How things change in 6 years!!

matty19869

Hi Moneysavers,

Im looking for some advice regarding savings and investments in order to reach my end goal but before I describe my end goal I will let you know a little about myself.

Back in 2008 I purchased a flat via a housing association on a part buy part rent scheme, so I own 35% and rent the rest of a HA. At the time I was on £13k a year so to afford my flat was a struggle to say the least. I ended up getting caught up in a cycle of payday loans and credit cards. By 2011 I had defaulted on my credit card and it was passed to a collections agency whom I finally payed off but I now have a blemish on my credit file. How does the default work I know they get removed after 6 years is that from the date the account was defaulted(reported) or is if from the time the account was settled and how much is this affecting my credit score im currently rated at 849 (experian) any idea what my score may jump to and how important is it.

So now we flash forwards a few years to the present day and I am totally debt free and have landed myself in a fantastic job doing something I love and earning a decent wage. Due to the job and becoming debt free I can afford to overpay my mortgage my £700 each month and put £210 into a rainy day fund then the day before payday I transfer any leftover money that is in my current account to a savings account each month which is basically any overtime minus my spending money.

If I continue the way I am I will have paid my mortgage off in two years and it will become time to start my crazy idea which is to build a house. There is a company locally that builds modern timber framed houses for a very reasonable price so this is my goal.

So here is where I need the assistance of MSE, In 2 years time providing my flat sells for £120k or more my share is worth a minimum of £41650 minus solicitors fees. That should get me a plot of land somewhere and I can then mortgage around £150k based on the online calculators and my current salary. So I think I am all set with a plan there but because I know what I am like when it comes to nerdy stuff I feel I will need quite a bit more cash for fit and finish because I want to try an integrate the following things into my house.

Essentials

1) MVHR system with AC
2) Log Burner in the lounge(open space)
3) Rainwater harvesting and storage system for toilets, garden and washing machine.
4) Electrical closet, containing a server rack for nerdy stuff (Lutron/Rako lighting dimmers, AMX system control, AV switching, Home server etc) it will also contain the electric meter and consumer unit. The electrical heat from this room will be used to heat the rest of the house via the MVHR system so there will be no waste heat.
5) Server room/Electrical closet to have flush/concealed doors and take up as little floor space as possible but still allowing for expansion.
6) All rooms to be flood wired with Cat 6A fully shielded cabling, where there is an electrical outlet there will be 2-4 network points. Behind every TV location there will be 4 network ports and there will be ceiling mounted UniFi WAPs and associated Cloud controller.
7) The garden will have its own Wifi network supplied by an outdoor WAP via external grade Cat6a.

Future Expansion
1) Detached Garage with fibre connection to the house
2) Summer house/pavilion garden shed thing to work from in the summer when its too nice to be cooped up in the house again fibre connected back to the house.
3) Garden sprinkler system hooked up to the rainwater harvesting system and also connected to a cloud controlled sprinkler automation system (Rachio).

As you can see my ideas get quite wild and that is where I think I will blow my budget, so knowing full well this is how I work and not wanting to get myself back into the state I was in back in 2011 I need a plan to put aside some extra money to make this happen or prioritise what needs to be done as the house is buit and then what can be done after construction as and when I have the money (savings)

Not accounting for overtime over the 23 months it will take to pay my mortgage off I will have saved an additional £4800 which isn't really a lot in the scheme of things. That will pay for the rainwater system or the MVHR system, now this is where I should know better. I keep seeing an advert pop up on my feeds for an "investment" company which do stocks and shares ISAs and the like. My question is where is my £210 + overtime money best placed and how can I get the best returns on my money as Ideally I would like to have at least £10k in cash (the more the better) by the time my mortgage is paid off but that means paying at least £435 into savings and £848 into my mortgage which would total £1200 per month rather than my existing commitment of £1058 per month. I feel that £200 extra is a stretch too far.

Has anyone tried a Stocks and Shares ISA and what are the real risks is it better to use a mainstram bank like barclays or a private firm (Can I link to therm here) and is there any financial protection from the FCA for these types of investment accounts.

Current savings wise I have the following

Instant Cash ISA £4000 (Rainy day fund)
Stocks £1000
Bank of Mother £1500 (could be more not sure)
I have another £1000 in stock coming soon as a gift

Prospective additional earnings
Christmas Bonus £2000 - 40000


Let me explain the bank of mother, When I was struggling with cash my mum would help me out by paying my car insurance and then I would pay her back. When I was in a better situate and was paying my insurance myself I didn't cancel the standing order and she has been putting the cash away for me. She keeps asking when she can send it over to me but I keep asking her to look after it for me until I am ready for it.

Crazy plan part II will be 5-6 years after moving into my new house is to purchase a house as a buy to let and build up equity that way.

Thanks Matty

eskbanker

That was a very long-winded way of asking where the best place is for a few hundred quid a month for a couple of years! Chances are the answer will be one or more regular saver accounts that'll pay up to 5% interest.

And to pick up on a couple of the points raised along the way:

matty19869 wrote: »

how much is this affecting my credit score im currently rated at 849 (experian) any idea what my score may jump to and how important is it.

It's not worth obsessing about the made-up number that Experian conjures, no lenders will see that.

matty19869 wrote: »

Has anyone tried a Stocks and Shares ISA and what are the real risks is it better to use a mainstram bank like barclays or a private firm (Can I link to therm here) and is there any financial protection from the FCA for these types of investment accounts.

It's not a good idea to invest in stocks and shares for a short period of 2-3 years, as the volatility and fluctuations in value mean that you could easily have lost money by then, an effect which decreases over time (at least five years and preferably 10+) because of economic cycles. There is FSCS protection against failure of the investment company but not fluctuations in the value of the underlying investments themselves! See https://www.fscs.org.uk/what-we-cover/products/investments/

EachPenny

matty19869 wrote: »

So here is where I need the assistance of MSE...
...my share is worth a minimum of £41650 minus solicitors fees. That should get me a plot of land somewhere and I can then mortgage around £150k based on the online calculators and my current salary.

So if I understand you plan so far you will have a budget of around £185k to spend. Then you'll buy a plot of land?

In which case I'd say the remainder of your budget will just about cover this:

4) Electrical closet, containing a server rack for nerdy stuff (Lutron/Rako lighting dimmers, AMX system control, AV switching, Home server etc) it will also contain the electric meter and consumer unit. The electrical heat from this room will be used to heat the rest of the house via the MVHR system so there will be no waste heat.

What exactly is the plan to pay for the rest of the items on your list of essentials?

I'd also suggest adding a few extra essentials to your list (can't see them accounted for anywhere in your post) -
1) Plan preparation, obtaining planning permission, building regulations approval.
2) Purchase of the materials to construct house (either as a kit, or raw materials)
3) Hire of scaffolding and construction plant
4) Cost of labour to construct house to weatherproof shell
5) Cost of labour and materials to complete interior (plumbing, wiring, flooring, plastering, decorating)
6) Cost of labour and materials to supply and fit kitchen
7) A toilet (non-optional)
8) A bath or shower plus washbasin
9) Cost of disposal of several tonnes of building waste, more if site is not level to start with.
10) Cost of labour and materials to make good/landscape garden, lay paths and driveway.
11) Cost of connection of utility services to house, cost of providing vehicular access (optional)

Sure there are some more things to add as well.

First thing you need to look at is a realistic budget for building the basic house. Add a minimum of 15% contingency, and be prepared to double that figure if necessary. Then figure out how you will pay for it all.

velocity_girl

EachPenny wrote: »

Then figure out how you will pay for it all.

Yes indeed. OP correct me if I've misunderstood, but you seem to suggest you will buy a plot of land for circa £40k and then just get a £150k mortgage for the build costs? This will not happen - you will not get a conventional mortgage for this.

Will you have the cash up front to start getting the work done then get it back from a lender in stages in arrears, and/or to pay significantly higher rates than with conventional high street lenders?

jonesMUFCforever

I would be surprised if OP got a plot for that amount with planning permission unless its only big enough for a shed.

EachPenny

It depends where he is looking to buy, but I was working on the assumption he had a budget of around £185k which would cover the costs of land purchase and the electrical closet. Will need a substantial sized plot for a house of that size plus detached garage and the summer house. Otherwise LA likely to refuse planning on grounds of overdevelopment.