What to do with £100k savings?

[IVFNewbie]

So, we have some decent savings by being very frugal. We have around £230k mortgage still to pay. Would you just remortgage and whack it all into reducing the mortgage payments? I confess I am awful with money and never know what's best.We are currently overpaying the mortgage at £1000 a month. We are only allowed to pay 10% of the mortgage off every year so we would have to wait for our current deal to expire or start a new one.

Well done on your savings, that's an amazing amount to accrue - is that on top of the £1000 a month overpayment? Very impressive!

As to what to do with it, I think with that amount of money to spend you'd be justified in paying for some proper professional independent financial advice. The best thing to do depends on a number of personal circumstances - you don't have to answer these questions here but an IFA will ask/take into account - the ages of you and your partner and your pension situation, whether you have the option to make additional voluntary contributions to your pension schemes and the value of these, whether you have already maxed out your ISA allowances, the current interest rate on your mortgage and how long you have left on the fixed term deal (and bear in mind that the possibility of recession over the next few years may mean it's harder to get a good mortgage deal if you are trying to remortgage in the next few years), whether you have any children and their ages, whether you want to earmark or start a fund for their benefit, and finally your risk/reward appetite, ie are you prepared to risk losing some of the money to earn more, or do you want to take the safest possible route.

All other things being equal, if it was me personally I would probably leave a good chunk in an easily accessible account as a rainy day fund, the equivalent probably of 6 months income for you and your partner (to cover eventualities such as job loss, severe illness, urgent house repairs etc), would pay a substantial chunk off the mortgage, and then invest the remainder in a mix of ISAs, pension fund and managed investment fund that matches your level of risk appetite - personally (well pre-Covid anyway) my investments have always outperformed the money I would save by putting the equivalent amount into paying off the mortgage early, but I have a medium-high risk appetite so this wouldn't be the case for everyone. So there might well be a good argument depending on your mortgage rate to simply focus for the time being on paying off your mortgage and then starting to build other investments with the money you save on the mortgage further down the line.

Perhaps also if the £100k mark is a milestone, now is the time to 'treat' yourself and your DH/DP a little? I'm not talking about frittering away the lot on crap, and I too am a real saver rather than spender so struggle with this, but allowing yourself to live a little on the odd occasion can be what keeps you on the saving path for the next 10 years, so perhaps book a holiday or do that home improvement work you've always wanted or buy yourself that 'luxury' item you've been craving? You do deserve it after all those years frugality!

Right now? NS&I, various products to the max. It's safe and accessible.

Depends on so many factors.
Do you have accessible savings for an emergency fund? I’d suggest setting aside 3-6 months of your core monthly expenditure for that. I use premium bonds for mine. But as long as can access easily is the main thing. Given interest rates are very low don’t expect a great return.

Generally advise is normally to pay of the debt as that is costing you and rates on mortgage will be higher than you’d get on savings. So if your making the 10% overpayments monthly you could put aside funds to repay a lump sum at the end of the fixed rate. Having a a lower loan to value may help get a better deal when you remortgage.

However, before doing that think about what your plans are for the next 2-5 years. Is there anything you may need money for like building work or renovations on the house? New car? Moving house? Future university fees for children? If there is possible large purchases in the future then set aside funds for that and again possibly look at cash based products. ISAs and NS&I are good starting points.

Finally if you don’t need access to the money for the next 5+ years then think about investing. This is where a professional should help to suggest investment funds that fit your risk appetite and investment time horizon. You can find investments that make use of the ISA allowance and stock markets having dropped means now could be a good time to put money in. Just have to remember it should be seen as at least 5-7 year investment, ideally longer. So markets could go down more. It doesn’t matter you’ve not lost money as long as they are up by the time you cash in.

Hope that helps.

Pay it off your mortgage.
Interest rates can only go up, and in the current climate I'm sure they'll rocket, soon.

I don't think interest rates are going anywhere for a very long time.

There's a lot of debt out there and the economy was being propped up by low interest rates even before coronavirus.

When does your mortgage deal expire OP, what is the rate and is the early repayment charge?

There are some really good remortgage deals right now and it might be worth paying a penalty to get a better rate and paying some or all of your £100k off at the same time - if you have plenty of slack in your budget, you should be able to build up an emergency fund again quickly.

MSE has a calculator to help you work out if it's worth doing this.

www.moneysavingexpert.com/mortgages/fixed-mortgage-calculator/

Otherwise, if your interest rate is already really low, eg under 1 %, you could gamble the interest saving by buying £50k each worth of premium bonds, which should get you close to the stated average payout, which is currently 1.4%, so you might even profit a little on the deal. This is assuming that there are indeed 2 of you, and you don't currently have any premium bonds.

What did you do with £95k savings? How did you feel about that?

It's such an individual thing in terms of attitude to risk, age of kids, closeness to retirement etc.

In fact your posts are so vague there's no way any opinions we give can hold any relevance really.

thanks all! Lots of food for thought. I really appreciate the time and input you have given. There are no kids involved and we're about 20 odd years from retirement.

You need to really bulk up your emergency savings first. If you can't stand a year without an income in this economy, you don't have enough saved. Then the rest can go into the mortgage. Once the mortgage is paid then pay the same into your pension

What about putting £100k into a pension?

You are in a very fortunate position, I also think mortgage rates are likely to stay low. However relative food shortages may cause some inflation and increased day to day costs. Agree a good buffer against job losses a must at this uncertain time.
I think your best bet is to consult a certified financial planner (this is different to a financial advisor) their focus is on looking at your position now vs where you would like to be in terms of retirement age and income, travel plans etc

Just at the moment I'd keep it as ready cash and split it into two, keep it in different banks so you'd be covered by the govt's guarantee to cover up to £85k if a bank goes down.

Over paying your mortgage is no use if you then find you can't pay the monthly payments because you lose your jobs. Things are uncertain at the moment, so I'd wait a few months and see what happens.

have you got any pension savings? If not you need to address that, as inflation is much higher than savings rates (has been for a decade) and is going to rocket.

now is a good time to invest in the stock market but it must be for the long term.

you need at least six months expenses in an accessible account. Best rate at the moment is a pitiful 1.2%. Inflation is triple that in reality.

no-one is 'awful' with money, you just need to take advice and do some reading.

What about putting £100k into a pension

Unless you earn £100k that would need to happen over a few years. Other than that it’s a great way to make that money instantly grow.

Buy to let or property abroad? You sound good at saving , save the rent money for a pension , and you've still got the asset if you need to sell in the future.

it is funny that anti-landlord MN always suggests BTL as a good home for money. £100k won't buy much and with the new regulations coming in England it is a really risky investment. Most single property landlords will be getting out, which is of course the idea.

If you can't stand a year without an income in this economy, you don't have enough saved.

What actual planet are you on?! That's one of the most jaw-droppingly unrealistic things I've ever read on here.

"You need to really bulk up your emergency savings first. If you can't stand a year without an income in this economy, you don't have enough saved."

Do you deliberately post to sound like a dick?

Meanwhile, back in the real world

OP, I would keep a good chunk aside for emergencies then pay the rest on the mortgage. What I woukd then save on payments and overpayments would top up my pension.

Do you deliberately post to sound like a dick?

When you have £100k to hand you would be a fool to not form a year’s emergency fund in this economy. Six months bare minimum. You do realise what’s going on out there right? If I sound like a dick, you sound like a flamingo with her head in the sand.

What actual planet are you on?! That's one of the most jaw-droppingly unrealistic things I've ever read on here.

How is it unrealistic to put away enough to survive for a year when OP has £100k to hand? Pensions are great but they won’t be bailing you out in 6 months when your job has gone down the swanny. Of that £100k, put enough aside for emergencies, it’s hardly rocket science dear.

Dave Ramsey would suggest, in order:

£1k emergency
Pay of any debt (not mortgage)
Save 6 months' emergency savings

When those are done, do the following simultaneously:
15% income to retirement savings
Save for kids' college (irrelevant here)
Pay off mortgage

So keep 6 months back for emergencies, or 12 if you're cautious. Pay the rest off your mortgage.

Good luck and well done!

I think I'd look at buying a bigger/better house unless you are perfectly happy with the house you've got. If prices fall it would be a good time to upgrade. Money in the bank is a dead duck IMHO. But if your jobs are not secure it's a different thing.

How is it unrealistic to put away enough to survive for a year when OP has £100k to hand? Pensions are great but they won’t be bailing you out in 6 months when your job has gone down the swanny. Of that £100k, put enough aside for emergencies, it’s hardly rocket science dear.

In the OP's case, sure, she is in the lucky position to do that. But your earlier post made it sound as though everyone should have this much put away. In the real world (just letting you know in case you don't get a chance to visit), many/most of us don't have the disposable income to do that, dear. (Patronising much, BTW?)