Buying a house or investing?

Bristo

Hi,

What’s the best thing to do with £120,000? I am thinking medium-long term investment. Here are my options:

a) buying a studio flat (I'd be a first time buyer). This way I have a property, I am mortgage-free and can even save each month some good money (roughly 1,000).

b) use the money as a deposit for a mortgage to buy a two-bedroom. This way I can live straightaway in a nice property but will have a mortgage to pay and no savings

c) invest in equity funds and bonds and keep renting (currently I am on a ridiculously low rent of 300 pm) until I can afford a nice house

Thank you

xylophone

Could you not use part of the £120,000 to fund the deposit on a two bedroom property, keeping the rest as your sundries/emergency fund?
http://www.money.co.uk/mortgages/5-year-fixed-rate-mortgages.htm

atush

I agree with xylo.


Buy a 2 bed property with a mtg, retaining a smallish amt (say a years cash ISA worth ) as your emergency fund. And save from there, as possibly your payments will be less than your current rent?

A studio mtg free is not a great idea (unless it is a large studio you could convert to a one bed flat and so increase value) as it won't be large enough going forwards in your life so you could be faced (after you get a partner, maybe get pregnant) with moving sooner than you might have wanted to. Never good to be a forced seller.

A 2 bed is flexible, large enough for a new couple/family or to take in a lodger.

alexanderalexander

There is no "right" answer -- any of the options you suggest have their advantages and your choice depends on personal factors unrelated to pure finance (e.g. are you ready to settle down in one place or is there a risk you might need to move to another town? If you carry on renting and use the money to take a punt on the stock market which turns out to be ill-timed, would you be in a position to wait for the markets to come back round in order to avoid crystallising a loss? etc. etc.).

That said, assuming you can afford to pay the mortgage from your income then I would broadly agree with the other two posters -- use part of the £120k as a deposit on a 2-bed, and invest the rest.

robtgossard

Yes, there could no right answer until you have your priorities set. You are renting a house, but have never enjoyed the luxury of owning a house and staying in it. It is rather a pleasant investment. Though I agree with most others that owning a 2-bedroom flat could be good for you and the rest to be invested in the bonds and equity funds.