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.

Yes, mortgage paid off/down and investments boosted is going to be life changing for us. Extremely grateful to have been given this opportunity.

Me personally I'd pay off the mortgage. Get a new kitchen, go on a family trip then invest the rest.

We had a windfall and focused on pensions and investments over overpaying mortgage. The effect of compounding interest in a pension or investment cannot be overstated and paying in as much as possible as early as possible to a pension or investment is one of the best things to do. I’d rather pay into pensions and investments now and overpay mortgage later on. Even on the new higher interest rates, my pensions and investments have outperformed my mortgage every year, mostly fairly significantly. At 60% LTV or less you’re on the most favourable interest rates you’ll be offered by the bank, and since we’ve reached that point, we’ve had zero interest in overpaying mortgage because it just doesn’t make sense financially to do so. I’m not sure if the rules are different paying into a SIPP from inheritance vs income but from income the government will top up SIPP contributions so worth looking into if that’s a possibility.

If you use the money to move you could still be mortgage free
then use the money you would usually have paid monthly for your mortgage to put into pension for tax efficiency?

Who has the money been left to? You or your husband? Because I think the person who is actually inheriting gets the final say.

I would pay off the mortgage and then decide if you want to move elsewhere. No point paying all that mortgage interest if you don't have to. Have a look at AJ Bell platform which allows you to invest sums at rates in excess of 4 per cent on a 12 month fixed or x days notice basis. You can also invest in stocks and shares ISAs if you can accept the risk of it going down as well as up. NS&I is a safe home for it while you make up your minds but I would definitely pay off the mortgage if I were you. No more mortgage repayment frees up a lot of disposal income.

I think often when you do all the jobs around a house to get it ready for sale - you begin to realise whether you do want to stay or move on.

if you get all the nugget jobs done and make it nice from the front, use AI for inspiration inside and then see how you feel.

either way it’ll be ready to sell if you do still want to move on.

If you are not looking at a comfortable retirement, pensions and investments over moving definitely. My experience has been that retirement became significantly more important in my 50s than any house move had been before. There was a complete shift in my outlook. That said I am generally of the view that the fewer house moves you make over your lifetime, the better, as it is so expensive.

I did move in my early 40s and did so to shorten my travel time which I don't regret, but had I stayed where I was, I could chose to retire right now. Also had we held out for a property where we could live downstairs we might also not be thinking of moving again when I do retire, hence a need to save more funds.

What is your current mortgage rate / term / length left? Basically is it higher or lower than what you can currently get from savings?

What tax band are you in? Do you have occupational pensions? Any private?? Do you already have savings, ISAs etc?

Educate yourselves to be as tax efficient as possible. In my mid-fifties I've had an epiphany, semi-retired and making the most of my earning / saving potential now for as long as possible. You have more time, which is important for compounding across all products.

You say you’ve not enough pension, and are not expecting any further inheritances, so pension should be the priority IMO.

Even with detached houses in quiet areas with lots of space space issues can arise, eg with neighbours (albeit not closeby), roads, building work, land being developed etc.

In your position it sounds like moving to a new home could be done and you’d have no mortgage, and you don’t feel happy in your current home. Then you have 20 (or less) years of what you’d have put towards a mortgage to put towards your pensions.

I’d do up the house and put the rest in pensions/investments/savings. When the other child has left home you might want to move/downsize so could move to a quieter area for not as much as a jump? Then you could draw a lump sum out when you retire to support this?
Id also look to do something fun/memorable as the above is quite boring!

Pay off mortgage and invest the rest - you won’t know where you need to live and what kind of property as the DC will leave home and may move far away so staying put for the time being is best.

Talk to an adviser. Much of this advice is not tailored to you and £300k in a high interest account may be good advice - but it depends on your entire financial position and your goals and when you want access to the money.

Similarly, depending on your
mortgage interest rate, paying off the mortgage isn’t always the right move.

Pension (tax relief) and investments may well put you in a much better position in the long run.

But don’t listen to advice from strangers who have totally different financial positions, risk profiles and long term goals.

I am so sorry for your loss. No need to make decisions immediately. Take some time and look into all the options. We personally feel that early retirement trumps having a fancier property. It’s really easy to get sucked in by glittery things. Real wealth is having control of your own time and life.

We're in a similar situation re paying mortgage vs investment. My pension is definitely not great but I have recently massively increased my contributions. I'm 45 so still some time. I think we've decided that once our fixed term ends we're going to pay off the mortgage. Then I'm going to start paying what I was paying for the mortgage into my pension each month in addition to what I currently pay in.

Could you downsize and help your DC buy their own house?

So downsize and hopefully pay off your mortgage and use the £150k you’d spend on a different house to help your DC buy?

Then invest the rest, put some in pensions and have a good once in a lifetime family trip somewhere.

Keep enough in savings for buying a new car etc if needed.