Lump sum - best option

D

daveb

Registered User
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I inherited an average lump sum recently and would like some advise on how best to use it. I don't know whether to invest it in a Life Assurance managed property or equity bond, government bond or simply pay off some of my mortgage which is on a standard variable rate.

Setting the lump sum off against the mortgage seems the most logical thing to do in order to reduce the repayment years and associated interest.

I'd love to hear your views around managed funds v pay off some of mortgage debt.
 
What's the rate on your mortgage?

How big is the lump sum?

Do you have a pension?

Do you have any other debt?
 
Assuming you have a reasonable cash reserve set aside to address emergencies (six months expenses is a good rule of thumb), I would use the entire lump sum to pay down the mortgage ahead of schedule.

That will give you a guaranteed, tax free, net return of 3.4% pa over the remaining term of your mortgage - that's a super return in the current environment.

It might even bring you into a lower LTV bracket, in which case you could secure a lower mortgage rate - either with your existing lender or by switching to another lender.
 
Sarenco said:
Assuming you have a reasonable cash reserve set aside to address emergencies (six months expenses is a good rule of thumb), I would use the entire lump sum to pay down the mortgage ahead of schedule.

That will give you a guaranteed, tax free, net return of 3.4% pa over the remaining term of your mortgage - that's a super return in the current environment.

It might even bring you into a lower LTV bracket, in which case you could secure a lower mortgage rate - either with your existing lender or by switching to another lender.
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Gordon thanks so much for the speedy responses. It is genuinely appreciated
 
Sarenco said:
That will give you a guaranteed, tax free, net return of 3.4% pa over the remaining term of your mortgage - that's a super return in the current environment.
Click to expand...

This view has been stated many times on AAM. I understand its intent - but it requires a significant qualification. Any takers?!
 
daveb said:
I inherited an average lump sum recently and would like some advise on how best to use it. I don't know whether to invest it in a Life Assurance managed property or equity bond, government bond or simply pay off some of my mortgage which is on a standard variable rate.

Setting the lump sum off against the mortgage seems the most logical thing to do in order to reduce the repayment years and associated interest.

I'd love to hear your views around managed funds v pay off some of mortgage debt.
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Use some of it on something you will really enjoy. Is there somewhere you've always wants to go but thought you couldn't afford? Do something that you'll be talking about for years later.

Use the rest to pay down your mortgage.


Steven
www.bluewaterfp.ie
 
Dan Murray said:
This view has been stated many times on AAM. I understand its intent - but it requires a significant qualification. Any takers?!
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I suppose it would be more accurate to say that the nominal return on paying down a variable rate mortgage ahead of schedule is the equivalent of the weighted average rate, less any applicable interest relief, over the remaining life of the loan. Is that your point?
 
Sarenco said:
I suppose it would be more accurate to say that the nominal return on paying down a variable rate mortgage ahead of schedule is the equivalent of the weighted average rate, less any applicable interest relief, over the remaining life of the loan. Is that your point?
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No need to suppose!
 
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