How best to use inheritance?

Discussion in 'Money makeover' started by hokey32, Mar 30, 2010.

  1. hokey32

    hokey32 Frequent Poster

    Age: 37
    Spouse’s/Partner's age: 34

    Annual gross income from employment or profession: 25k
    Annual gross income of spouse: 46.5K

    Type of employment: e.g. Civil Servant, self-employed: Both private sector.

    In general are you:
    (a) spending more than you earn, or
    (b) saving?

    Not spending more than we earn but not saving either.

    Rough estimate of value of home: Not sure - €220k? Purchased 4 years ago for €288k
    Amount outstanding on your mortgage: €250K
    What interest rate are you paying? 3.25%

    Other borrowings – car loans/personal loans etc: None

    Do you pay off your full credit card balance each month? Yes
    If not, what is the balance on your credit card? 0

    Savings and investments: Credit Union €30k savings.

    Do you have a pension scheme? Have paused it for the moment.

    Do you own any investment or other property? Have just sold inherited property for €120k.

    Ages of children: 19 month old daughter and baby no. 2 due in early June.

    Life insurance:

    What specific question do you have or what issues are of concern to you?
    We are in the very fortunate position of having recently inherited a property in a midlands town and sold it for €120k and now need advice on how best to use this money.
    Four years ago we bought a two bed apartment in a convenient location to Dublin city centre on the Northside hoping to trade up after a couple of years. We now have a 19 month old daughter and another baby due in early June and would love to buy a house with a garden as space/storage etc. are no longer enough in the apartment.
    My questions are:
    1.) Is it better to try and sell the apartment now albeit at a loss?
    2.) If we do sell the apartment should we rent for a while first
    before buying again?
    3.) Do we rent out the apartment and rent a house for ourselves? If we
    did this we'd have to top up the rental income by approx. €300 per
    month to make up the mortgage.
    4.) Rent out the apartment and look for another mortgage with the €120k
    (this sounds like the riskiest option to me but just thought I put it out
    Houses in the areas we'd be looking at are currently selling for between €250k - €300K.
    I was hoping at some point down the line when the children are in school to stop working - maybe in 3 years time so this is also a factor to be considered.
    We had thought about contacting an independent financial advisor but are they all affilliated to a pension/investment group?
    I hope I've given enough information!

    Thanks for any help.
  2. aristotle

    aristotle Frequent Poster

    If I was in your shoes I would sell the appartment at a loss to what your remaining mortgage is, if you have to take 20,30,40k hit then I would as I could balance it out via the inheritence. You would still have a good lump sum in the bank afterwards.

    My reason to do this would be based on my opinion on where prices of appartments are headed and my belief that it will take many years to see an upturn again in prices. I also wouldn't want the hassle of being a landlord but if you work out the figures would it be worth you renting out the appartment? (edit: sorry, I see you have done and it means you have to back it by 300 per month. If you can't rent it out for a month or two then thats a big hit to you.)

    I would rent in the meantime before looking to purchase a house again after price drops in property have stopped.

    Thats what I would do anyways.
  3. circle

    circle Frequent Poster

    You should check what mortgage you could get now, presuming you had paid off the existing one, as that may influence your decision.
  4. paddyodoors

    paddyodoors Frequent Poster

    To start with get your property valued, confirm this first before deciding to get a clearer or more accurate picture.

  5. annR

    annR Frequent Poster

    I agree with Paddy, that would be a good first step.

    Do you want to move before you have the baby or after?