Another thought would be – the £600 per month saving on the mortgage would be enough to reduce hours? You don’t lose 20% of your pay dropping to a 4 day week.
This is definitely what I would do.
Sorry for your losses. My Dad died at 69 too- tho he'd been retired 15 years so got a lot out of those years.
+1 to clearing the mortgage. We cleared ours a few years ago- the relief of not owing anything is great. Work got sticky a few months ago and I handed my notice in with no other job to go to. Not having a mortgage & having saved what used to go on repayments made that an easy decision. I was on a 3 month notice period and got a job offer in that time.
If you're concerned about having access to capital, then an offset should give that security.
First of all condolences to the OP.
A couple of quick factual points. The £85000 protection limit kicks in after 6 months. This is to allow people in your situation to decide what to do.
National savings bank (NS&I) provides protection for balances over £85000 if you need more time to decide what to do
For me the priority is the mortgage. I’ll express that in 2 ways.
If you currently owned the house out right, would you borrow against it to invest in the stock market?
If you put £200,000 in the stock market today and in 4 years that was worth less than £200,000 how would you feel?
Oh and if you do pay off the mortgage you’ll save £28,800 in payments over 4 years.
But do get proper advice. We’re just randoms on the internet
My wife and I are in a similar situation due to the loss of both my parents in the last 5 years.
Our thinking is clear the mortgage, it's the psychological pay off here that will mean the most. We can look at putting a sum aside every month from what would have been the mortgage payment to build up a savings pot.
I understand this probably isn't the best financial decision, but it will make the most difference day to day, right now.
Also, jonba has it above, once you've lost parents, I feel like it totally resets your priorities. As soon as it becomes viable, I'll be looking at reducing my hours. Time is the most important asset.
You could put it towards your fuel bill this winter, it should help reduce the sting of that.
You could put it towards your fuel bill this winter, it should help reduce the sting of that.
"Put it towards" don't be so negative 😉 £200k should cover it completely 🙂
Tricky one.
Do you both enjoy working? Sounds daft but what would you do if you didnt work?
I would maybe reduce the mortgage balance significantly but not pay it off as as stated above mortgages are very cheap at the minute and will house price rises off set the interest charge ?
Savings are pointless at the minute there is no real return which leaves gambling on higher risk investments.
Personally I would spend some of it. Nice family holidays and experiences, memories that are free and last.
Look at a nice sports car, choose wisely and you are sitting on an investment for the future.
But do get proper advice. We’re just randoms on the internet
I would be wary of 'proper' advice. Certainly seek it but I would base all my assumptions on what they tell you. It doesnt necessarily always work in your favour.
Hobnob has a great point re buying a plot and building a house
Nice romantic notion but £250k wont get a house these days.
Half on the mortgage, a quarter set aside for children and enjoy the rest would be my suggestion. In similar circumstances (welcome to the Orphan Club 🙁 , my parents average lifespan was 50 years old), I blew a lot on a big family party for my own 50th. We'd had a turgid year, with two deaths, and needed something special. My extended family still recall the day out on the river and it was worth every penny.
Buy memories, but apply some prudence to go with it.
My immediate concern would be spreading the cash around different banks as the amount exceeds the amount the government protects (£85k) in the event of bank collapse.
This is something to think about, but it doesn't have to be a 'do it right now' sort of thing as you're protected for up to 6 months for unusually high balances.
An IFA is the obvious answer, £270k is not to be sniffed at
If invested properly until the 4 year mortgage deal is done, it could easily keep pace with your mortgage payments, plus the benefits of compound interest/reinvestment
My pension fund started off with £320k, I've been taking £1500 p/m for nearly 3 years, and it's now £327k
The ongoing mental relief of having no mortgage left would be an incredible gift...
Being mortgage free buys you time and as you get older with the kids, that’s the most valuable thing of all.
^^^^ This. Times 270,000.
Nice romantic notion but £250k wont get a house these days.
I don't know where the OP lives, but the cheapest one round here, 1 bed flat admittedly, is £28k.
Two bed terrace with a garden from £100k.
£250k would get 3/4 bed detached with a nice garden. Obviously if the OP wants one in the south east its a non starter.
I was in a similar situation maybe 5 years ago. Mortgage was tied in for a while so instead I reduced my hours at work while still being able to maintain a similar lifestyle. When I was a kid I hardly saw my dad as he was always working, now I'm basically always there for my kid. To me that's the best investment I've ever made.
It does come with financial penalties in ways, there's no grand holidays, we have 16yo cars & live in a good but not great house but I'm still happy with my choice.
Going down a traditional route I recommend getting pro advice but go to a few different sized places, I found the small guy working from a converted shop was much more on my wavelength than the suited and booted big boys.
I’d do two things, check what level of overpayments I could make on the mortgage and penalties for paying off in one go. And second, get the services of an IFA. Beyond that I’d not want to risk spaffing the cash on some speculative opportunity.
Hobnob has a great point re buying a plot and building a house
Nice romantic notion but £250k wont get a house these days.
Hob nob was referring to building a house- new builds are exempt from VAT so it should be viable as long was you don't go all Grand Designs.
re IFAs- the inlaws went to one (following recommendations) with the FILs redundancy package. I suggested speaking to a few but they just went with the recommended one. They put c 25% of their money in a product aligned to the Japanese market just before it stagnated.
I think the point expressed above about possibly reducing work hours is important. Time is a greater luxury than money and I'd plan according to what type of lifestyle you want.
For sure I'd put a good bit into stocks and shares for the long term though, U.S S&P returns have averaged out around 10% per year. I'd also put a small bit into Bitcoin.
Andy5390 - where do you get that sort of return off a 320K pot? I'd be keen to know!
I was expecting lots of people to say "buy another property outright and rent it out to pay the mortgage (or part of it) whilst leaving your income for fun things. And then sell the other house whenever you want in the future".
Any reason people haven't been suggesting that?
I was expecting lots of people to say “buy another property outright and rent it out to pay the mortgage (or part of it) whilst leaving your income for fun things. And then sell the other house whenever you want in the future”.Any reason people haven’t been suggesting that?
I guess because that comes with a load of faff associated with it. It crossed our mind but neither of us wanted the hassle of a tenant, the additional tax return, admin, regulations etc.
If the OP was of that mind I'm sure he'd be on it in a flash.
Like a lot of things some people will do anything to squeeze the last percentage out of any investment. Others just want to make their lives easier.
I was expecting lots of people to say “buy another property outright and rent it out to pay the mortgage (or part of it) whilst leaving your income for fun things. And then sell the other house whenever you want in the future”.
Any reason people haven’t been suggesting that?
For me, it's because if I was to come across a sum of money that was big enough to reduce stress, I wouldn't then aim to increase it by trying to be a half decent landlord while still doing everything else.
I'm no expert and my risk appetite is low.
We pushed ourselves to become mortgage free 5 years ago, felt great immediately but in hindsight it wasn't everything we hoped. We thought we'd then have the opportunity to stretch ourselves further to start setting up our kids future. As it was, we just spent more of our disposable as opposed to saving more whereas out low interest mortgage was actually a fairly effective excuse of putting money aside.
If it were me, assuming your parents estate includes the house that they owned, i'd keep that, rent it and use that income to pay my own mortgage. Then once your 7yo is ready, you've provided him a house.
Property somewhat tracks property so why release equity from a property now to put it in an investment that may not be large enough to buy an equivalent house in 10 years time when he needs one.
If you really want the option to have capital at short notice and “no” mortgage then something like an offset mortgage might be worth considering. With the whole balance there it means you don’t have interest and can be 100% totally mortgage free with a phone call (well its probably some forms!), but if something happens and you need 20/50/100K you can get it without needing to ask for approval (which depending on the circumstances meaning you wanted cash quickly might be an issue – like if you quit your job!).
This. An offset mortgage gives access to cheap cash if you lose your jobs or something unforeseen happens. All the benefits of no mortgage but with access to a decent sum of money at short notice. I’d spread the risk/opportunity rather than keeping it all in the mortgage account - maybe put half or more into shares, and move cash across to use up your ISA allowance.
Then c&h for a good chunk. Obviously.
Paying our mortgage off was the best thing we ever did. It just feels so gratifying when you can say, 'we own our house outright'.
What we did, which was advised by our IFA (nephew) was to overpay the mortgage off, IE, the mortgage company actually owe us money, something like £3.50. They don't take any more money off but it leaves the account open & we have a borrowing facility without much faff should we need it. (We won't, but hey)
Maybe worth asking.
Was in a similar position recently but smaller inheritance.
Decided to clear the mortgage even though technically it would have been more financially beneficial to invest in a long term cash savings account as that would have beaten the interest we were paying on the mortgage.
Did the sums regarding early repayment and for us it made financial sense to just pay the penalty (we payed less in the penalty than we would have in interest should we have stuck it out)
It is very nice not being a slave to a mortgage and being able to decide whether to use the surplus to put in savings of some sort or to use for fun things.
Another vote here for paying off the mortgage or putting the money somewhere safe to pay it off when your fixed term ends. If you want to make a hobby out of putting together an investment portfolio to squeeze the maximum (maybe) return out of the money then go for it but like the majority on here I favour the nice feeling of going to bed knowing you don't have to worry about the roof over your head. Thats what me and my missus did when we inherited, paid off the mortgage and did a few home improvements like putting a new roof on the place (so I literally don't have to worry about the roof 😉 )and I heartily recommend it. Down the road if you want to release some equity to give to your son then you can downsize. By all means keep a few thousand back to enjoy.
Look at a nice sports car, choose wisely and you are sitting on an investment for the future.
I would be wary of ‘proper’ advice.
😂
Just a bit of advice on mortgage, a friend of mine was in a similar situation but would have incurred a big penalty paying off their mortgage. What he did instead was reduce it to 10k, no penalty, tiny monthly payments.
I’d do a variant of the post above but you need to factor in income tax on savings interest - which could wipe out any marginal gain.
Ideally:
- keep the fixed rate mortgage
- stash the inheritance in cash savings (ideally shovel as much as possible into a cash isa each year)
But
- pay off the monthly mortgage payments from savings so you’re getting an immediate benefit in cashflow
Then pay off the outstanding mortgage balance when the term expires.
Really sorry for your loss OP, sounds like a rough few years.
If I was in your position I'd sit down with my wife, make a list of things that make us happt then ask a financial advisor how we can get the money to help us do that. I'm not sure exactly how that would look, but I'd almost certainly be figuring out a way to spend more time together as a family while the kids are growing up. I figure my kids will always be able to make some money when they're older but they will never be able to buy time with us.
So yeah, maybe figure out how to pay off the mortgage so we could work less.
