Hypothetical (ish) Question
Discussion
A 61 year old with a reasonably well paid job inherits around £200k from a deceased parent.
There is a wishlist of home improvements and a few "nice to do" things which would account for around £80K.
Is it best to pay for these items outright and diminish the capital, or borrow to pay for these, keeping the £200k in a savings account , safe in the knowledge that if SHTF, you can just settle your debts?
Do rich people stay rich by spending their own money?
There is a wishlist of home improvements and a few "nice to do" things which would account for around £80K.
Is it best to pay for these items outright and diminish the capital, or borrow to pay for these, keeping the £200k in a savings account , safe in the knowledge that if SHTF, you can just settle your debts?
Do rich people stay rich by spending their own money?
Nicetobenice said:
First thing would be to decide if paying the loan off out of income would have a negative effect on lifestyle.
Second thing is if you are confident the return on capital you would get is less than the interest payable on the loan and lost on the savings you would have otherwise made.
Mortgage was paid off about 2 years ago so a small mortgage for the home improvements would easily be affordable.Second thing is if you are confident the return on capital you would get is less than the interest payable on the loan and lost on the savings you would have otherwise made.
Jazzy Jag said:
Mortgage was paid off about 2 years ago so a small mortgage for the home improvements would easily be affordable.
Just need to do the maths and then decide whether you can beat the interest paid and the interest you will lose.You could always use the money but pay yourself back what you would pay in the loan.
Jazzy Jag said:
keeping the £200k in a savings account , safe in the knowledge that if SHTF, you can just settle your debts?
There is no point doing that as you are guaranteed to lose vs inflation even if you have somehow borrowed at less than the savings account pays.Rich people don’t spend their own money that makes more than the cost of borrowing. Generally that will be invested in profitable businesses.
Rich people also don’t keep assets in cash and they love a tax write off.
Jazzy Jag said:
Is it best to pay for these items outright and diminish the capital, or borrow to pay for these, keeping the £200k in a savings account , safe in the knowledge that if SHTF, you can just settle your debts?
Well, that depends on the interest rates of the loan and the savings account. If the latter is usefully higher than the latter, great, but things don't usually work like that.Can I suggest an off-set mortgage sounds exactly suited to your purpose..
You could borrow the £80k from the lender (Coventry Building Society best for this product).
Then place the equivalent amount in the off-set savings account. This will effectively create an interest-free £80k loan which see's you only needing to repay the capital borrowed whilst keeping the original £80k on hand and completely liquid in case SHTF as you say.
You could borrow the £80k from the lender (Coventry Building Society best for this product).
Then place the equivalent amount in the off-set savings account. This will effectively create an interest-free £80k loan which see's you only needing to repay the capital borrowed whilst keeping the original £80k on hand and completely liquid in case SHTF as you say.
Jazzy Jag said:
A 61 year old with a reasonably well paid job inherits around £200k from a deceased parent.
There is a wishlist of home improvements and a few "nice to do" things which would account for around £80K.
Is it best to pay for these items outright and diminish the capital, or borrow to pay for these, keeping the £200k in a savings account , safe in the knowledge that if SHTF, you can just settle your debts?
Do rich people stay rich by spending their own money?
Personally, I would be inclined to pay for all the “treats” etc from the £200k and then put the balance into a savings/investment product which gives the best return based on your attitude to risk.There is a wishlist of home improvements and a few "nice to do" things which would account for around £80K.
Is it best to pay for these items outright and diminish the capital, or borrow to pay for these, keeping the £200k in a savings account , safe in the knowledge that if SHTF, you can just settle your debts?
Do rich people stay rich by spending their own money?
At 61, I would be thinking of trying to find a way to retire with the funds or alternatively look to bolster your pension payments as much as possible.
What's the pension looking like (which isn't that far away)?
Is there anyone in line to inherit anything?
With a 'reasonably well paid job', sounds like this is a Brucie bonus of not (currently) needed cash. So does it really matter what scenario will make the most additional money? You're still winning either way.
Unless your pile of saved cash generates more income than interest payments on a loan, I'd say avoiding loans would be good.
Offset mortgage could work, as long as you don't need to access/rely on the savings for anything.
Is there anyone in line to inherit anything?
With a 'reasonably well paid job', sounds like this is a Brucie bonus of not (currently) needed cash. So does it really matter what scenario will make the most additional money? You're still winning either way.
Unless your pile of saved cash generates more income than interest payments on a loan, I'd say avoiding loans would be good.
Offset mortgage could work, as long as you don't need to access/rely on the savings for anything.
Gassing Station | Finance | Top of Page | What's New | My Stuff