Reply With Quote.12345
In the next 6 months my partner and I are set to receive £25,000 which is a great 'problem' to have but we don't really know what to do with it.
This will be the first time in our lives we have had any reasonably large lump sum of money (we are both late 30's). We currently rent our property but don't wish to move and in real terms we live comfortably.
Premium bonds have been suggested by a friend of the family but it would be good to have something with a guaranteed regular return each month/year.
I would be happy to buy stunning watches and have done with it but then I would be divorced in a matter of days!
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Last edited by jambobbyb; 22nd May 2019 at 10:28.
100% no no on the property ladder?
It's probably the best way to go, in my opinion anyway. If you rent you pay rent until the day you die, at least with a mortgage theres a cut off date.
Premium bonds are safe but in reality they offer a fairly poor return. Yes there is a ‘odds of winning the lottery type’ chance of a big win but extremely unlikely.Originally Posted by barty9
Without knowing your circumstances it Will be hard to give any advice of substance, but personally I’d want to build long term security and that starts with owning your own home.
I'm intrigued, can you elaborate on this a bit for me please mate?
Perhaps a small buy to let property would be worthwhile, but we like the house we rent and it wouldn't be something I would look to live in.
I know you don’t wish to move but I’d definitely use it as a deposit to buy a property, even if you only buy it to rent, any rent should cover mortgage payments and at the end of the term (near retirement age) you’ll own a valuable asset. Plus looking at how property has always performed as an investment over 25 years it’ll likely earn you more money than most investments without undue risk. Bricks and mortar all day long for me.
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IMO getting on the property ladder would be the only option. You seem happy renting which baffles me... you are just throwing money away every month.
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Last edited by jambobbyb; 22nd May 2019 at 10:28.
Kind of :-) ... the rent agreement is low in relation to where we live and is unlikely to change.
Things go in cycles - boom and bust, growth and recession etc.
In 2007 we saw the start of the last retraction - Northern Rock, Lehman Brothers et al. All of a sudden things got worse - property prices dropped, work dried up, lending went from easy to extremely difficult and the stock market took a huge drop. These cycles tend to repeat themselves. Late 90's saw a huge boom in technology and come 2003 the stock market halved - what was different about that one was property prices boomed so the 'average' person didn't even notice it as all they saw was their house rising in value. A false economy in one way, but an advantage over people that didn't own.
What I would say is that history tends to repeat itself and one test is that when lending gets easy (as it did back then), people tend to borrow more and more on the 'never never' - 125% mortgages, ridiculous credit card limits and banks giving away personal loans at service stations to all and sundry!
Are we close to that stage again? Who knows! However the stock market is at an all time high, personal loans are under 4% and almost anyone can get one and credit card limits are being raised all the time. Worse still watch prices are rising at 20% a week :-)
I’d certainly be looking at a buy-to-let property. Either local to you or if you fancy something a little more interesting, possibly a holiday let somewhere, (although if it’s too far away, budget for having it managed).
Much appreciated gents, thanks.
Always eager to learn when the pound in my pocket is affected.
For the first 10 years, 80-90%+ of what you pay on your mortgage is interest. This is money you are throwing away, as during that time your are effectively renting the house from the bank assuming property prices stay flat.
Twenty years of property price inflation, means that property price only go one way, right?
Tell that to the folk in the late 80s/early 90s who lost their shirt on property.
Not really true nowadays. A house for say 160k with a 135k mortgage over 25 years at 1.89% would be £564 per month. The interest element would start at £211 per month and the rest would be paying off capital. So you are immediately paying off quite a bit every month.
Caveat: of course depends where you live. Many places you could buy a home for 160k. Unlikely if you live in the south east.
Last edited by Devonian; 25th May 2018 at 12:39.
Horses for courses!
Home ownership has been pushed down our throats for as long as I can remember. It isn’t the ideal solution for everybody.
Renting isn’t “throwing money away”; it’s only seen that way due to the massive appreciation in property values over the last fifty or sixty years: if they depreciated like (say) cars then renting would be considered the sensible option.
Renting is also the prudent option for those who are geographically mobile: the cost of selling a property and buying another can easily outweigh years worth of rent.
Agreed, renting is the norm in much of Europe apparently. If it works for you then great. Matching Rolex's it is then!
This is very tempting!
https://www.telegraph.co.uk/investin...ares-and-gold/
The link is a few years old, but it's more true than ever.
If you're not interested in property then the first place to put the first £20k of any investment money is an ISA as it is tax-efficient.
Lego eh? As safe as bricks I suppose...
Incredible! Thanks for the info.
I really dont get why people rent over buying.
If Joe Public moves out of his Mums house at 20 and rents a house at £500 per month, he'll be paying £500 a month until the day he dies.
If he buys the house over 30 years, his money's his own after his 50th birthday PLUS he owns a house that he can sell should he so desire.
I'm not having a go at anyone, if renting suits you, then no problem, who am i to say otherwise, but when you see it like that in black and white, how can renting be better?
The issue I have at the moment is that I rent a house within my means which I couldn't afford to buy.
Have a nice holiday to celebrate and put the rest into stocks and shares ISAS, a diversified range of funds with global reach. Don't touch for five years and see where that gets you. Compound interest is a wonderful thing and free money has to be experienced to be properly appreciated! Try to add to it every year if you can, even if it's just a little it all helps.
There are many ways to invest but until you've used your annual allowance, it's hard to beat a method that's 100% tax free. Have to say I'm glad I'm not renting though, maybe keep an eye on that, especially if the market crashes.
Set up a SIPP and stuff it into that.
You would get an extra 20% from HMG plus tax relief next year, plus growth.
The only problem is that you cannot touch it until you are 55.
Whoever does not know how to hit the nail on the head should be asked not to hit it at all.
Friedrich Nietzsche
If you have zero intentions of using it for a deposit on a house then Stocks & shares ISA -drip feed it perhaps £2k a month in to a FTSE250 tracker (returned just over 12% annualised since it was launched over 25 years , or perhaps Fundsmith equity fund ?or lindsell Train Global equity- both solid managers that have an excellent track record over the previous decades )
I live in the South East; if I were to move house, it would cost me in the region of £40k to move (most of it being stamp duty!) if I were more geographically mobile or moved a lot (I moved give times in seven years when I lived up north) then it’s far cheaper to rent than buy and sell.
As I said before, it’s horses for courses and not a fine deal that buying is the best option for everybody!
Don’t get me wrong, I’ve always owned property since leaving university and still own three but I’m not blinded to the “buying is always best” ethos.
There you are, a case that proves tge point!
Property prices in London have levelled out and that is usually a prelude to falls in prices. Much depends on the precise location but (as others have suggested in relation to the stock market) putting money into assets that have had a good run over a long period isn't necessarily a great idea.
But remember what you take out is taxable (subject to 25% tax-free). That, and the age you can access pension savings, is subject to the whims of Governments too.
If you are higher rate tax payers but expect not to be in retirement then that makes pensions savings more attractive. If you are in an employer sponsored scheme, worth looking at their Additional Voluntary Contribution options as the ongoing charges will likely be less than a SIPP and 20 years of lower fees is likely to be a decent amount.
After being coerced into buying around 15 years ago it was without a doubt the worse thing I ever did.
Bought when prices were at a peak, area took a huge decline and put us in negative equity which meant i was paying double my mortgage to negate the negative equity at the time in an area that we an absolute sh1thole. Plus the cost of maintenance and new doors/windoes/kitchrns/bathrooms etc. All adds up and eats into any bottom line. Stamp duty/tax when you move as well plus the myriad of other fees...
If I'd been renting I'd have moved out as soon as it got bad, as it was it took ten years to get into a position to move.
Buying property certain isn't all its made out to be and is a pretty archaic view in my opinion.
What you take out is not taxable if you stay under the personal tax allowance. As for charges, true, but if your SIPP isincreasing at say 7%/year, do you really mind paying 1%?
As for the government doing stuff, well that's true of many thinks. Mortgage tax relief springs to mind, but I cannot see them making pension changes retrospecitively. Much more likely will be in a cut in the amount people can put in a SIPP per year, or the tax relief element moving forward.
Whoever does not know how to hit the nail on the head should be asked not to hit it at all.
Friedrich Nietzsche
Invest it for the long term, via S&S LiSA, ISA, SIPP. You’ll thank yourself in 20years.
What you haven't had, you won't miss.
Indeed - I was assuming ....
If the OP invests in a given fund via his employer AVC scheme he will almost certainly pay less than if he invests in the same fund via a SIPP. No reason why a SIPP investment should increase more than an employer scheme investment. Many people aren't aware just how much fees can take away from performance. So fees should always be considered.
Depends on how you define retrospectively. If you had a (trustee discretion) right to retire from 50, that was changed to 55 by the Government. Many employer schemes with indexation "rights" have had indexation reduced from RPI to CPI. A large number of "Final Salary" schemes have had salary caps, etc., implemented so that the pension you paid in for over a number of years is no longer based on final salary but rather a smaller figure. I believe a lot of public sector schemes saw retirement ages lifted and salary caps (or similar) which applied to existing members irrespective of the rules that were in force when contributions were being paid.
I never got the renting mentality?
Paying someone’s mortgage instead of your own.
Must be a modern fad?
All the talk of pensions not covering expenses when folk retire, yet they will have to find an extra 1K a month for rent,
I suppose renting allows you to live in a better area than you could afford to buy, dropping standards & all that.
Six or seven years ago it would of bought a quarter of my holiday home, today a tenth, that’s a decent return.
If your not interested in property & have decent luck PB may be an easy option for you.
Money available within a couple of days if needed & a win or couple a month.
3 SS Daytona’s & double your money ;)
Don’t waste it whatever you do.
My son is in the same predicament. Currently paying £1,000 a month for a house that would cost £450k+ to buy - no interest in saving £40k+ deposit as he is a bit of a spendthrift. His Girlfriend is the opposite though and it’s a constant cause of friction between them. Her view is that they are young now (early thirties) but she says, and I agree, what are they going to do when they are retired with no income?
My daughter on the other hand is more like me and the wife and is in the process of buying a flat with her boyfriend. A 2 bed flat in London, nothing special and it’s £420k. She’s saved very hard for a few years and we told them both as an incentive, if you save for a deposit, we'll match it up to a certain amount but we ain’t just going to give it to you. She’s due for her lump sum soon and we'll put the same amount aside in Premium Bonds for our son but who knows when that will ever be used.
How can two kids with the same upbringing have such different views?
Last edited by Motman; 26th May 2018 at 09:55.
If I’m not mistaken I don’t think you can get a buy to let mortgage unless you own a property already. I believe you must have a minimum of £25k income, be a homeowner already and the buy to let mustn't be worth more than your property you own and live in. I’d either go premium bonds, 2 x steel sports Rolex bought at a good price or look for an alternative property investment like a garage which can be bought freehold depending on location from £5k upwards which can return £50 upwards per month every month if let out. I have a few in good areas which generate healthy returns. It’s a bit of a left field suggestion but it works. I get £250 per month on a garage I bought for £20k. That’s £3k a year. That’s a decent investment in my book.
I'd go buy to let
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I take it you never read my above post? I don’t think it’s possible for the OP as he only rents and he needs to be a homeowner to get a buy to let mortgage. I could be wrong but that’s my understanding...
Simple, first off they can not afford to buy because deposit alone is unachievable, renting on the other is one month down + the bond.
Rinse repeat.
£20k open a 123 account 3% job done. 5k open another one.
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Last edited by Volvomanuk; 26th May 2018 at 20:11.
With that sort of money and being young - I'd stick it in an a stocks and shares ISA or A LISA and forget about it.
I would not get into BTL with that sort of money because of the hassle and the way that the benefits have tapered off.
123 pays 1.5% not 3%
Someone else’s property.
I received a small windfall and didn't want to spend it on watches so I popped it in a Zopa Innovative Finance ISA.
Yes, the capital is at risk as with all investments (as opposed to savings accounts) but the way they spread the risk is such that I'm comfortable that I'm unlikely to lose out. Expected return (after fees and predicted bad debts) is about 5%, which is above inflation without being greedy.
If you go that route, you may want to drip feed this year's £20k in over a period of weeks rather than put it all in in one go as that reduces the impact of any bad debts. 1% of the money you invest becomes a "microloan" to be bundled with microloans from other people to be lent out. That way if someone defaults, you lose 1% of your capital. If you put £20k in all in one go, each microloan is £200, if you put it in £5k at a time, each microloan is £50. The default rate is still likely to be the same but with smaller microloans there is a greater likelihood of hitting the predicted return rate. With larger microloans, you could do a lot worse (or, of course, a lot better)
Last edited by Gyp; 28th May 2018 at 09:38.
I realise that this is crystal ball gazing but lots of people (some of them in the property market) are saying that we are likely to see a house price crash soon and many are advising not to buy until after Brexit. It would be a bit of a bummer to have rented all these years then finally get on the property ladder only to be instantly in negative equity!
The property experts that always pipe up in these threads are amusing.
Nothing is as simple as some make out. Yes property has been an excellent savings vehicle over the last 20 years. To say it's the only way forward is optimistic at best.
Gross yields in London are still under 4%, with declining prices over the past year and an expected 2-3 years of stagnation if not larger falls.
Would you tell someone to buy a £500k London property rather than rent it for £1500 for the next few years? They would be £15k down in stamp duty off the bat, on top of all the other fees. Then have years of brexit uncertainty with potential price crashes from an unprecedented high price to earnings ratio. All for a 3.6% gross yield.
Think the only thing you can say for certain is if you wake up tomorrow and it's 1995 then you'll do well with property.
Get yourself an original Nissan R32 GTR if you’ve got a garage. American import rules and the fact it is THE Jap king can only mean they’ll be big money in years to come.
I had a max amount of premium bonds years ago (pretty sure you could only have £25k blocks back when I had them?) Worked out about the same as a savings account IIRC. Was quite exciting though, I think there was only a couple of months I didn’t win anything and I had one £500 ‘win’ but most were pretty low.
Not sure how they work out now but you can buy a lot more so it’s probably harder to ‘win’ given the interest rates these days.
In years to come (2040) petrol and diesel cars will be banned in the UK. Surely this will make such cars worthless?
The proposal is that in 2040 the sale of new cars that cannot travel 50 miles solely on electric power will be banned. That's a rather different proposal. Petrol and diesel cars registered before 2040 will be fine, as will new electric cars and hybrids that meet the spec.
Ah ok thanks for clarifying. This is the beginning of the end for petrol and diesel powered vehicles and the supply of fossil fuels though surely? Investment potential in the longer term will surely be impacted. I'm not against owning cool cars by the way just questioning the longer term investment potential of them.
You could say the same about the rental experts too - ‘they rent in europe’ ‘you can move on when you want’ ‘it’s the landlords responsibility for repairs’ ‘you can rent a far nicer house than buy’/
Yes they are all true.
Though you’ll ALWAYS be at the beck and call of a landlord.
You’ll never have security over where you live as any landlord can sell.
You’ll always be paying rent.
You won’t be building up an asset to leave children (if you have any).
You won’t be taking advantage of extremely cheap interest rates which means most of your payments are towards building an asset.
And whilst house prices falling are a always a risk, you keep paying the payments and eventually you’ll own it and prices will have gone up again.
I employ 6 mortgage advisers and by far the most rewarding thing about their job is seeing first time buyers get on the ladder. They are so happy and by and large they all see it as building a future.
Of course it won’t suit everyone, not everyone can afford it and some don’t have the credit. Some are better renting. For me though getting on the housing ladder is as important as any advice you can give most people.
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