Inheritance - WWYD?

[Curiosity123]

I'm about to receive an inheritance (£70k-ish) and currently debating on how to use it. Some information about us: we have one DC at nursery, second one on the way. We live in a shaded ownership house (3 bed semi) in a nice and expensive area of the country. We like our home. Currently paying rent to housing association, mortgage e nursery fees, no other debts. Combined salaries £100K. I’m planning to keep £10K in easy access savings to top up my mat leave if I need to. On top of that we have enough savings to cover 6 month expenses and decent redundancy packages. I can think of three options to save/invest the remaining pot:

• buy more equity of our home (~10-12%, plus costs). We could save in rent each month to HA but I’m a bit concerned about reselling (more equity means bigger mortgage and less people might be able to qualify); on the other hand, we might want to buy more equity now before it gets too expensive
• Keep them in savings (and pay taxes on interest); have the capital ready when we will be able to staircase to 100%. Hopefully in 6-8 years time if we decide that’s what we want
• Keep some in savings and use some to overpay the mortgage

I’m leading towards one option, but I’m interested to hear WWYD if you were in my position

Depending on the interest in your mortgage if savings return is higher than mortgage interest rate I would put into savings. You do run the risk of the value of your house increasing though so I would do the maths on that projected to when you want to purchase 100%... I would save it in instant access ISAs in mine and DH name ( up to 40k) then remainder locked in long term high yield savings.

Premium bonds?

I'd buy more shares in your home, what is the shared ownership split atm? This will probably be the only time you can buy an increased share in your property outright.

If you're still unsure then I'd lock it away for a year this way before making a decision:

£50k in premium bonds (tax free)
£10k Stocks & Shares ISA
£10k easy access savings account

House prices will just keep going upwards so I think best to buy more of a share now - more security / equity for you and your family, and more disposable income every month.

Are you married?

I would look at getting out of shared ownership and using the money towards a purchase of a different property where you own it all!

Thank you all. Answering a couple of questions here: we own 44% shares, mortgage rate is 4.6% for 6 more years. I haven’t considered premium bonds, I’ll have a look

Yes, we are

I had a shared ownership home and was able to buy 100% of it eventually. In my case it made selling much easier and more profitable compared to someone I know who didn't. But it depends on the scheme you are in.

Use all of it to buy a non shared ownership house.

Anything else is bonkers.

I agree with buying out as much of the shared ownership as possible. This will give you much greater financial security.

There’s not many houses available to buy for £70K.

Yes, as above, consider a non HA property with a mortgage.
but if you really love your home, put more into the equity- it’s true I think that a shared ownership can be hard to sell though so have a think.
ISAs might be a good option.

I don’t know why people suggest Premium Bonds. The return on them is very low compared to a high interest savings account which is certain income.
id use £50-£60k to staircase on your property and use some for a nice holiday.

The return on PB’s depends on your luck and how much you have in holdings. Also the prizes are tax free, unlike interest in a savings account when you hit a certain amount of savings (roughly £20K).

Definitely get out of shared ownership if you can.

But the OP has a mortgage for part of their property. The 70k is on top of that.

Is the plan to keep buying more shares of the house until you own it outright or do you plan to move in a few years?

we are not considering moving house at the moment for various reasons. DH would prefer to stay in this house long term and he considers it his forever home, I would move only for certain specific circumstances (having more space in the future, relocation or school catchment)

We have a shared ownership 3 bedder. 25% share. All I am interested in is security of tenure, which a shared ownership gives us and our kidults going forward. We are also in a fairly expensive area.

Buying an extra 25% may reduce the rent part a bit but it wouldn't give us any extra security of tenure and it will turn a liquid asset into an illiquid one. If you need the money further down the line, you would have to sell up to access it.

If you don't want to move then definitely put as much as you can in premium bonds - ok I admit I am biased but they are more exciting than our ISAs or shares that just send a cheque of the dividends every time I don't have any input they are just there but the PB are much more exciting

£50,000 is the maximum and on average I get £150 per month back on that

Which is 100% tax free and completely safe

If you want to withdraw it is very easy you just tell them and it is transferred into your bank account

I will confess that I do enjoy the draw at the beginning of each month just in case we might have a big win but not yet but obviously we have as much chance as the other millions of people who have them

I do know it isn't very likely but at least we don't lose the money each time there is a draw like we would with lottery

Because they are tax free
I'd fill an ISA first but anything above £20k I'd probably put in premium bonds rather than paying tax on savings.

Id think you should keep £20k in a personal account that's only in your name. I believe that where possible you should have exit plan money. I'd put £5k each into Junior ISA for the kids. I'd pay down the mortgage with the rest of the money. But, only if you are 100% secure in your marriage. If you are not 100% secure in your marriage id keep it all in your own personal bank account and not touch it for joint expense.