What to do with 100k?

Naetha

Hello there...

House no. 1 is about to go on the market and we anticipate getting at least 100k for it.

House no. 2 has a £150k mortgage with a 3 year lock-in period.

What is the best thing to do with the anticipated £100k from our house sale, so that it will pay off as much of our mortgage as possible when we come out of the lock-in period?

I figured with keeping the bulk of our cash in an instant access account of 5.5% or above, and drip feeding the cash into an ISA for me and my husband and a regular savers account each, we'd be able to make approx £13k over 3 years after tax.

Now this is obviously guaranteed (or as good as) but is there anyway we can get closer to paying our mortgage off in 3 years with those savings? Although I'm not fussed about having 100% instant access, I'm not too sure if I'd want that cash to be locked up in a bond for that long, but if the redemption penalties weren't too harsh then maybe I would consider it. Is there much of an advantage in a bond compared to an instant access account at 5.5%?

Risk wise, I'm not averse to a little risk, but realistically I really *don't* want less cash then what I started with!

Naetha

Any ideas?

missile

http://www.nsandi.com/products/ilsc/index.jsp

pioneer

Don't sell it house prices were going to rise 10% this year; yesterday !

No; sell it growth has slowed this morning !

If your mortgage rate is less than 5.5 keep it longer.

tom188

Remember to figure in any CGT you would have to pay on the proceeds of the sale.

Naetha

House 1 is all paid off and mortgage free, and from what I understand, I wouldn't pay any CGT until it was 3 years after it stopped being my main residence? Correct me if I'm wrong please!

As for house price increases, they've risen slowly and gradually in my area - and although Armley is earmarked for regeneration, it's still a pretty rough area and I can't see a huge increase on the way.

missile

You did not give enough info in your post.

Can you overpay the mortgage? What rate is it at? Presumably if you have a 3 year lock in it was at a good rate? and if it is fixed, looking better by the day

Naetha

We can't overpay the mortgage at all unfortunately. My husband has a poor credit history, so the best rate we could get was 5.4%, but this is fixed for 3 years.

One thing we were considering was putting a fair whack of our cash into a 5-year bond, and when we come out of the lock in period, we remortgage again with a 2 year lock-in and hopefully a better rate by then (CCJ and default will be off the record).

I'm just completely confused by bonds, investments, share portfolios etc etc and don't know what's a good deal and what's a bad deal!

The best bond I've seen is a 1 year bond from Birmingham Midshires for 6.05% AER, but is it really worth it when I can get an instant access saver for 5.65%? Also, a question about the NS&I Index Linked Savings Certificates - the 5.55% tax free interest - is that over the full term of the investment (3 or 5 years) or is this annually?

missile

If you are not prepared to risk loosing money, then perhaps you should consider saving and avoid investment products. NS&I is only one product available. The link I gave you lists the current return as 5.55% for a basic rate tax payer when the investment is held for three years. As you will see it is slightly higher than your mortgage rate.

There are many other products available High interest savings, ISAs, bonds etc to temp you, which may give a better return. However, in your circumstances, you may feel it is more important to protect your £1K against inflation.