Small inheritance, best use of it ?

[babyboo1and2]

We have inherited £10,000 and are not sure How to best use it. We don't have any debts or loans except for our £85,000 mortgage. We were thinking of doing some work to the house over the next year or so and this would amount to £7000 (using 0% credit card that we pay off before end of term) Should we use this money to pay for the work or would we be better off paying off a chunk of the mortgage (currently have 2.5% variable repayment mortgage). We have around £2000 in savings. Have never been in this position and really want to get the best from the money. Thanks

will the work increase the value of the house? how much is current mortgage Vs value of the house? Do you have DCs?

I'd be tempted to do the work, therefore hopefully increasing the value and possibly making your house more of a joy to live in. I'd then pop some money away for DCs if applicable and spend a thou on something immediate and lovely that has resonance with your departed ..and buy a tree for the garden, presuming you have one, so you have a reminder of them (... and you see your current home as a forever home.

Congrats!
Check if you have a flexible mortgage, whereby you can pay down the 10k now so that your mortgage balance is 75k, and then pay for the works by extending the mortgage again later on. Paying the mortgage down is tax-efficient.

The work won't really add value but will make the house more lovely for us as its been some years since we have been in a position to spend anything on the house. Two children here and have no plans to move but you never know. The house is probably worth about £250,000 max. Is there a way of working out how many months/years it would take off our mortgage ?Thanks so much for the idea of something for the garden, we are going to make a donation to the hospice who helped our family but having a living reminder at home is such a lovely idea especially as she loved nature.

Bump

There's a good mortgage calculator on money saving expert. It will tell you have many years you have took off you mortgage and the amount of interest saved.

I was in exactly this position last year with a relatively small, low SVR mortgage outstanding on the property, some spare cash and a plan for home improvements. I opted to keep the low SVR mortgage because it's dirt cheap and no-one is offering 2.5% today. I took on new borrowing for the improvements in the form of a 3.9% mortgage - reasoning being that I will realise the value of them if/when I sell the house. I then put most of the cash in some long and short-term investments as 'rainy day' money.

How long could your family exist on your £2000 savings if there was a job loss or similar crisis?

Thanks for the money saving expert info, I put the figures in and it knocks off 2 years of payments. I thought it would do more than that as i remember past mn threads suggesting it saves so much interest.

Our jobs are very secure and we have insurance for sickness redundancy etc but do realise £2000 isn't much in the form of saving. Just worried it would slowly get eaten away.

If you're worried about chipping at it, there are some reasonably good fixed rate deals if you're prepared to tie your cash up for a year or more at a time. Google 'Best fixed term ISAs' for example and there are tables. You're discouraged from taking out your money before the term is up through penalties but, if you need it in a hurry, you still have the option.

I would use it to pay for the home improvements. You could always take the 0% loan, put the money in an easy access savings account and make the monthly repayments from this so earning a small amount of interest. Or put the max amount in an isa for a year, then cashing in to pay for home imrovements.
Stay debt free either way. Blow £500 and put the remainder in your savings.

Make sure your savings cover at least 2 months living expenses and put this in an ISA or high (!) interest savings account. Pay any remainder off the mortgage and pay for the home improvements using a 0% credit card (as you have already noted you can afford to pay this off during the 0% period).
It is worth checking with your lender if 1) you will incur charges by making such a big overpayment 2) you can borrow back the overpayment if you need to - obviously either of those being a yes changes the best course of action.