. I would like to buy a flat to let out and am pushing dh to talk to the mortgage broker about it. Otherwise we will add to it to do the loft in a year or so.

aloha · 24/11/2005 22:36

Gosh! How do you make 3K a month?

soapbox · 24/11/2005 22:38

There are no tax advantages to having a mortgage on your principle private residence. There are however advantages to having one on your rented properties as the mortgage interest is allowable for tax purposes.

aloha · 24/11/2005 22:39

Definitely don't buy a new car. Most of the value drops off as you drive it out of the showroom. Buy one a year old instead.

MrsSpoon · 24/11/2005 22:43

I could give you my Paypal account details and you could send it to me?

I would probably pay off our mortgage and any debts, then I'd be tempted to buy a holiday home abroad which could be let out the weeks I wasn't there.

Nice decision to have to make. All the best.

expatinscotland · 24/11/2005 22:44

Snap, MrsSpoon! I was thinking the same thing!

starlover · 24/11/2005 22:45

agreee... dp bought one almost new for £10k about 3 years ago... it is now worth around £3k

finefatmama · 24/11/2005 23:13

WRONG soapbox.

if you plan to leave your ppr to anyone, they would pay inheritance tax after the 250k allowance at the rate of 40%. if you still had a repayment mortgage, then the mortgage outstanding would be used to offset the value of the house first and only the equity will be considered.

eg house valued at 350k and no other assets, iht is (350-250)*40%= 40k tax if no mortgage.

if 90k mortgage outstanding (350-90-250)x 40%= 4k
payable in 6 months from date of death or thereabout.

endowment mortgages do not apply though. if the 90k was in the proper trust fund (always seek professional advice this doesnt qualify), it would be exempt for iht purposes. then again if you spent it, there would be nothing to tax so enjoy! Most people end up getting loans to pay inheritance tax because in most cases you pay the tax first before you have full access to the property. DH has had a few dealing with such people. He has joint venture with some guys where the do the sale and rent back.

Blondeinlondon · 24/11/2005 23:13

I would pay off the mortgage

finefatmama · 24/11/2005 23:14

and whoever inherits will have to find the 40K to pay the tax.

soapbox · 24/11/2005 23:17

Erm - not really!

It is your total assets that are taken into consideration for the purposes of IHT!

So if you have a whacking great mortgage on your proporty and a huge bank balance then your liability to IHT on the net estate will be the same!

So if Crossed fingers has £250k no matter how she deploys those assets then she will pay IHT on them if her total estate exceeds the IHT threshold!

The only way to mitigage IHT (short of complex trusts) is to gift money to people and hope that you live longer than 7 years!

finefatmama · 24/11/2005 23:41

to make 3k? trade secret but the summary is : get property worth 100,000 for 90,000, 15%deposit to value and other cost will be about 7000, good 85% buy to let mortgage, insurance and other monthly costs will be about 410 per month. rent each room at 70per week per room (assuming three bedroom house) is 910 per month (net 500).

buy six such properties (HMO rules apply) with 42000 - 45000 and make 3000 net monthly.
Its hard work sourcing the right property but there are people out there who charge a finders fee to get the right profile.

I am just simplifying. its more than that but thats possible and i have met people who do it. I even had to go to greater manchester myself to confirm that 50k properties still exist.

pls do not jump into multiple property investment without doing research. I have mett more distressed landlords than i have met successful ones. in fact the amateur distressed landlords are usually so hard pressed to sell that, they reduce asking prices by ridiculous margins.

finefatmama · 24/11/2005 23:53

Allow me to emphasise that i am not selling any products or services. My research on gaining financial independence has led me to some well known businessmen and thier tactics. It is so amazing.

soapbox, sorry, i meant in my illustration assuming no other assets are owned.

if you didnt pay off the mortgage and started a company to own or manage the property portfolio for example, then it can be deferred. I believe I did mention the trust fund being a good tax avoidance vehicle.

But i hear we parents dont plan to leave stuff for our kids these days anyway so it doesnt matter.

slug · 25/11/2005 10:33

feels great dosen't it. We came into some money a few years ago (not as much as you) and after much debate, decided to pay off the mortgage with it. I cannot tell you how liberating that is. The upshot of it was that dh could give up the job that was making him depressed and become a full time dad.

Don't make any immediate decisions (we took a year to fully work out what to do with the money), spend a little on some luxury in the short term, then decide what will make you really happy.

finefatmama · 26/11/2005 21:57

went to bed and kept dreaming Ebenezer Scrooge died and left me all his money. Oh! the joys.

And then i woke up. Oh! the PAIN.

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