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Thread: Short term savings ideas for £550K

  1. #1
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    Short term savings ideas for £550K

    We've (myself and 'her indoors') decided it's time to start looking toward our retirement house - by that I mean our last house away from it all.... The plan is to retire in perhaps 3 years time but, in the mean time, I still have to go to work each day. So the plan is cash some investments in. Buy local, small house with that money and use that as a local base perhaps 4 days a week (works out at 4 months of the year adding up the days). House prices are going bonkers around us at the moment so the hope is the value of the second, smaller, house will perform at least as good as the investments I will have to cash in to purchase it. Once that's done then sell main house and move into smaller house whilst looking for the main retirement house. Purchase main house. Move there and then use the smaller local house as a crash pad for work or when visiting parents etc... One issue I have is how to juggle the stamp duty and tax issues. I suppose I'll have to speak to an 'expert' on that.

    Anyway the question is what to do with the £550K from the main house sale whilst looking and purchasing the new primary home? This could be anything from 6 to 18 months but the money needs to be easy to get to with perhaps 1 months notice.

    Suggestions please.

  2. #2
    No risk and one months notice. You’ve got few options but to stick it in a savings account/premium bonds and earn buttons in interest.

    You’re going to have to spread it across 6 banks/building societies if you want the £85k FSCS guarantee.

  3. #3
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    Quote Originally Posted by noTAGlove View Post
    No risk and one months notice. You’ve got few options but to stick it in a savings account/premium bonds and earn buttons in interest.

    You’re going to have to spread it across 6 banks/building societies if you want the £85k FSCS guarantee.
    Premium bonds is probably a no-no because it's three months before it even gets entered in the draw! (well it used to be).

    Yes I'd forgotten the 85K guarantee limit.

  4. #4
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    Quote Originally Posted by solwisesteve View Post
    Premium bonds is probably a no-no because it's three months before it even gets entered in the draw! (well it used to be).
    You’re right it’s not ‘immediate’ but it’s not anything like 3 month wait. Maybe 1st if month following. Also, of course, relevant to when you disinvest.

  5. #5
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    Marcus savings by Goldman for some of it would be a sensible option. Instant access, 250k max, online and 1.5% fixed for 12 months

  6. #6
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    Quote Originally Posted by David_D View Post
    You’re right it’s not ‘immediate’ but it’s not anything like 3 month wait. Maybe 1st if month following. Also, of course, relevant to when you disinvest.

    Yes, you're right, now one month BUT maximum 50K (according to money saving expert).

  7. #7
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    Quote Originally Posted by dustybottoms View Post
    Marcus savings by Goldman for some of it would be a sensible option. Instant access, 250k max, online and 1.5% fixed for 12 months
    I think Sainsburys bank is 1.45% with a 500K limit.

    tbh I was hoping for better but maybe I'm in dream land as far as that's concerned :-(

  8. #8
    One savings bank have good rates for a one year bond

  9. #9
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    Quote Originally Posted by solwisesteve View Post
    I think Sainsburys bank is 1.45% with a 500K limit.

    tbh I was hoping for better but maybe I'm in dream land as far as that's concerned :-(
    I'm afraid savers were thrown under the bus a decade ago to save the 'system', and nowt much has really changed since then. Personally I'd choose anywhere but Sachs but that's more because of that organisations historical unethical behaviour than a criticism of their Marcus account.

    Best of luck with your plan.
    Last edited by Passenger; 15th May 2019 at 10:03.

  10. #10
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    Watch out for capital gains tax on the small local house, especially if it is not formally your main residence.
    It used to be you had to live in a house as your main residence for a minimum of 1 year to avoid capital gains tax.

    If you are expecting to use the small local house for 3 years do the sums on renting v buying as buying is not usually cheap factoring in stamp duty and legal fees etc. Renting is also much more flexible if life events mean plans need to change etc.

  11. #11
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    You would need to be very tight with your buying/selling timescales to avoid the stamp duty surcharge for second home owners. By the time that stamp duty and other buying/selling costs are factored in to each sale, (particularly if you assume the surcharge will apply), I suspect you will be losing money rather than making money.
    Last edited by Maysie; 15th May 2019 at 10:48.

  12. #12
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    Quote Originally Posted by solwisesteve View Post
    Yes, you're right, now one month BUT maximum 50K (according to money saving expert).
    Yes, £50k max but could do £50k each for a couple.

  13. #13
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    Quote Originally Posted by BadgerUK View Post
    Watch out for capital gains tax on the small local house, especially if it is not formally your main residence.
    It used to be you had to live in a house as your main residence for a minimum of 1 year to avoid capital gains tax.

    If you are expecting to use the small local house for 3 years do the sums on renting v buying as buying is not usually cheap factoring in stamp duty and legal fees etc. Renting is also much more flexible if life events mean plans need to change etc.
    Well to rent a house for our needs it would be a grand a month. Over three years make that 36K. To buy is, for example, 170K. Let's assume 1.45% growth on that if left in savings. So that's about 2.5K - yes it's compound to not that easy but for rough sums it's okay. So 'cost' of renting says 36K but buying is 2.5K so far. Also, purchasing the second home there's extra stamp duty but that can be reclaimed if no more than three years so we can rule that out. Then there's tax on any profit you make BUT that's after any 'costs' like renovation etc... are taken off. So if we spend 10K doing it up but add 15K value then we only pay tax on the 5K profit - if I've understood this correctly. Would that be 22% tax? Don't know. Or is this offset by your capital gains allowance? Again I don't know. Need to speak to an 'expert' about that. Either way it still works out cheaper than renting over that period.

  14. #14
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    I'm pretty sure that you can't offset improvements against CGT - just necessary maintenance. Or at least you don't have free rein.

    Sent from my moto e5 play using Tapatalk

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