WWYD - Significant inheritance

[differentname100]

Have name changed for obvious reasons for this. We have been left enough money (£250k) to pay off our mortgage and have nearly £80k left over. We are though unsure if this is the way to go. We are young (early 30's), both professionals, and our mortgage repayments are comfortable for us even if one of us was to stop work tomorrow. We are wondering if it would be sensible to instead of paying off the mortgage to buy 2 small houses (one for each of our children) that they can then use when they're old enough as a means of starting off on the houseing ladder. We all know how hard it is to get a foot on the ladder now a days.

If we were to put all the money into our house and then we wanted to help our children out later in life we would have to release equity from our home but if we were to buy 2 small properties then the money would be easy to release. Also, if we invest in housing now we are thinking that we are ensuring that the money increases with the house prices whereas it might not in another investment. We would want to rent these 2 properties if this is what we did until the time came to give them to our children.

So, what would you do?

Buy one house in a university town, or one flat in a city and sell it when the time comes for your DC and split the money then.

Pay off mortgage. Reduce work commitments. Invest remaining money and give your DC a great life and then make them stand on their own two feet when they leave home [knowing that you have money in the bank if they really need it].

That's what I'd do. Sorry, you are no doubt grieving, but lucky you!

Do you have experience in being a landlord? It would be another job to do and don't kid yourself that it ends with renting out the house and cashing the check every month. In the US if you have someone who just stops paying the rent it can take months to get them evicted so know the laws there. Also be prepared to pay for repairs, painting, cleaning/replacing carpet after someone moves out. It's not their home and they won't be looking after it like you would.

I would pay off your own mortgage and invest the rest in a portfolio that matches your needs and risk tolerance.

I would treat the family to something nice - a holiday or something, then...

I would invest it in property - whether that's one house you can sell and split between the children later or 2 so you can give them one each or 5 - it depends where you live and how old the children are. I would do it so that the rent pays the 'bills' and the mortgage with a bit left over (so make the deposit fill the gap iyswim).

I would also put some of it in a 'cash' investment to cover any downtime or any other wants/needs.

For convenience I would buy locally - property may be better value in other areas, but rental properties that aren't local are a pain in the neck.

Also, I would not tell your children that this is your intention - you don't know what will happen in the future and neither you nor they need to feel you are using 'their' inheritance should you need it. Until you give it to them, it is yours.

Sorry for your loss - I can but hope it was a long lost relative that you never knew - but I suspect not x

Pay off the mortgage (when any penalty period is spent), use regular monthly payments to save a nest egg for your dc and enjoy some great holidays. If you have some left over each month save that towards an investment property (second home to use for holidays or lets perhaps) but it may be a lot of unnecessary aggravation to buy to let at the moment.

Pay off mortgage, do you never ever want to move to bigger house (you'll be liable for capital gains tax), pay for education - school/university? I'm not convinced its a great start in life to be given some money or property on a plate when you are starting out in life.

Why property rather than the stock market? Have you been to see a financial advisor? As Jabberwocky says, owning properties does involve work yourself, or hiring someone to do it for you.

What will happen about your children's University fees (if applicable?) Would it be a good idea to be investing for these?

I also agree with taking the approach that this is not your children's money, but that this is family money, to be used as seems best for the family at any point. You never know what may be around the corner.

If you pay off your mortgage you will only be 'better off' by the interest you save. If you buy rental properties tennants will be paying off your mortgage on further properties... I don't see why you would just pay off your mortgage?

Stock market - not for me. A GOOD balanced fund is worth looking into though. But if it was my money - I'd invest in property.

We haven't been to see anyone yet, we're just talking together at the moment. Need time really. We hadn't even thought of the savings of the mortgage payments and using them to pay for university. Clearly not thinking properly yet. You've all given good ideas. We know we need to go and talk to a financial advisor but we want to sort out in our minds what we want.

Hi,my situation was/is different but basically ex husband died a year ago,id been paying morgage and insurance on my own since we split

Anyway by having the insurance i had a choice what to do so payed of the morgage put some away for the boys paid all debts.

im not currently working and single so my thinking maybe different to you as you have a partner and work so this as i saw it was my 1 chance for total security and the boys would get the house when i die anyway,

Basically im in my 30's and the feeling of having no morgage,debts etc is amazing,means i have more money for extras etc

but im quite boring like that not a risk taker but the freedom is fantastic and theres always the security for my sons now.

Enjoy it and wish you well

Pay off mortgage and see a financial advisor wrt the rest and how best to invest it for your kids

What noddyholder said. Use it to make your family's life easier, not more complicated.

I think that over the long term, the markets are always a better investment than property and much, much less worry. And if your children don't want to live where you own the houses, you'd have the tax complications of gifting/cgt. Although it seems like a lot of money, it's not once you start splitting it into properties.

Find a great financial advisor,talk to him or her about what you want the money to do for you in the long term. All the best

Set up a trust fund for them? A well managed trust can make a lot more money than a house! And far less hassle.

Why should you pay off your mortgage? Because it is money you owe. Simple. So get rid of the debt. Or at the very least reduce it substantially.

You may alternatively think that if you can guarantee a return on investment that is greater than the interest you are paying on your debt then that may be a preferrable option. On paper anyway. Only works if it is guaranteed. Depends as well on what type of mortgage deal you have. How risk averse are you?

Somekind of trust that is released once the children get to a certain age might be an idea.

Ditto to whoever said that the stock market is always good in the long term.

We've got rental properties and one of our last tenants was a nightmare and we are significantly down on (lack of) rent.

I would pay off my mortgage in a flash.

Then I would invest the remainder wisely, and save some of the money each month that I am no longer spending on mortgage payments for a university fund.

Buying a house for your children sounds all very well but they may not want to live where you buy. Also I think it's better to provide for their education rather than set them up in a property. Let them make their own adult choices.

I'm sure the FA will have much better advice than me though!

The FA will be able to advise on property and whether buy-to-let is a good idea ATM. I read that the market was pretty flooded with buy-to-let, even holiday homes. I agree the stock market is probably better.

If you do go for property I wouldn't advise buying one for each child - the two properties may start out equal, but what if one significantly appreciates in value and the other one doesn't? One property to then sell and split the money would be better IMO.

We were in your situation a few years ago. We inherited enough to pay off the mortgage (though no more). Can I say that paying off the mortgage was the single best decision we ever made.

Being mortgage free has allowed us to be more relaxed about our employment status. DH decided to take a career break to be a SAHD. Having no mortgage meant we could cope on one salary. We have both made the decision to change careers. We've been able to deal with short term contracts and pay decreases, all of which means we are now happier and more relaxed. This has had a positive effect on DD who is used to plenty of parental time. Our ultimate aim is to both work part time.

You can't predict, in this economic climate, what will happen to either house prices or your jobs. What happens if one of you gets made redundant? Being mortgage free give you such a cushion against future unknowns. I agree with he others who suggest a trust fund for the children. They may not want to go to university. They may want to spend it on setting up a business or travelling around the world.

Agree with others - pay off your mortgage.

Put a lump sum of money aside/invest for when you retire - pension, etc., and contribute to it monthly (with some of the money you would use to pay mortgage)

Save for your dc - you/they can decide later if the money is used for university, deposit on a house, etc. Wouldn't buy houses for them now - you can't know where/how they'll want to live.

Take one really lovely holiday a year with your family - you/they will have those memories forever.

Buy to let is over for now, especially University towns, we live in one with 11,000 empty properties which will attract council tax after 12 months.

I'd pay mortgage off, and look for safe long term investment plans. Can't remember his name but that money saving expert website (chap on Radio 2 sometimes) is useful.

what rate is your mortgage? Left to my own devices I'd always pay off mortgage, BUT my DH always resist when we have spare cash, and so far can always find a place to put it on deposit where the net interest rate is higher than the interest we pay on the mortgage. It's getting harder though and it helps that he always uses ISA allowances and is a basic rate tax payer. If you have time to do that don't pay off all the mortgage - make the money work for you. Also what is your attitude to risk? If you buy houses for your children you will have a lot of money in property i.e your house with a mortgage and the property you buy for the children. That is very rarely the right decision unless you are very sure of your returns (rental income less costs). The stockmarket will usually outperform property in the long term, but even if it doesn't a spread of investments means you have less overall risk and more freedom if things change in the future. If you needed money in the future its very difficult to get out of property at the right time, and it can often be a very illiquid asset. Also how much time do you have to manage your money - whether that's managing property, stocks or shares. If you don't have time or won't make it paying off the mortgage is more sensible. If you are able to be an active investor you will probably get better returns.

Finally if you do see a financial advisor - pay for their time as you will get better advice (I am not a financial advisor and have no vested interest there)