Inheriting £50k... WWYD?

[MamaFrey29]

Inheriting £50k. What would you do with the money?

We had similar to this (smaller sum) about 8 years ago. We used it to extend our house and put in a new kitchen. We then sold the house and made the same again which enabled us to move and have space for another dc.

If this happened to us tomorrow I think we would use it to ensure we had no outstanding small debts and then put it in Premium Bonds to gradually pay extra off the mortgage without penalty.

The current situation has exposed vulnerabilities in our finances that I didn't really worry about before. As a key worker I'm not worried for my income right now but seeing friends and relatives go from comfortable to really worried almost overnight has shown me that we should build up bigger buffers and rein our spending in.

No decent savings accounts unfortunately

Pay off the mortgage. Use what's left over to buy a new car, get someone in to decorate the rooms that need done, and get a new porch built.

Why put money into premium bonds when you can guarantee a better return with a fixed rate savings account? Makes no sense to me.

If it was me OP, I'd put the money into a savings account and then put an amount from it into an equity ISA every month.

Take 40k off the mortgage
3K for a holiday once travel is permitted again
7k home improvement - new stair carpet, bedroom carpet, redecorate spare bedroom etc

That would clear my mortgage and leave a few thousand left over. I'd do that and have a holiday.

If you are investing I'd definitely go for property over anything else. I've never regretted my rental apartment, even though I've currently stopped taking payments for the time being. My tenants are reliable and look after the place so I don't want them to move out.

Hang onto it for now and put on best low risk interest rate that you can get. Due to Coronavirus property markets will likely fall, so look for A rated investments. Worst thing imho would be to buy a property to rent and the tenants can’t pay.

You already have an investment property so you know the gains and pitfalls of that, so why not buy another one if you are in an area where you can get something for that amount. Can't in my area, even a garage is more than £50k.

Premium bonds is a temporary storage place in times of trouble. Once the pandemic has an end in sight then the money can be put to better use.
We are in uncharted territory, we have not yet had another Northern Rock but could it happen? Interest rates from banks is being slashed, many accounts are lowering rate from early May.

Returns on cash is below inflation so it loses money - be it in premium bonds, in a bank, or under your bed.
Ideally you want to invest it in something that will go up in value over the next decade or several decades and from which you can draw an income... rental property has been good for that but will it continue to be, no one knows.
Investing it all on the stock market (FTSE Global All Cap for example) may well give a return over a few decades. Whatever investment is done there is risk.
Without risk there is usually no reward. So the OP needs to consider what risk they are prepared to take and how much work they want to do - investment properties are not passive income, someone has to do maintenance, get new tenants, collect rent etc.

I wouldn't buy a property for 50k. I'd buy so where for around £200-250,000. The tenants pay the mortgage off and when I sell in 20 years, I'll have £250,000+.

Retirement planning.

I was thinking a 2bed flat for £250,000 ish.

Can't get anything for £50k near me!

Buy an investment property for £200k with £50k as deposit. So you would take on debt, even though you are debt free now?

Using leverage in a market going up can pay off.

Using leverage in a market going down is madness.

At the moment the housing market is doing what? Nothing it seems... so it may go up or down or stay about the same.

Will mortgage lenders lend with a 25% deposit on a BTL? They might but they may be more cautious in the coming months/year.

Or wait till it's rock bottom and buy?

We have a £20k extension we'd like to do that we will only do if we get an inheritance so we'd do that, £5k for other home improvements we'd like to do and £25k on the mortgage. I'd probably wait a few months at this stage though to make sure my job is still secure!

I have had premium bonds (not many between £2-5k) for 3 years now and averaged 1.6% 'interest' e.g. winnings over those 3 years. I'm hoping that will increase when I have nearly the max in there. At the minute the best savings account interest is around 1.3% with many being slashed, so for me premium bonds are a very good option as I will potentially be buying my first house in the next 1-2 years so can't use a fixed bond.

I'd use it to move nearer to my family. I need £30-50k to move back. And would use any left over for reno.

If I didn't move then I would save the 50k in trust for my 2dds. Either government backed bonds or premium bonds. I wouldn't dabble with the stock market following the recent losses as they may need the money in the mid term and so I need to hold the money in a low risk way.

If I was op, I would do exactly what you said, get a btl and have the btl paid off in 25 years and then have that money at my disposal. Property over the long term is a winner.

Buying property could be a good investment, sadly it's going to very much be a buyers market, with a possible 30% dip in the price of real estate

Put a deposit down on a house.

Premium bonds

2 story side extension and extend the kitchen out

It's a 235 k house, mum is selling her shared ownership flat too. It's a five bedroom high standard house

The current situation makes property a very risky investment. The longer this situation continues, the more jobs will be lost. Very little of all this announced government help has actually materialised.
You may not be able to get the house paid off by your tenants, especially with an interest only mortgage.
On the other hand things could go back to ‘normal’ in three months time and you could have yourself a bargain.
I doubt it though.

Same position here... we have massive mortgage though (275k on our residential home, & £170k from equity release on our old home). In our late 30s, I was job hunting so worried about my employment prospects now, although DH’s job as a doctor is secure. We are thinking some necessary house repairs & paying down a bit of the higher rate mortgage.

Agree that property right now is very very risky. If prices drop after you buy, that £50k could literally disappear into thin air. Although if you can keep reliable paying tenants in the property, it could still pay off in the long term.

Definitely park it in premium bonds for now if you don't have any. Until the payout rate drops, it's probably the best investment you could make with zero risk where you can get the money back quickly.

I'd also be very cautious about bonds, which is generally lending money to companies. If those companies go bust, your money is lost. And it's likely that more companies will go bust over the next couple of years. But it's probably possible to spread the risk by investing in 'bond funds' but I don't know anything about those.

The other question I'd ask is how secure is your income and do you/your partner 'have' to work? If your secure financial position is based on one or both of you staying in a well paid job, think about how long your savings and investments would last if you lost your job and couldn't find another one quickly or had to take a lower paid job.

If you have a high income, high cost lifestyle, it could all come undone very quickly if you lose your income and can't find a similarly well paid job. You wouldn't want to put all your money into property if you need it back in the short term when prices could be lower.

I'd spend a chunk, maybe 10k on a really amazing family holiday then pay the rest of the mortgage.