Active discussions

Meet the Other Phone. A phone that grows with your child.

Meet the Other Phone.
A phone that grows with your child.

Buy now

Please or to access all these features

Talk
Money matters

Find financial and money-saving discussions including debt and pension chat on our Money forum. If you're looking for ways to make your money to go further, sign up to our Moneysaver emails here.

Original poster

What to do with inheritance

16 replies

namechangeforinheritance · 07/03/2023 20:33

I've name changed for this as I have discussed this in real life.
I'm about to inherit money from my DF, not a huge amount but enough to want to make sure it is used wisely, looking at approx £70k.
Current thought was to make a lump sum payment of £50k off the mortgage- currently have £200k and 25 years left so this would reduce by quite a bit. The rest would be saved for a rainy day, no specific plans on what to do with the rest.
Is this the best use? Is it worth investing? It doesn't seem like enough to bother with investing but FIL has money invested and enough to draw a wage each month on it so is suggesting we look at it. Any thought?

OP posts:
MissLucyLiu · 07/03/2023 20:37

Hi given the rise of mortgage rates and the persistence in inflation I actually think you are doing the right thing. At the moment investments are quite risky as the central banks are trying to slow the economy down (therefore de-leverage).

Ask your mortgage advisor if you can convert your mortgage to an offset account. That way you can put down the entire inheritance towards the mortgage, but also has the option to take the money out if something happens you need lump sum cash.

This effectively gives you 4% interest income (that is paid towards the principle & equity of the mortgage).

That just my two cents.

Original poster
namechangeforinheritance · 07/03/2023 20:42

Thank you, that is reassuring. Our mortgage deal ends in April so we were hoping that making the overpayment before we sign a new deal will allow our term to be reassessed. We're 40 and the thought of being able to knock some years of the mortgage would be nice! I will go back to our advisor and ask about an offset mortgage.

OP posts:
MissLucyLiu · 07/03/2023 20:44

Yeah an offset mortgage is great. I have one. If suddenly you need money to buy a new car or pay for roof leak etc. You can take the money out of the offset account just like a current account. Def worth having a look.

nannynick · 07/03/2023 20:48

You may find it helpful to go through the UK Personal Finance flowchart.

ukpersonal.finance/flowchart/

slowsnow · 07/03/2023 20:59

Definitely invest get your money to make you money

Overthebloodymoon · 07/03/2023 21:20

With similar in the past, I did exactly what you’re suggesting and put a good chunk into the mortgage. Bought a few bits for the house, furniture, fitted shutters etc and then had a lovely, more expensive than usual holiday. It was a good balance. Sensible - tick. Practical - tick. Fun - tick.

Original poster
namechangeforinheritance · 07/03/2023 21:29

@Overthebloodymoon that sounds like money well spent. I think we will put some money away to take the kids on a splash out holiday when they are a bit older.

OP posts:
JamMakingWannaBe · 07/03/2023 21:39

I wouldn't rush to overpay the mortgage now, but definitely when you remortgage in April you can get a lower LTV.
How are your pensions?

FunnysInLaJardin · 07/03/2023 21:46

I have just inherited £135,000 and have decided not to pay anything off my mortgage as we have 9 years left and the interest rate is about 2%, so mostly capital now.

We are putting the money into a prudential investment fund which should see a 7% pa growth and the money will be there for about 15 years until we retire. Aim to put another about 150k in as and when we have it from DH's lump sum and the rest of my inheritance.

We have kept about 20k in cash for stuff we need to do and to pay off debts etc

Honestly, I would invest!

Original poster
namechangeforinheritance · 07/03/2023 21:51

JamMakingWannaBe · 07/03/2023 21:39

I wouldn't rush to overpay the mortgage now, but definitely when you remortgage in April you can get a lower LTV.
How are your pensions?

Pensions aren't too bad. I'm public sector and DH is self employed but always made sure to pay into pension. We also save for the kids and they currently have a nice chunk saved (it won't by them a house but might get them through uni). We also have no other debt apart from the mortgage.

OP posts:
Original poster
namechangeforinheritance · 07/03/2023 21:52

@FunnysInLaJardin if we have over £100k then I would definitely be looking to invest. I just wasn't sure if the return on £50k would be worth it? Also the thought of still paying the mortgage at 65 is quite depressing!

OP posts:
JamMakingWannaBe · 07/03/2023 21:56

Be careful that the money you save on not paying the mortgage each month doesn't just get frittered away. Perhaps you could use this as a regular investment sum.

Original poster
namechangeforinheritance · 07/03/2023 21:58

Sadly we want actually save any money as our payments will go up. We're currently making a regular monthly overpayment but our payments are expected to go up to around that amount in April. It would be good to reduce the monthly payment but still be able to overpay.

OP posts:
FunnysInLaJardin · 07/03/2023 22:00

namechangeforinheritance · 07/03/2023 21:52

@FunnysInLaJardin if we have over £100k then I would definitely be looking to invest. I just wasn't sure if the return on £50k would be worth it? Also the thought of still paying the mortgage at 65 is quite depressing!

It all depends where you are in life I suppose. For us paying down the mortgage isn't really worth it as we are 52 and 56 and only have 9 years left. I will be mortgage free by 60 ish and the mortgage is mostly capital now.

10 years ago I may well have taken a chunk off the mortgage, but if you can get a better return in an investment compared to the cost of your mortgage I would certainly invest.

It depends on your stage in life and whether paying down your mortgage to free up cash to live on is better than a long term investment.

BTW the return on £50k in a decent investment fund would be about 5%, so £2,500 pa

Callmenat · 08/03/2023 13:28

nannynick · 07/03/2023 20:48

You may find it helpful to go through the UK Personal Finance flowchart.

ukpersonal.finance/flowchart/

Love this, thanks for posting 👍

Ilovetocrochet · 08/03/2023 14:38

MissLucyLiu · 07/03/2023 20:44

Yeah an offset mortgage is great. I have one. If suddenly you need money to buy a new car or pay for roof leak etc. You can take the money out of the offset account just like a current account. Def worth having a look.

I took out an offset mortgage when I got divorced, by putting all my savings into the account, I reduced my 15 yr term to 8 yrs which was great.

I was warned by my solicitor when I took it out to be careful and not treat it as an open cheque book! I am very strong willed and would not have withdrawn large sums from the account but it might be a temptation to some people.

New posts on this thread. Refresh page