Completely unexpected news

[TotallyShocked]

I have lived my whole life (almost 47) managing. Staying largely out of debt and with an ok income allowing for a bit of fun and some savings. My DH and I pay into a pension. It won't be massive and the state pension will be an important part of our pension planning.

I have always thought we'd receive NO inheritance. None.

This year my DH received £30,000 and I will receive £125,000. We had to spend £12,000 on a car but are saving each month to "put that back" if you like. I could also scrape together another £8,000 from various pots and "fuck off funds" (I'd rather not)

The inheritances equal a possible life changing amount of money for us.

We have 20 years and £138,000 left on our mortgage. It's a new mortgage so significant fees if we pay it off now. Maximum 10% over payment per year.

My dream has always been to be mortgage free BUT I also want to try and create "generational wealth" for my 2 DC.

We both have secure jobs for now, but that could change in an instant

Our new life insurance (for the mortgage) is going to be much more expensive due to age and health conditions (none serious)

What would be the best thing to do with this money?

At the moment I'm thinking we save/invest the money somehow and trickle the maximum 10% in each year as a one off over payment.

Is this sensible? Is there a better time of year to make a one off over payment?

We have one teenage DC at home and supporting another living out at Uni.

What should I do? We do have about £4,000 of debt but all of it interest free and the monthly repayments are manageable.

We had no summer holiday this year as we decided to use our holiday budget to do home improvements.

We're getting reducing mortgage cover to save us money.

London and Country are advising us as we are just in the process of changing.

Due to various reasons our existing cover won't last so we need new and better to do that now while still youngish.

Advisor trying to sell us loads of things and we've allowed a figure of about £150-£200 a month for cover (2 products one would pay off our mortgage the other will provide a lump sum)

I'm very close to not bothering with that now.

Keeping our existing insurance products and letting them age out instead.

For complete clarity we haven't changed mortgage product yet. It happens at the end of October.

We won't get £125,000 of this money for six months so we'll have to switch product or go onto a crazy variable rate leaving our amazing 1.89% rate behind. 😢

We're arranging a call with the advisor at L&C To see if there might be a different product that better suits our future needs.

We're already considering a LISA for one DC - you have to be 18 to open them so won't suit our other DC.

@jackstini no DH couldn't afford to up his pension payments any further. We need the money for day to day living.

However due to some weird TUPE arrangement with his employer he has a significant sum going into his pension each month and it doesn't cost him that much!

I pay 22% of my salary into a pension. This includes employer contribution of 6%.

If you are certain you are getting the money could you go onto a 2 year fix rather than 5?

My penalty was less than the interest I was paying, taking into account the interest I’d make from investing my lump sum.
You can work it out yourselves - there will probably be an advantage in becoming mortgage free and the %age penalty goes down each year. It feels good too!
You can then decide how many hours or years you need to work - it should give you some freedoms from scrimping and saving.

A 2 year fix is an excellent idea. Why didn't I think of that! 🤦🏼‍♀️

Yes definitely getting the money.

L&C say we're at the best LTV level. Can't improve on it.

Consult an independent financial adviser. 🙂

You could also look at a tracker with no ERC.

I think the LISA is a great idea for future wealth where they can't blow the lot at the pub like they can with a JISA. I can see you say how much you are putting into a pension as a percentage of salary, but have you done projections for what you should have to live on at the end? Pensions are really important and most people don't put in as much as they probably should. You also get the government top up too, which is likely to be more than any interest or fund growth in the shorter term.

I would be overpaying the mortgage by 10%, even if it isn't the best route financially, just because it is a debt. Think with your head, not your worries! It might not be the most profitable thing for you to do.

Congratulations on the windfall. I would pay the mortgage off earlier depending on charges.

I have done a pension forecast and if nothing changes I should have a pension pot of around about £320,000 at age 65. DH will have similar.

We've decided to go with the existing mortgage product, fixed for 5 years and trickle in the maximum 10% a year. Best time to pay this 10% is early in January (year runs by calendar year).

This will
Reduce our monthly outgoings (we used to overpay a little every month but will stop that)

Allow us to pay off mortgage in 8-10 years instead of 20! Though we might just manage to do it in 5 years!

Allow us to have some funds "liquid" in a savings account for unforeseen circumstances, to have fun, to help DC. We won't be able to do all 3 and pay off mortgage in 5 years but might be able to do 1 and pay off mortgage in 8-10 years.

Will seriously review our existing and planned life insurance with a view to being sensibly covered but also minimising outgoings.

At the moment, you could probably obtain a fixed rate interest ISA at or likely above your mortgage rate, so my advice is get one x £20k ISA each (max amount for tax free interest it will earn). Do this before the budget in case they change the amount you can save tax free.

Have a look at meaningful money or rebel finance on YouTube or buy the meaningful money book. That will cover the key things you need to have in place and how to best go about it - emergency fund, savings, investments including pension.