How would you use a £300k inheritance in our situation?

[AnnSueSueSueDroid]

We have received 300k inheritance.
We have 150k mortgage remaining on £550k house.

Would you move to a 'better' property, renovate & repair current house, pay off the mortgage, invest, pensions, anything else? We are in our late forties with one adult child still living with us and not likely to receive any more inheritance. Thank you. The money has been left to us by a very dear relative after a long illness.

does your current house meet your needs? if so, i'd pay off the mortgage and renovate then invest or put the rest in pensions. Or donate some to your DC towards a house deposit?

If you would like to move, then use this to do so.
This may be your only opportunity.
if you are happy in your current house, pay off the mortgage, put a chunk in S&S ISAs, make your house exactly how you want it - and treat yourselves to a holiday of a lifetime.

@MiddleAgedDread it does, but there are some issues with it that would be improved by moving - no neighbours, better parking situation.

Difficult to say without understanding more about your financial situation like pensions etc. well worth speaking to a financial advisor for that amount of money to invest.

I’d take advice but concentrate on saving, pension, investments with a view to earlier retirement. Tempting to think about buying the perfect home but I think long term quality of life and not having to work as long is better.

Much of my advice would depend on your ages and whether you have children etc. If your current house suits your needs, has the potential for expanding etc, then I’d probably pay down the mortgage and stay put rather than move (remember, you can release equity at any stage on a paid off house). You could do as we have done and get/swap to an offset mortgage - on that you would keep the £150k mortgage, but you have a linked offset savings account will £140k (is the balance, less the minimum amount it requires you to hold in the loan), and pop the other £10k in an easy access account. ie your have effectively paid off your mortgage, but have easy access to £150k in funds should you need them in an emergency or want to to extensions etc. You only pay interest on the £10k.

If you are young and thinking of starting a family, then moving to a larger house and doing renovations work now may be a plan - but be wary of thinking that you can make a profit on doing so. All my neighbours have done these projects recently and stalled due to rising costs of materials and labour, so have either run out of funds to complete and/or have barely broken even. In the latter case, this is fine if it is to be your forever home in which you raise children, as over 10-20 years they house would still eventually appreciate in value - but the hassle unless you really want to move and take on the challenge often isn’t worth it.

Would paying off your mortgage relieve stress in current jobs, free either of you up to reduce hours, train for a new career or take early retirement? If so, it seems sensible?

It's difficult to weigh up moving vs staying, as I'm aware it's likely the only real chance we have of moving. Staying put and having a more relaxed future with options to drop hours at work / retire early etc is very appealing! DH is keen to move, I am leaning more to staying put.

If you don't have pensions and aren't already looking at a comfortable retirement that would probably be my first priority. But assuming you do, if there are only minor things you don't like about your house you could consider a move but not a really aspirational one so that you spend say £50-100k on a better property plus stamp duty and keep the rest of the inheritance to pay towards the mortgage, help your DC out and have some nice holidays and/or a savings buffer

Immediately, I'd pay off that mortgage (& any other debts?) while taking time to consider other options.

What savings/pensions/investments do you have?
Do you have any reason to move or would it just be to have a nicer house?

No debts aside from the mortgage, our pensions & investments would benefit from a boost as currently we are not looking at a comfortable retirement. Main reason to move would be to have no neighbours as we are a neuro-divergent family who need peace and quiet. We could definitely do a non aspirational move. But I am nervous that the new property would require some work to it etc. Sensibility says stay put and boost savings...

edited to add that our dc have some savings that they can choose to use for deposits on first properties so we don't need to factor that in.

Do you have children? Have you looked at the cost of university at the moment? £60k per child. Or the cost of independent living for young adults? £18k per year per child. Deposit for house: average house in commuter belt is 11x average earnings = £380k in 2026, £450k in 2031, £540k in 2036. Your kids will need to be earning 110k pa in 2036 to qualify for a mortgage on the average home with a 90% mortgage. If they qualify via combined income they require your support while single income during childbirth. Better still, they will need to be looking at 50% mortgages or lower. Therefore, £100-200k each.

Put the 300k in high interest accounts, stay liquid, reduce the debt burden on your children.

i dont know how old you are or how many years is left on your mortgage which is important.

making some assumptions I would consider splitting the investment. use some funding to limit the time remaining on the mortgage, not a full pay off because of the balance between compound interest and investment interest.

once the mortgage is paid off or close to it. You use your house money to consider a new property at the point so you don’t over invest in property.

do you have life insurance policies? If not get those.

the rest into your pensions and/or ISA savings account if you expect to need access to money and if you don’t currently have any savings.

So is the choice essentially between spending more money on a house and not having a comfortable retirement, or putting £200k away into ISAs over the next few years and leaving it to appreciate so you can have a comfortable retirement?

pay off mortgage
do necessary repairs
rest into a fund (pension?)

Def speak to an IFA but if you pay off mortgage check there isn’t a penalty for this. I do think that’s the first thing, then make house repairs and invest.
We are due an inheritance soon and will def pay off the mortgage and think about moving in a couple of years once DCs have finally left home.

Why not look for a more suitable property? It sounds as if you have specific requirements and there may not be anything out there that's better than what you already have. Then you can make a decision based on reality rather than on what you hope might be available.

We chose not to pay off our mortgage. Mortgage is 3.5%, long term stock market average return is 7%. We’re early 40s so plenty of time to weather market fluctuations. Having said that our mortgage isn’t huge, we can afford the repayments and are happy with where we live.

It’s a very personal decision depending on your circumstances and your appetite for investing. If paying off your mortgage brings you peace of mind go for it. I’d rather have more money long term - neither approach is wrong.

Do take some of it and go on holiday or do something fun with it too, life’s too short to be sensible all the time.

Have a good look at the housing market and weigh up moving v staying. If you stay, pay off the mortgage and get anything done that needs doing.

I would pay £150,000 off mortgage
Backdate pension contributions to cover last 3 years for both of you to fill them up OR if you have good provision for pensions give you child money towards housing deposit. Assuming your adult child is living with you for financial rather than disability reasons, they are not going to benefit at all from a different house. If they're stuck at home for financial reasons, you can set them up hugely in life by passing money to them earlier and give them the advantages you had with easier housing costs.

We're planning to do this for our children. Live in a house much smaller than we can afford, pay off mortgage decades early and level the playing field a little by paying uni fees/giving housing deposit.

Sounds like you would be happier in a different house. I would wait a year before moving though, just to see what happens with this government, as they are talking about overhauling property taxes and no one know what effect it will have.

Definitely pay off your mortgage in the meantime

That gives you plenty of time to get your current house spruced up ready to sell, and to research what house will suit you best. Don’t fall into a trap of buying something expensive because you can now “afford” it. As you say, this money needs to stretch several ways to give you the life you want.

Pension should be your priority but as you are only in your 40s you will have time to build a pot.

I would only move if you could afford to invest most into pension and be able to afford any potential mortgage increase for a new house.

Do you know what cost a new house would be? On a pure mathematical level it's likely a pension increase would prove to be most financially beneficial over the longer term due to compounding factors however enjoyment of life is also an important factor.

Could you invest 50% into pensions and buy a nicer house with the rest?

Thank you for all latest posts, lots to think about.

New house that would fit our needs better (detached, off road parking, same number of bedrooms as currently) would be 650k. We have looked at quite a few from the outside. We need to spend at least 25k on our current property to stop any more damage to it. We could possibly sell for 575k.

Sensibility says stay, pay off mortgage or most of mortgage, do necessary work, invest the rest. Or, as a pp suggests, pay off mortgage, and then sit it out and reassess in a year or so.

One of our children still lives with us and is studying, the other has moved out and is set up.

As someone in their mid 50s…. There is no better feeling than paying off your mortgage. Especially if you know your pensions are well looked after.

You are young enough, and your child old enough, that early retirement could be a real possibility with wise investment. I’m mid 50s with two teens, it is very much not a possibility for me. My “generation” of colleagues are beginning to retiring / the long haul ahead of me stings a bit!

stock market for me, the next bobby axelrod so to speak