Sold House and Going to Rent, what should we do with the proceeds of the sale?

georgemcr

Hi,

This is my first post so apologies in advance if I have posted to the wrong forum or broken any other rules!

This is our situation: We are in the lucky position of having agreed the sale of our house, the survey has been completed and there are no problems so it looks as though the sale will go ahead (touch-wood). The buyers are aiming to complete mid to late January.

The sellers of the house we wanted to buy have not reduced their price to a level we think is reasonable in the current market and to what we can afford. We have not found any other house we want to buy at the moment. But we don’t want to lose our sale. So we are planning to go into a rented house for 6 months and wait for our dream home to come on the market at a price we can afford.

We have no debts. We have agreed the sale of our house for £225,000 (purchased for £43k in 1995). I also have £85k in savings.

Do you think we are doing the right thing going into rented now? What should we do with the money in between houses? How can I ensure we do not lose any of the capital?

I work for myself and feel reasonably confident of being able to keep employed in the future (again touch wood!).

Thanks for any advice.

Regards,
George

ShelleyC_2

Might be worth looking on savings & investing board and asking this question again.

All the savings rates are rubbish at the moment. Depending on timescale might be worth looking at some short term bonds. I'm in a similar position and have money split across different banks to avoid 50K limit and potential hassle if one goes under. Haven't wanted to tie up the cash in case sudden spot dream home

Cannon_Fodder

A little harsh to say all savings rates are "rubbish". They are not what they were, and will not stay where they are now, granted. By February when the funds come through...?

With inflation falling rapidly, high 4% is not too awful. May still be low 4% by February. And better than maybe losing 15%, which is the prediction for house prices in 2009...

15% also being the amount you could get off the next house, if the right one crops up, and the predictions are correct.

As suggested split between banks under £50K for FSCS protection.

How about taking the rental opportunity to try something a little different? - you may surprise yourself as to what you really think of as a "dream" house, afterwards.

Entertainer

Look at the savings board for more info. Bank rate is 2% right now and best rates are going to be 2-2.5% above that. It could well drop to 1% next year so frankly a rate of 4%+ may well look good next year what with inflation dropping to zero quite possibly. If you have the flexibility to fix then that's what I would be doing (I've just taken the last 2 year 5% fix which has now been pulled.) You may want access to your money if you are thinking of buying shortly (which you shouldn't). Split the funds into £50,000 amounts.

And yes, you are doing the right thing renting now IMO etc. You are sitting there like kings now. As Jonathan Davies, the surveyor who predicted the credit crunch and is anticipating falls of 50%, says, don't touch property with a barge pole.

cuthbert_the_octopus

We are in the same position as you....... and put our money in Icelandic banks...... so I wont be recommending that idea to you!!

Some people thought that we were crazy, but we are now looking at 3 bed family houses being the same price that we sold our 2 bed flat for!

It is just a matter of how long we can sit and wait!

mezelks

Well done on being so shrewd!
This will put you in a great position when it comes to buying, as there will be no chain.
Whatever interest rate you get right now, you will still get more then nothing, but still do shop around.
Try and go for a rental that's maybe less than 6 months.
Something my mortgage broker said to me in 2006...'The interest rate is 4.19%...i'd fix because it may go down, yes, but there's a heck of a long way it could go up...'
He was talking about interest rates, but the same applies for house prices, so be wary of waiting too long to buy
Good luck
x

huntersc

I'd personally put 90% into Northern Rock, the rest into ISAa and any left over should be spent on a nice gift to congratulate yourselves for being so astute!

I guess you could fix some of it for a while, but it's probably not worth it if you might need quick access to it.

Swans1912

I would:

Keep the money ready to go in as a cash buyer - carry on looking for some good deals and put in some cheap offers!

Make the most of it! Extensions? New Kitchen, Bathroom etc - now is the time to buy if you can afford too!

Unless you have unstable jobs - things change then!

Trollfever

In uncertain times cash is King.

Stay liquid and remember for joint accounts the FSCS limit is £100k.

Lorian

Make sure you get a break clause written into your rental agreement so you can terminate at a months notice, will potentially save you loads and make it more flexible to move out when you do find a new property.