Sizable inheritance- how to invest?

[gutzgutz]

I've recently been very lucky to receive a sizable sum of money. I'm going to use the bulk of it to pay down our mortgage and plan to put the maximum I can in a new tax ISA and top up my existing one. 3 questions if anyone can assist please:

1. Should I pay off our mortgage completely or will this make it harder to get a new one as my credit score won't show up (or something). We plan to move to a bigger house in the next year and will need to take out/ increase our mortgage when we do;

1. What to do with the remaining money given we don't want to tie it up long term? Approx £40,000. Is a cash ISA best or can someone suggest a better vehicle; and

1. Is it worth paying an IFA to get some professional advice given that again we don't wish to tie the money up due to wanting to move house? I tend to think I can find out what I want to know on the Internet. Arrogant or naive view?

Thank you for your thoughts.

Can't give you any professional advice I'm afraid, but I swear by Premium Bonds. Generally get a better return than if you invested in an interest paying account, plus the top prize each month is £1million (so you might not need another mortgage . You can withdraw pretty much instantly, and also via online so no need to post off a form and wait for a cheque to arrive.

ISA allowance rises to £11700 per person in July
pay down ALL debt
fill up yours and DH's ISAs
premium bond return is under 1% at the moment
terms deposits with building societies are good

I've been in a similar situation. I did the following

• pay off all debt
• put max possible in ISAs. Some in cash, some in low-cost tracker funds if you are investing for more than 5 yrs.
• made a long term plan with financial adviser.

IFAs used to work on commission, meaning they would sell you the thing with most commission, not the one that was best for you. now they are not allowed to take commission, but the up-front costs to you are much higher. So make sure you have an IFA who really works for you. Mine did a good review of everything going on in my life (current investments, house, pension, school fees etc) and then made an overall plan.

If you do want to go it alone (I did for a few years, until the sums I was investing got too big), then that can work fine. I recommend basic, low cost tracker funds rather than anything clever. A tracker that follows the FTSE-100 with a 0.25% annual charge is a far better bet than a fancy investment trust with a 2% annual charge. The fund has to do 8 times better to beat the basic tracker, and that is almost impossible.

You can buy tracker funds and ETFs though various online platforms like Selftrade and www.hl.co.uk/shares/share-dealing, and it is pretty cheap & easy now.

One key thing to watch is the annual charges. 1% or 2% sounds low, but if your fund is making 7% per year and then 2% of that goes in annual charges, then you are making a LOT less. IFAs and many funds hide away info about things like annual charges because that is how they make money.

And finally, all my advice is based just on my own luck and reading of stuff online - it has worked so far, but do take all financial advice with a large pinch of salt.

A bit off the wall but since you will be mortgage free you could buy a small flat somewhere nice on a BTL mortgage. If you get one which allows for holiday lets you should earn enough to cover your costs, though perhaps not enough to cover the mortgage.

We've done this near my elderly mums. We have been lucky in that there is a good year-round rental market as well, so the pattern is holiday lets in the summer and an assured shorthold through the winter. Plus we get a holiday home and get to visit my mother. And in time the mortgage will be paid off giving us effectively a pension. If things get more difficult, and we have to spend more time with her, we will have a base.

Thanks all, some interesting things to consider. Realise how fortunate I a to be in this position

Hello

Suggest pay debts first, some mortgages let you overpay each month, so you pay less interest over the years

Pay all loans, debts

From 1 July 2014 ISA changes to £15000 each person in UK

Pay into a pension, If you work, your company may also pay extra money into your pension

I you buy a buy to let property you will have to pay capital gains tax on profits, may be better buying shares in property instead ?

Look at www.moneysavingexpert.com

If in UK Santander 123 account pays 3% up to £20,000 minus tax

goodluck !

Hello

Max £30,000 premium bonds
If you win it is tax free
Your money stays in pbonds, but you can have the money back at any time

HTH

Premium bonds max has or is going up to 50k.
I've found I've had a good return on mine and certainly better than bank interest rate.

I don['t think it damages your chances of a mortgage on the new house if you totally pay off the loan on this one. I would use it all to pay off the mortgage. If there is any over just keep it in savings until you move house and use it for that.

Premium bonds in the last year or two have halved the numbers of prizes I think and they are less attractive to investors than they were.

...but given there are no savings accounts or even current accounts that meet real inflation, it may be worth a try!

Yes, certainly. In my view interest on most savings accounts is so low you might as well put the money under the bed. At the very least I advise using every spare penny to pay back debt.

I would open a cash ISA to the maximum allowance, look for the best rate around. £15,000 allowance from 1st July
Have a Santander account up to £20,000 at 3%
The remainder I would invest in premium bonds as interest rates are so low everywhere.

We paid off mortgage and bought a house for cash, they are cheap up here.
We rent it out and treat it as a long term investment, it has increased by 15k in a year and is only a 2 bed terrace.

You need to check if there are any penalties for paying off your mortgage early. Also, if you are looking at increasing your mortgage in the near future it may not be in your best interests to pay off all your mortgage now as you would be looking at a new mortgage rather than increasing your current mortgage.

Watch out for the mortgage. Due to new regulations which came into effect in April we are now only able to get a much smaller/insignificant mortage because of paying school fees. The mortgage company only took into account our out goings and completely ignored significant savings. Moving house is no longer an option for us.