What to do with inheritance?

[Leafytrees]

I appreciate this is a nice problem to have. We're about to inherit 200k.

We have a 150k mortgage, but house needs about 100k of work.

We will do the work needed to the house, but I don't know whether to invest the remaining 100k or use it to pay off 2/3 of the mortgage given current awful rates. I'd be investing over about 4/5 years given the children are getting older so we'll need the money to spend on them.

Given current interest rates I would pay down mortgage first. It would leave you money for some house repairs and not paying your mortgage gives you the ability to save.

I would pay off the mortgage. ThT will benefit you more than anything else.

If the house needs the work, then that is first

What's your current mortgage rate?
If you can find a better fixed savings rate then put it in there

Or maybe just pay down however much mortgage you won't get charged overpayment fees for

Depending on your ages you could pay some into your pension so you get the benefit of the government paying more on top. Limit per year per person is £40k, but then Govt would add £10k

I'd pay off all the mortgage and buy a £50,000 block of premium bonds

(safe flutter returning at least 3%) .

Then use the monthly sum no longer paid to mortgage, to do up the house.

I would pay down the mortgage, because it would give you more flexibility for the future.

Then I would make regular investments of the difference between the two amounts. So if your mortgage is currently £1000 per month and the new mortgage payment would be £800, you pay the £200 difference into a S&S ISA. If your situation changes in the future or you find you need the money for something else, you can easily stop the regular ISA payments.

Be careful what penalties you will incur for paying off such a large amount of mortgage at once. Often you can only overpay by 10% a year without incurring a penalty if you in a mortgage deal.

4 or 5 years is not a long time in investing.
So I would say go for the guaranteed return of paying the mortgage down.
Then you will have more free cash to invest or spend in the future.

Thanks everyone, really appreciate your input and getting different views. I'm leaning towards paying the mortgage off and we're not fixed in to a deal any more (hence mortgage has gone up 100% over the past year) so I don't think we'd incur any penalties.

If we could do the work to the house as we went along we would, but there's a lot that needs doing now (all new windows and doors, damp proofing, re-rendering) as we've been here 6 years and had nothing done, and it would talk us years to save up to pay for that.