Advice needed - What to do with £85K?

ELdxb230

Hi everyone, I have spent many months reading around the website and the forums but still find it very confusing what to do with my savings. Apologies if this is not the place to ask for advice, I can delete this post if against the rules.

Im currently a 29yr old expat living in the Middle East. I am fortunate in being able to save quite a decent amount per month, and have £85K saved in various savings accounts in the UK, but I plan to pack this lifestyle in at the end of the year and come back home. I have been away for most of my 20s, so I don't currently own any property and I'm also worried about not having pension plans in place.

I was planning on buying a small apartment in cash with the bulk of my savings (around £75K - I'm from the north luckily) without committing to a mortgage, so that will keep my monthly outgoings as low as possible whilst I'm earning a lower salary back in the UK. I would then keep an emergency fund of cash of around £5-6K and possibly invest the rest? Does this sound sensible or am i way off the mark? 

Thank you in advance for any advice, really appreciate it!

Speedbird676

Your plan looks relatively sound.

Personally, I would keep all of what you don't spend on the property out as your emergency fund initially - in the highest interest paying account you can find. Once you're settled, not having a mortgage will increase your disposable income, so you can then start ploughing the excess into a pension and/or investments.

What sort of salary do you think you'll be making when you return? Are you looking to be employed/self-employed?

paul090971

You have to do what you feel comfortable with and I dont know all the ins & outs, other will know better but I believe there are ISA's to help  people save for their first home & you get a decent amount back from the government. Rather than buying a flat with your cash as the deposit, look into putting it first into an ISA & getting some free money towards the purchase. I may be wrong but I have heard of these products.

Also with interest rates very low right now do you need to put all your deposit into the flat. Work out the mortgage monthly payments for say 60% 80% & 90% mortgages. If you can cover the mortgage payments from UK salary then you could use some left over to open a SIPP & start your pension.  Good luck & I'm sure other will give you some good advice.

Speedbird676

paul090971 said:

You have to do what you feel comfortable with and I dont know all the ins & outs, other will know better but I believe there are ISA's to help  people save for their first home & you get a decent amount back from the government. Rather than buying a flat with your cash as the deposit, look into putting it first into an ISA & getting some free money towards the purchase. I may be wrong but I have heard of these products.

Also with interest rates very low right now do you need to put all your deposit into the flat. Work out the mortgage monthly payments for say 60% 80% & 90% mortgages. If you can cover the mortgage payments from UK salary then you could use some left over to open a SIPP & start your pension.  Good luck & I'm sure other will give you some good advice.

You could start a Lifetime ISA (only when you return), which would have to remain open for a year before you can use it and benefit from any bonus. If you're comfortable delaying your house purchase you could do this. You can contribute up to £4,000 per year and the government will add a 25% bonus, ie: up to £1,000 per year.

Should you want to go for a property worth more than the £75k, the optimum Loan-to-Value would be to put in at least 40% deposit to secure the best interest rates. You may struggle, as I did, with only having recently returned and limited UK income history to secure a mainstream mortgage.

yabba_dabba_doo

In the circumstances, I might skip the LISA. Provided that your cash now is enough to buy a property in an area you expect to stay in for a good while, and a property which you like enough to stay a good while in it, while leaving a bit of cash over to cover likely random out-goings.

By delaying buying a property for a year, you'd gain £2,000 in LISA bonuses (because the year would span 2 different tax years) plus a bit over £1,000 interest on your cash; so a total of £3,000 or so. But you'd pay rent for a year, which would presumably be more than that? Not really worth delaying if that's the only reason for the delay.

OTOH, if you're not sure what area you'll want to settle in, or are compromising too far by going for a property you won't want to stay in long to keep within your available cash, then perhaps you'd do better to delay buying. Once you have an established record of employment / self-employment in the UK, you will be able to buy significantly more expensive properties, for (say) £75k deposit + a mortgage of 4X your annual earnings. And if you're delaying for those kinds of reasons, then you might as well also take advantage of a LISA for a few £1,000 in bonuses.

ELdxb230

Firstly thank you all for your very helpful comments and advice! Im so grateful.

In response to Speedbird, I think i will be expecting to earn around £20-25K (given my current role is very niche and not many opportunities and not highly paid in the UK so I'm studying now and looking for a career change) so with that in mind I am trying to keep my costs as low as possible so I can settle well before I begin to build up my earnings and savings again. 

I have thought about the LISA, but as mentioned above (Paul and Yabba_dabba thank you kindly for your explanations!) I would be paying more in rent. I am however, still very unsure where I will want to settle (problems of an expat lol) but I have always thought having a base in the UK would provide some stability and I am looking at staying in the UK for a couple of years at the very least! I would in the future love to own a larger home, but as I am single without children I don't necessarily need that right now.

Thanks again for all your help.

Socajam

Since you are set on purchasing a flat, make sure that it something that you do not foresee any problems selling down the road.
Make sure that you have a long lease or it's possible to have the lease extended before purchase.
Have you thought of buying a 2 bedroom house instead of a flat?

ELdxb230

Socajam said:

Since you are set on purchasing a flat, make sure that it something that you do not foresee any problems selling down the road.
Make sure that you have a long lease or it's possible to have the lease extended before purchase.
Have you thought of buying a 2 bedroom house instead of a flat?

Thanks for your advice, I will make sure I do thorough research. The flats I'm currently looking at have very long leases and have depreciated in re-sale value quite significantly from when they were converted around 15 years ago (Grade II listed textile mills converted into residential apartments) I can't see them going for a lot less than they do now? However I may be wrong. (This seems to be a trend for apartments that I keep seeing.. they don't keep their value or increase like houses do?)

For the same price I would only get a terraced house in quite an undesirable area, or something that would need a lot of work doing to it. Its not something I'm against doing, but I just am unsure whether as a single person on a salary of £25K I would qualify for a high enough mortgage to be able to pay for a house that I would want to live in for a long time and in a suitable area. My credit rating will be non existent too. Im happy to build up to that in the future once my earnings increase.

I was hoping that by purchasing outright and if I was to then build up a significant deposit again, I could keep the apartment (with no pressure to sell until necessary) and then (after a couple of years) afford and be accepted for a first time mortgage on a second house, when I decide exactly where I want to live long term. 

Speedbird676

Socajam said:

Since you are set on purchasing a flat, make sure that it something that you do not foresee any problems selling down the road.
Make sure that you have a long lease or it's possible to have the lease extended before purchase.
Have you thought of buying a 2 bedroom house instead of a flat?

Also consider rental potential.

Thespilster

ELdxb230 said:

Socajam said:

Since you are set on purchasing a flat, make sure that it something that you do not foresee any problems selling down the road.
Make sure that you have a long lease or it's possible to have the lease extended before purchase.
Have you thought of buying a 2 bedroom house instead of a flat?

Thanks for your advice, I will make sure I do thorough research. The flats I'm currently looking at have very long leases and have depreciated in re-sale value quite significantly from when they were converted around 15 years ago (Grade II listed textile mills converted into residential apartments) I can't see them going for a lot less than they do now? However I may be wrong. (This seems to be a trend for apartments that I keep seeing.. they don't keep their value or increase like houses do?)

For the same price I would only get a terraced house in quite an undesirable area, or something that would need a lot of work doing to it. Its not something I'm against doing, but I just am unsure whether as a single person on a salary of £25K I would qualify for a high enough mortgage to be able to pay for a house that I would want to live in for a long time and in a suitable area. My credit rating will be non existent too. Im happy to build up to that in the future once my earnings increase.

I was hoping that by purchasing outright and if I was to then build up a significant deposit again, I could keep the apartment (with no pressure to sell until necessary) and then (after a couple of years) afford and be accepted for a first time mortgage on a second house, when I decide exactly where I want to live long term. 

When I bought my house I put down 30k on a 130k house. You've got a huge deposit so you can definitely make your money go far. I'm also from the north! With such a large deposit, you can get a decent property and low mortgage payments.
It's worth thinking beyond the right now situation. I wanted to future proof myself a bit so got something which I could grow into when I had a family. My needs changed, I now live abroad and a family rents my house.