First home time, Got some extra money, what to do with it
Discussion
Hi All,
Looking for some opinions, I'm looking to get my first house and have saved enough for a deposit of about 15-20% depending on what value I go for, I recently came into a bit more money 20k, and am wondering what to do with it, I could easily buy a few new toys with it but want to invest in my future.
Option 1, Go for a more expensive house, though nothing in my area really jumps out at me worthwhile so far.
Option 2, Put it towards the deposit and have either a shorter term or lower payments.
Option 3, Buy another house to do up and move on or possibly rent, in the 100-120K mark, I'd have to lower my deposit that I had saved for my house to use some of that for refurbishment expenses.
I'm fairly sure I could afford to pay 2 mortgages for if I forgo saving for a few months and cut some other costs until another house would be completed, Though I haven't as yet worked out exactly what rates I'd get on a second mortgage, it's only recently come about as a thought/option.
Any advice would be appreciated,
Cheers
Looking for some opinions, I'm looking to get my first house and have saved enough for a deposit of about 15-20% depending on what value I go for, I recently came into a bit more money 20k, and am wondering what to do with it, I could easily buy a few new toys with it but want to invest in my future.
Option 1, Go for a more expensive house, though nothing in my area really jumps out at me worthwhile so far.
Option 2, Put it towards the deposit and have either a shorter term or lower payments.
Option 3, Buy another house to do up and move on or possibly rent, in the 100-120K mark, I'd have to lower my deposit that I had saved for my house to use some of that for refurbishment expenses.
I'm fairly sure I could afford to pay 2 mortgages for if I forgo saving for a few months and cut some other costs until another house would be completed, Though I haven't as yet worked out exactly what rates I'd get on a second mortgage, it's only recently come about as a thought/option.
Any advice would be appreciated,
Cheers
Put it into an ISA and use the tax free returns to pay a portion of your mortgage.
If you use it to increase equity in your house, if you ever need the cash it is quite difficult to get it back out the house, so is just keep the minimum equity you can in there. Liquidity is very important.
If you use it to increase equity in your house, if you ever need the cash it is quite difficult to get it back out the house, so is just keep the minimum equity you can in there. Liquidity is very important.
With interest rates this low then maintaining leverage is a good way to make greater long term capital gains provided that:
- You're comfortable on taking on that additional risk
- You believe that your job is secure and you're comfortable making the mortgage repayments accounting for things that life can throw your way
- You believe that house prices will rise in your area
- You are comfortable with having an undiversified portfolio
- You wont need to get the capital out quickly as liquidity is an issue (but you could consider an offset mortgage)
Focusing on property:
My first choice would be to explore the option of buying a BTL.
My second choice would be to explore the option of a flip/redevelopment
My third choice would be to buy a larger house to own/occupy but that needed work and that I could potentially add additonal value that way
If I were nervous about diversification then I would probably invest it through an ISA wrapper in equities/unit trusts.
Most of these options need to held for the medium term so you need to ensure that you don't need to money in the short term.
Had the same conundrum
We decided to use enough to get to the next rate tier, in our case 60% and made sure we were only into it by £1 then invest whats left. Also made sure that the value of the mortgage was sufficient to make meaningful over payments (assuming 10% per year).
The percentage will depend on Mortgage rates and value left.
Don't forget to factor moving costs, stamp duty, solicitor fees etc.
Note: This strategy is extremely risk averse. But it means we have plenty of money left over for Race Cars and such
We decided to use enough to get to the next rate tier, in our case 60% and made sure we were only into it by £1 then invest whats left. Also made sure that the value of the mortgage was sufficient to make meaningful over payments (assuming 10% per year).
The percentage will depend on Mortgage rates and value left.
Don't forget to factor moving costs, stamp duty, solicitor fees etc.
Note: This strategy is extremely risk averse. But it means we have plenty of money left over for Race Cars and such
Edited by Bertrum on Friday 3rd March 16:18
Depends what you want I guess. If the house you're looking at is a 1 bed shack which needs a lot doing to it, and another 20k would get you a nicer city centre apartment then go for that. Otherwise I'd go for number 2, if only because the quicker the mortgage is paid off the sooner you have money for toys and holidays.
BTL with a mortgage is not as profitable as it used to be as you pay tax on the whole income with no relief for the mortgage. At 4% return or less, with the risks of disruptive tenants, and the risk of property going down in value , its basically a gamble on the capital going up more than you're paying in mortgage interest and tax, on which you pay capital gains! Not great, and thats before you think about cash flow!
BTL with a mortgage is not as profitable as it used to be as you pay tax on the whole income with no relief for the mortgage. At 4% return or less, with the risks of disruptive tenants, and the risk of property going down in value , its basically a gamble on the capital going up more than you're paying in mortgage interest and tax, on which you pay capital gains! Not great, and thats before you think about cash flow!
Gareth1974 said:
Buy a better house for your first purchase. Moving house is an expensive business, go straight to the second rung n the ladder.
This every time - however OP is raising the point it's £20k so it's not going to be a significant step up the ladder by any measure. Another option is to buy a classic Patak for its tax free increase in value
sidicks said:
Welshbeef said:
Worst case you have a lovely watch utterly unleveraged. A buy to let market could tank and you need to sell = suddenly a big problem.
If the buy to let market 'suddenly tanks', what happens to the 'expensive trinket' market? 
I assume you just drop it into Cash Converters!£20,000 watch as a sensible investment. PH delivers again.
chow pan toon said:
sidicks said:
Welshbeef said:
Worst case you have a lovely watch utterly unleveraged. A buy to let market could tank and you need to sell = suddenly a big problem.
If the buy to let market 'suddenly tanks', what happens to the 'expensive trinket' market? I assume you just drop it into Cash Converters!£20,000 watch as a sensible investment. PH delivers again.
Watched are sold globally U.K. Houses are subject to U.K. Market and highly illiquid. The watch will never have zero value or at worst it's worthless but you have a lovely watch. A house which is not owned outright well it's a risk if you cannot fund the finance of it.
sealtt said:
Watches are pretty liquid to be fair. Houses are most certainly not, even if you find a buyer tomorrow it will take some time to get the cash (not to mention quite a bit of cost too).
That being said an ISA is still surely a far better investment..
Yes, I bet the market for £20k watches is massive and the bid-offer spread is negligible...That being said an ISA is still surely a far better investment..
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