Live off interest?

GracieP

This may sound silly or irresponsible but I am considering selling my house next year and going travelling. After I pay off my mortgage I estimate I will have between £170-150k left over.Is it possible to put this in a savings account which pays monthly interest yet have access to the interest so I could use it to live on while travelling? I have no interest in becoming a landlord so I don't want to rent my house out and I think my local market is at it's peak so I want to get out as I don't plan on living where I do for the rest of my life. I don't want to touch the lumpsum from my house sale but I've not done a lot of travelling and want to do some now before I start a family.Also what kind of tax will I pay on the interest? This is the only money I'd be earning while I'd be travelling.

ManAtHome

Have a look at Nationwide current account - Flexcard is about the best for getting cash overseas. You could feed this from a monthly-income savings account (several variable and fixed available).

Tax - £150k at 6% (you can get over this for 1-5 year fixes) would return £9k before tax, £7.2k after savings tax (20%). You would then need to reclaim tax after the end of the tax year for your standard allowances (around £1k) and the 10% band (another £200). Note that monthly payments into your current account would be paid net of tax, so around £600 a month, with a 2 month "bonus" (probably late summer) from the taxman each year.

You may obviously get more depending on the capital and interest rates you end up with. Also, the above only works if you start at the beginning of a tax year (April) as you may have used up some or all of your allowances by working part of a year.

wkt54

If you put your money into a bond or fixed rate interest account for a year, and obviously can't touch the capital, if you get interest monthly, are you able to withdraw the interest each month?

GracieP

Thanks for the reply. It's nice to know it's possible and the tax isn't as bad as I was afraid it would be. And as luck would have it I have a Flexaccount. As long as I sell my house for what I think I'll get this should be doable.

noh

wkt54 wrote: »

If you put your money into a bond or fixed rate interest account for a year, and obviously can't touch the capital, if you get interest monthly, are you able to withdraw the interest each month?

Yes, some but not all, fixed rate accounts allow you to nominate a bank account to receive the monthly interest payments.

Nigel

noh

GracieP wrote: »

Thanks for the reply. It's nice to know it's possible and the tax isn't as bad as I was afraid it would be. And as luck would have it I have a Flexaccount. As long as I sell my house for what I think I'll get this should be doable.

Nationwide are currently offering a 6.7% fixed rate e-bond wich will pay monthly interest to your Flex Account.

Nigel

GracieP

What is an e-bond?

ManAtHome

A couple of 1 year fixes with monthly payments I know of are Birmingham Midshires at 6.5% (6.7% for annual interest) and Saga at 6.6% (monthly only) if you're an "old git" like wot I am...

[edit] An e-bond is fixed savings you operate online (accounts with e- s in them seem to be trendy these days)

IvanOpinion

I don;t know how you could work it but it would be a shame to sell your house simply because it is likely to accrue in value more than any savings account ... when you would decide to come back you may not be able to afford to get back on the housing ladder at the same level. I would be inclined to consider getting a family friend or letting company to handle your finances back home and consider letting the property out prefereably with enough to cover the mortgage plus a bit more (if poss).

You may find after 6 months that you do not like it and you could end up coming back to nothing?

Whatever you decide good luck, there is a fantastic world out there to be discovered and I just wish that 20 (cough!) years ago I had have had the nerve to up roots and explore it. If you do travel then consider setting up a blog and make regular posts on it with photos and current location .. you might find people suggesting places to go and see next.

Ivan

noh

GracieP wrote: »

What is an e-bond?

http://www.nationwide.co.uk/savings/e-bond/introduction.htm


Nigel

GracieP

IvanOpinion wrote: »

I don;t know how you could work it but it would be a shame to sell your house simply because it is likely to accrue in value more than any savings account ... when you would decide to come back you may not be able to afford to get back on the housing ladder at the same level.

This is probably not the place to discuss it, but I think the housing market has peaked or will soon. I'd be more worried about going away and coming back to find my house worth less than it is now. It'll be early next year at the soonest before I sell anyway, so I'll have a better idea then. If the market somehow roars on I'll wait a little while to sell up. But either way my long term plan is to settle down in Ireland where house prices are most definitely falling so I'm not worried about being priced out of the market.