What would you do with £20,000?

[CucumberCool]

I have a L-ISA. about £16,000
Privately rent. Online mortgage calculator quotes around £145,000. Wouldn't buy me anything suitable where I live.
Earn about 22,000 pa after tax.
Have £8000 in savings.

Inheritanted £20,000. What on earth should I do with it?

Could max out my LISA for a couple of years but obviously get penalised if I take any out and don't like the idea of not being able to use it if I need to. To be honest I also hate the idea of the gov taking 10% when I do legitimately withdraw it...

What would you do with it?

Could you buy under a shared ownership scheme?

@CucumberCool If I were you, I would invest it in a digital business that earns passively. There's so many out there including SaaS, KDP, POD, blogs etc. I invested in a digital business that wasn't doing so well last year, and now it's bringing me in 2k a month so I've been able to leave my job and it's still growing month by month based on me just using my initiative and skills to develop it. Best investment I've ever made tbh.

Sounds like a good way to lose the lot!

Can you have an ordinary ISA with the L-ISA? If so put it in there, or the highest rate savings account you can find until you need it.

£26K gross salary? You have a good £44K deposit but yes, it's hard to buy as an individual on a low salary which is why most on similar salaries buy as a couple. At a stretch, you can look at £180 - 200K so maybe a studio or a 1 bed flat in a cheap area.How old are you? I would advise you to keep building your deposit and try to increase your income or buy with a friend.

Honestly, I would put some (£5K) into my pension and then put the remaining £15K into an ISA - cash or S&S depending on your level of risk.

I’d put it in premium bonds for a bit.

Not a good idea. 😳

Premium bonds are an idea, is there any risk?

@sansou £28k but will rise to nearly £30k next month. What's s&s?

I'm 36 with a toddler so a studio/one bed is not suitable. Would be willing to buy to let if it was allowed.

@SupportiveMumSquad Not interested in high risk investments to be honest, but good for you! Sounds too good to be true! @sansou(sorry mistakenly tagged you again and can't edit !)

The risk with Premium Bonds is that you may not win much or nothing at all. But you do get to keep your ‘stake’.

What do you think about shared ownership?

Why would the gov take 10% of your LISA when you withdraw it legitimately?

The government gives you 25% with a LISA, they don't take 10%. I've got 2 children who gave cashed theirs in over the last couple of years & they definitely didn't lose 10%.

This is very risky. So many businesses fail. OP has no way to evaluate this investment. Sorry, but I would advise her to steer clear.

Government guidance on LISA: https://www.gov.uk/lifetime-isa

OP can use the LISA to buy her first home if the property costs £450,000 or less otherwise she will have to pay a 25% charge which is the government's way of clawing back the initial 25% interest. However, the claw back could exceed the initial interest so generally people should not use a LISA if their first property is likely to exceed 450K.

It is a risk in London but not so much outside.

Don't know where OP got the 10% from.

Oh, I've thought all this time I would loose 10% for withdrawing it. That's a pleasant surprise!

Bloody hell, ignore @SupportiveMumSquad - what a dreadful idea.

If I were you I would use it to increase the deposit so that you are in a position to buy at some point. Unless you could get social housing somehow.

But I would definitely prioritise getting out of privately renting, it's so expensive and little security.

If your budget wouldn't buy anything suitable, how far off suitable are you? Is there anything you can compromise on to get on the ladder, then move to something more suitable in a few years?

S&S is stocks and shares. Generally you invest in a fund that targets a sector or region eg technology or emerging markets. Or a stock market traker. They usually outperform cash over time, but can go down in value and should be considered a longer term investment due to the risk.

Are all ISAs topped up by the gov? Or just lifetime ones?

Just LISAs. Look at the link above, they are very restricted because of the great bonus. Regular ISAs interest is tax free

Does the 20,000 max a year allowance include interest?

I've put £1000 ok my Lisa this year already. Set up deposits to max it out (£4000) by the end of the financial year. the Lisa rate is 4.75% and the app tells me it will be around £750 bonus.

I have put the £15000 in an ISA at 5.1%.
Will the interest on both mean it pushes me over my £20,000 limit?

I have held back £1000 to make sure but now I am worried it will be close...I am also terrible at maths...

Any help appreciated!

No, it's the amount you can invest.

Thank you!
So doesn't count the bonus from the Lisa either?

Either put towards my mortgage or stick it in my pension.

No

I inherited the same amount a couple of years ago.

I’ve put it in a savings account where I can make 3 withdrawals a year without losing the interest rate. Keeping it there in case work comes up on the house (I take some out and then top it back up again over a few months) or a miracle happens and we need to support maternity leave. I know people are saying paying off mortgage is a good idea but I wouldn’t feel comfortable without a savings buffer.

If we didn’t already have a house and were in your position, though, would definitely be looking into shared ownership. I did it as a key worker years ago and it has drawbacks but also I live in the south east where the mortgage+rent were still less than a mortgage on the open market (which I couldn’t get when I was single anyway). With some schemes having that much in savings might rule you out, but worth checking.

Thank you all for your words of advice. You have been a massive help! 😁 Really appreciate it x