What would you do with £50000 inheritance?

[Bellavinci]

What would you do with £50000 inheritance?
My husband will inherit £50000 next year and we are trying to decide how best to invest it and not let it fritter away.

We are both 40 years old and not property owners (we currently rent a house that my mum owns).
We have two children aged 2.5yrs and 6 months and don't plan on having anymore.
My husband is just starting a new job with Royal mail and I currently work for a University (part-time since having kids) but am on maternity leave. I have just finished upskilling and qualified as a Personal trainer, Nutritional Therapist and pre/postnatal exercise specialist. I plan to start a self-employed business in this field within the next 6 months (alongside my paid PT job if we stay in the City).

We live hand-to-mouth at the moment and have £20000 of debt. With our current debt, low salaries and bad credit ratings we would find it hard to get a good mortgage rate and cannot afford a property in our current city where friends and my mum are based unless we increase our income. We are open to the idea of relocating, if it means we can afford to buy a property and have family in Bath, Bristol and Corby.

My mum owns two properties and has mentioned selling one to release early inheritance for me and my siblings, which would add to our cash pot but that is not a definite yet.

What should we do with the money to best improve our current situation and future prospects?
We don't trust ourselves to just sit on the money and save it as it would likely get sucked up into monthly living so we want to invest it as soon as possible.

Should we:

1. Clear debt first then try and get a mortgage using the rest as a deposit?
2. Use it all towards a mortgage (relocating to a more affordable area as soon as we can).
3. Purchase a property outright (in a more affordable part of the country) and rent it out in the hope of gaining a small income.
4. Clear debt then purchase a holiday home (chalet/lodge) and rent it out in the hope of gaining a small income.

If the latter two options would work then we would hopefully save the income towards a mortgage (option 4) or pay off the debt sooner (option 3).

Any advice or suggestions would be much appreciated. Thank you in advance.

Clear your debt first.

Then start living within your means.

What is your debt?

If not too bad then deposit on house.

Either 1 or 2, but you need to walk through Both options in detail with an independent financial advisor.

Definitely clear debt first, the payments you’re making on that will impact on your affordability assessment if you do try to get a mortgage. Plus the interest rate on your debts is likely higher than a mortgage interest rate as well.
Additionally, if you are looking to become property owners, now is an ideal time to do it if you’ll need a standard 25 year mortgage, as lenders do not usually allow the term to extend past retirement age.

I personally wouldn't bother buying anything to rent out whilst you still have debts and pay rent yourself. Not worth the hassle.

Clear debt then look to buy a house for your family.

I think I would do 1).

I would do 1 too

Clear the debt, which should mean an immediate improvement in your monthly income/expenditure as no longer servicing the interest or repayments. And an improvement in your credit ratings in due course.

Park the remaining £30,000 in Premium Bonds as a short to medium term home while you think about your longer term goals and objectives and put together a more detailed plan about how you are going to achieve them and the realistic numbers involved. May not earn much in PBs but as it takes a few days to get the money out again it's less likely to get frittered than if it's just held in an easy access savings account/bank account.

Not a good idea to buy property "in the hope of a small income". Doesn't sound like you could cope with the additional costs involved nor the risk of losses.

Don't do anything "in hope".
Clearing debts is most likely to be the biggest money saver for you.
But more importantly than deciding what to do with the money - change your attitude!

For as long as you can't trust yourself not to "dip into" this money, you will always struggle.

How about you don't rush to move it out of reach, and learn not to spend it because it's there?

Option 1

3 and 4 shouldnt really be considered unless you can afford to cover repairs and empty patches. An i dontvthink the amount you have us likely yo buy something which will rent well.

Clear the debt. Try and save 80% of what you were paying in debt repayments each month (so say your repayments were 200, put 160 into a savings account, and use the remaining 40 to stop you needing to dip into it.)

If you dont trust yourself not to dip into the remaining 30,000 you need to put it in an account where it is hard to access!

Clear debt. Put rest into an account that you cannot access easily. Keep it for a year at least to allow rest of finances to recover.
Under no circs dabble in property to rent out. You need contingency funds to do that.
After the year the pic with regards to your mum will clearer and you can make a sensible decision then.

Open a separate account for the 50k so its harder to lose.

How much are you paying on your debt each month in total?

I would pay off the debt then look at how much of that repayment can be saved - direct debit into the inheritance account. Obviously make sure you can cover all day to day costs first then save the rest so its like recycling the money.

Does your business need any cash investment that is currently on credit? Cover that wit the 50k too and again set up a direct debit to pay back as you would have done if it was a bank loan.

You'll struggle to buy much with the say 25k left so would put it towards a mortgage or lock it into a savings account you cant access for 5 years

Clear debt. Start saving. Work out a budget.

Rental property can easily be a money pit.

When i say you cant access ours is in a building society account only accessible by pass book and we live 120 miles from the nearest branch

Pay off the debt and like another poster said put the £30k in a separate account where you wont fritter it until you decide what to do. I would second premium bonds, just for the short term chance you could win something!

I would not recommend purchasing a property to rent unless you have the spare funds available for maintenance and to cover expenses during void periods. Buying a property outright for £50k will not generate much of an income once costs have been factored in.

In your circumstances I would use the remaining £30k for a house deposit,

I agree with everyone, get rid of the debt and use the rest for a deposit.

I would buy a small flat to rent out and use that extra income to pay off the debt. It's also an investment so a win win?

I’d potentially go against the tide of opinion here - it depends on your income and how much you’d expect to spend on buying a house.

When we first looked to buy a flat, we had a good income and could afford fairly big mortgage payments (especially compared to what we were paying to rent) but had a small deposit that limited how much we could borrow. Even though we also had a fair chunk of debt (thanks to me) it made more sense for us to put the cash into the deposit and keep paying the credit card debt off more slowly, even though having the debt obviously affected our affordability calculations.

I’d talk to some banks or look at online calculators to see how much you could borrow with different deposits before you make a decision either way.

It does feel nice when that kind of debt is gone though

No. 1 defo.
You won’t get a mortgage with that much debt

1. pay off debt-tbf it would be stupid not to.
2. invest the rest-you will have to wait for your credit score to go back up and there is no point in leaving it in a savings account.

Pay off the debt. Use the rest as deposit or funds for a home.

I agree with everyone else.

DONT buy anything to rent out.

DONT use it to subsidise your business plans.

These are too risky and you need more money, experience and expertise than you have.

You have done the right thing to get advice about what to do, so continue being careful. This is such a good chance for you to get onto the property ladder.

I would clear the debt. Property is risky at the moment with big changes going on for the whole country. It also has a lot of costs attached. Rest in an ISA?

Pay off your debts!