Advice on maximising interest whilst building house extension

PThomas_2

We are just remortgaging our home to build a large extension. We will get approximately £55,000 back to pay for this building work. Approximately £23,000 of this will be needed within the first 8 weeks but the remaining amount will be spent over at least 4-6 months.

Most payments will be predictable and a delay of 1-2 days to transfer money into a current account shouldn't be a problem.

Can anyone suggest a suitable bank account that will allow us to maximise our interest? (Yes, unfortunately we will have to pay tax on it)

It will probably be worthwhile us opening a current account with the same bank/building society with a debit card/cheque book to make it easier to manage and keep the money seperate from our main HSBC accounts.

ReportInvestor

Go for IceSave @ 5.45% and you can transfer money to your current account online, although I think you will need 3 days for the transfer to take effect.

Could someone who has moved money out of IceSave confirm or amend?

With that sum of money, you definitely want the best rate.

tom188

Or ICICI which also has the same rate.
By your comment on tax I presume you already have a mini cash or maxi isa for the year.

PThomas_2

No mini cash or ISA, we don't currently have any savings!

Can you confirm if IceSave or ICICI still pay interest on the balance if you withdraw funds?
Any other panalties for taking money out?
Could I open a current account with chequebook and debit card with either of these to speed up access?

With my HSBC accounts I can transfer money on-line and access it ittediately, will this be similar for other online accounts(Within the same company)?

Should I be concerned with having all of the money with 1 bank in case it collapses?

ReportInvestor

Both IceSave and ICICI pay interest on all the money in your account and have no withdrawal penalties. No sneaky A&L type tricks from them .

But you cannot open a current account or have a cheque book with them.

Most companies do allow instant transfers within their own company - but you won't get the same high interest as a price for that convenience. For example HSBC's Online Saver offers 4.65% (before the rate rise which compares to IceSave's 5.2% before the rate rise & will HSBC put theirs up by the full 0.25%? - we don't know yet but I wouldn't bet on it.)

IMHO you should also open two instant access ISAs if you have the time & can be bothered given your building project.

I like either NSI @ 5.5% variable (after the rate increase) or Kent Reliance BS Direct ISA @ 5.21% variable (before the rate increase).

PThomas_2

I don't know anything about instant access ISA's what will they give me?

ReportInvestor

Instant access mini-cash ISAs will give instant access and interest paid gross (with no tax whether you are a basic rate or higher rate taxpayer ).

So you'd leave these to the end of your building work before closing them.

PThomas_2

What's the limits on the mini-cash ISA's?

ReportInvestor

£3K per tax year per person over the age of 16.

The 2007/8 limit starts on April 6th 2007 - towards the end of your project.

PThomas_2

But we could put 3k in each before April and again after april? Thereby achieving tax free on 12k between us?

We are likely to have the money in the next month or so but won't start building until at least feb/march. Once the shell is done (Approx 8 weeks) I will then do the internal work which will take me at least 6 months of spending ad-hoc.

ReportInvestor

PThomas wrote:

But we could put 3k in each before April and again after april? Thereby achieving tax free on 12k between us?

That's correct.