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Original poster

WWYD in my situation if you came into £120k?

42 replies

WWYD12345 · 24/05/2021 22:08

Married with one DC
DH and I are 29-32
Mortgage with 20 years left and £230k to go (£100k equity)
Own one car outright
PCP on another car with payment of £10k needed in 18 months to keep it
Circa £5k in savings
I pay into a defined benefit pension
DH pays into a defined contribution pension
I have student loan of about £18k, pre 2012 version

Is paying a chunk off the mortgage, putting money aside to buy the second car outright and then putting a chunk in savings a sensible plan?

Would anyone do much different?

OP posts:

InsideNumberNine · 24/05/2021 22:10

I'd pay £100k off the mortgage, save £15k and blow £5k.

Palavah · 24/05/2021 22:12

It would make sense to put a chunk into your husband's pension.

Leave yourselves 3-6 months' expenses in cash.

Consider whether you would be happy to lock some of it away for a period in investments.

TokyoSushi · 24/05/2021 22:14

I don't think I'd want to pay £10K for a car I'd already had a few years, it's it the sort of deal where you can get a new one and keep paying monthly?

Other than that, I'd pay a really good chunk off the mortgage, circa £100K, save £15K and have a lovely time with £5K, holiday or similar.

nameychange · 24/05/2021 22:14

£10k to pay off car assuming you want to keep it -
£5k to top savings
£5k blown
Remainder pay off mortgage

use pcp payment and reduced mortgage payment to pay into a private pension to allow you to retire earlier

LivingLaVidaCovid · 24/05/2021 22:15

Mortgage is cheap debt. I wouldnt pay it off early. It's a false friend.
You'll make more investing it.

I'd put 20k into stocks and shares ISA for you and your husband this year. 40k this year and 40k next year.
Remaining 40k I'd use on car a nice holiday (disney?) and paying off the student loans. Anything left I'd pop in children's ISAs

Enjoy your good fortune (although I am guessing it is perhaps the result of a sadder event)

MyDcAreMarvel · 24/05/2021 22:16

Save 5k to buy a second hand car and pay £115k on the mortgage.

NeedATan · 24/05/2021 22:19

Use a large chunk as deposit on a buy to let property. Hardest-working investment IME.

AlwaysLatte · 24/05/2021 22:19

I'd put all except about £10k into the mortgage.

headlock · 24/05/2021 22:22

It depends if there are penalties for paying a large chunk off your mortgage. I think the max we can pay on ours per year is 14k without penalty.

NoSquirrels · 24/05/2021 22:24

You’re young, so anything you put in pensions or long-term investments has a long time to grow.

£10K for the car.
6 months expenses in easily accessible savings (£8-10K?)

With the remaining £100K, figure out how much you might pay off the mortgage to get down to either a shorter term or a new LTV that unlocks a good rate, and save for that purpose so when you next remortgage you can do this. Stick that amount in premium bonds.

Then invest the rest or put in pensions for you and DH. After you’ve had a great holiday!

sunlight81 · 24/05/2021 22:39

50k to buy a Buy to let investment (with mortgage)
50k off my own mortgage
10k holiday to disney Florida
4.5k savings - just in case money
500 - meal out or party (using rule of 6) inviting all my favourite family members and friends.

converseandjeans · 24/05/2021 22:52

£100k off mortgage
£10k into premium bonds which you can then withdraw when car payment is due
£5k fun

Then you can pay more into savings when your mortgage payments go down & build up pot of money gradually.

DancesWithDaffodils · 24/05/2021 22:53

Top up the savings account.
Put 10k aside to pay off the car (or buy one outright) in 18 months.
Have a fab holiday next summer.
See how much you can pay off the mortgage without penalty.
20k each for you and DH in a S&S tracker ISA.
Come up with a plan for the balance!

YellowFish12 · 24/05/2021 23:19

If either of you are HRT then pension and back contributions. Yours into a SIPP as it’s DB. There is no other investment that gets such an amazing immediate bump (the tax relief).

Then max your ISAs.

6 months of savings in premium bonds for emergency.

Spend something on a holiday/meal.

wonderstuff · 24/05/2021 23:28

Really depends on the interest rate on your mortgage. I've currently got money in stocks and shares isa that I'm expecting to make me more over the next 5 years than my mortgage interest. Depends on what difference to you the reduced mortgage payments will make, also what state your pensions are in, significant tax benefits to pension contributions.

I think that @LivingLaVidaCovid plan is what I'd do.

Unless you want to do significant work to the house or buy a more expensive property.

bigbaggyeyes · 25/05/2021 07:49

I'd not buy a car outright, they devalue quickly and chances are you'd change it after a couple of years anyway

I'd put £20k into a savings account, to use for the dc, driving lessons, uni or a house deposit. Put it in your name so you can access it in emergencies

I'd pay as much as I could off the mortgage without incurring any penalties.

For me a house that's bought and paid for is worth it's weight in gold, no one can then take it off you and you've always got that security. You could the. Either choose to reduce the mortgage term, or pay a lower amount in, and what's left pay into a pension for you and your dh.

120k is enough to enable you both to set yourself up for the future, it's not life changing, but you could have a house paid off and a decent size pension to look forward to, not many people have that these days

MrsWombat · 25/05/2021 07:54

A small amount £5-10k on something frivolous but vaguely sensible like a holiday or new kitchen. Then I would follow this flowchart: flowchart.ukpersonal.finance/

Original poster

WWYD12345 · 25/05/2021 09:58

Thank you so much for all the posts, this is really helpful.

I am an NHS employee, so the pension is reasonably good. I'm on maternity leave currently and planning to go back four days instead of five, which was the plan before the news of the money coming.

Mortgage wise - it's in two parts, £70k at 2.73% fixed until August 2022, and the other £160k fixed at 1.69% until Dec 2025. We can pay off 10% a year with no penalty. If we cleared the £70k chunk that would be £375 less per month to pay out.

Hadn't thought of premium bonds, that's a great idea.

House wise there are things we would like to do but nothing needs doing. It would be nice to sort out the kitchen floor but that won't cost too much.

Re the car, it is likely to be worth a little more than what we will have to pay to keep it, so we will most likely buy it regardless, whether we then part ex or keep it. It's the first new car we've had, we have always bought second hand cars outright. Our second car is a 59 reg fiesta that I got in 2014 which we will run into the ground/continue to use as the dog car!

I do like the thought of having more money available each month we are paid to put some into savings etc. Our PCP is £350 I have fertility problems and conceiving wasn't happening so we thought sod it let's treat ourselves to a new car and then tada along came DD!

OP posts:

NeedATan · 25/05/2021 10:35

A saving of £375 per month is nothing compared to what you could earn from a buy to let, and that's before you think of the equity increase. Speak to an estate agent, see what you could buy and how much you'd get per month. There will of course be expenses related to the property but the income will still be far higher than anything else you'd make with that money.

MyDcAreMarvel · 25/05/2021 11:33

It’s not a saving of £375 though, it’s a saving of thousands of pounds of interest in addition.

Overthebow · 25/05/2021 13:17

£5 isn't much to have in savings so I would top that up. I would also put a chunk in DCs savings account.

10K savings
20k savings for DC
10k spending money for treats
10k to pay off car
70k mortgage

NeedATan · 25/05/2021 14:26

@MyDcAreMarvel

It’s not a saving of £375 though, it’s a saving of thousands of pounds of interest in addition.

Agreed. But still less than the monthly income and the likely increase in equity.

BarbaraofSeville · 25/05/2021 14:56

@MyDcAreMarvel

It’s not a saving of £375 though, it’s a saving of thousands of pounds of interest in addition.

Plus the hassle of being a landlord, which the OP might not have the time or energy for.

There's calculators on the internet where you can calculate whether it's worth paying an early repayment charge when paying off a mortgage. It might be for the £70k portion. Look on MSE or Moneysupermarket for a mortgage overpayment calculator.

If you were planning to keep the car for a while, paying for that's probably a good idea. You can then hopefully spend a good few years without car payments, get some savings behind you, and break the cycle of needing to borrow to buy a decent car.

Putting rest of the money in premium bonds while you decide is a good idea too. It's pretty much instant access and should beat normal savings accounts for returns.

Definitely allow yourselves to possibly buy a treat, like a slightly nicer holiday or newer tech, but don't spend for the sake of it. Just keep the money in savings until you think of something.

maxelly · 25/05/2021 15:01

@LivingLaVidaCovid

Mortgage is cheap debt. I wouldnt pay it off early. It's a false friend. You'll make more investing it.

Enjoy your good fortune (although I am guessing it is perhaps the result of a sadder event)

I agree with this - obviously it depends a lot on your interest rate and overpayment terms - if your fixed term deal is ending soon it may be worth overpaying a chunk to tip you down into a lower LTV rate when you take out your next deal, at the moment you'd be under 70% already, but you could look into how much difference going to 65% or 60% would make. Other than that though when you are relatively young and with good stable incomes and with mortgage interest rates so low, it usually makes sense to keep the mortgage borrowing and invest extra capital for higher interest - even a relatively low risk/accessible fund may well outperform the savings on paying off your mortgage and you won't get have maxed out your ISAs so def worth doing that I'd have thought.

Personally I'd keep the student loans too and just pay them off over the course of time but depends on the amounts/rates you're on there too...

It may be worth seeing a proper independent financial advisor to through your investment options since you're fairly new to it - I would have thought a combination of ISAs/bonds/additional pension contributions and a managed stocks and shares fund would be what would be recommended but worth sitting down with someone and properly going through it...

maxelly · 25/05/2021 15:23

There's someone on every single inheritance thread that strongly recommends BTL and I make it my mission to put the counter-arguments every time too! I hope this isn't winding up the BTL fans and it's obviously the right decision for some, but increasingly the sums don't add up anywhere near as well as they used to.

Just to take an example, around my way the OP's £120k would buy you a nice spacious 1 bed flat or a smaller, less nice 2 bed flat. Either way it would probably rent out at around £800 a month. Superficially that's a great ROI but the 'some costs' actually add up a lot, it would probably amount to half the monthly rent once you take into account tax, landlords insurance, agents fees, maintenance fund, buildings insurance, service charge etc, so ending up with a yield of less than 5% / OP wouldn't likely be 'earning' that much more on a monthly basis than she saves simply by paying off the mortgage as the majority of posters are suggesting (and I think she could do better even than that by investing it in sensible funds). And that's before you consider OP might get unlucky with bad tenants who trash the place or stop paying rent, or void periods where you might take in no rent at all for months on end. I guess equally she might get super lucky with finding long term tenants and a flat which requires nothing doing to it ever, or live in a part of the country where the rental market hugely outstrips house costs but I think it's unwise to assume that without further information.

Obviously you do also get capital growth in terms of the value of the property itself with BTL but in some parts of the country this isn't that significant (in my town average annual growth is roughly 2%, that's across the board, I expect it's lower for flats, and may be lower still in some parts of the country) - but if OP did have a strong desire to invest in the housing market (I wouldn't recommend it myself as so much of her capital is already tied up in her residential property, why double down), she could simply buy into a fund which invests in/tracks the housing market, rather than having to put herself through the stress of becoming an inexperienced 'accidental' landlord?

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