What would you do with £100k

[Abfab63]

I've been gifted £100k and I'm wondering what's best to do with the money to get the best return / what makes the most financial sense. The ideas I had were:

• Pay off almost entirely an interest only mortgage I have on a rental - this is my preference as the mortgage is up for renewal next year.

• Pay off some of the mortgage on our main residence. Again up for renewal next year.

• Buy another BTL?

Any better ideas or comments on the above would be greatly appreciated!

I’d be clearing the debt you have.

The BTL mortgage gets tax relief (albeit limited to 20%), so unless the differential in rates is significant enough to compensate for that don't pay off the BTL in preference to your home mortgage.

What are the interest rates on the three products?

If they're up for renewal in the next year it's very likely that the interest rate is currently far lower than current instant access/short term fixes and even premium bonds, so if that's the case, I'd save the money and pay it off your main mortgage (or whichever is going to have the highest rate taking tax into account if relevant) on renewal next year.

However, don't forget to account for tax on savings interest (the first £1000 or £500 is tax free unless you are a top rate tax payer) but that can be mitigated by putting some of the money in a cash ISA if you haven't used this year's allowance, also premium bond prizes are tax free.

(Can't believe people are jumping straight to 'pay off the mortgage' without asking about interest rates - where have you been for the last year or so? If the OPs mortgage rate is 2% and she deposits the money at 4% for a year, that's £2000 of interest thrown away by paying off the mortgage)

I would go with the first option I think.

I agree with @BarbaraofSeville put £20k in high paying ISA (no tax on interest). Put the redo in a high paying account. At the point of remortgage on your property pay 10% or as much of the £80k off your mortgage.

This will free up money to either over pay mortgage or build savings.

As you already have one BTL you understand the costs so potentially look for a second one longer term.

Thanks everyone for your feedback! Very helpful x

The best money we ever spent was putting in a garden office or extra room. Then we did up the garden a bit. We got more space and a nicer garden to go with it.

I would pay off the BTL mortgage. Then use the rental income (whatever is left over after tax, insurance etc) to overpay your own mortgage

Depends on your age/income but I would consider buying another btl. Rents are up and the capital appreciation is where the money is. Ours have at least doubled over 8-12 years. Then if you don't really need the rent use it to pay down the other rental.