What’s the best thing to do with money from the sale of a property?

2unlimited91

It's a very bold move to expect house prices to move in a direction that helps you out. By which I mean: reckless.

IMHO, rethink your strategy before you do anything. Look at all the options open to you. You have a mortgage-free home, and (I assume) at least one of you is working, so borrowing with a mortgage is a possiblity. The 2 main options to consider are selling and buying a more expensive property, taking out a mortgage to cover the difference in price; or taking out a home-improvement mortgage on your current property, to cover the cost of required work on your home, perhaps including an extension or loft conversion (if that's feasible). Both these options should be considered carefully.

I imagine you've already found out what mortgage you could get, and added that to the approximate value of your current house, and decided that isn't enough to buy a property you'd like. But now do that again, trying different criteria for what property you would buy: different types of property, different areas, etc. What features do you really need in a home, what would you just like if possible? Most of us can't afford our ideal property, so we compromise.

Do also consider seriously what could be done to make your current property more suitable for you. Including extensions, reconfiguring use of rooms, etc.

You say your property is no longer big enough, so I assume that involves children . Most people value the stability they get from owning their own home, rather than renting, especially when they have children, so I would think very carefully before giving that up. This also affects the timing of any move, since children may need more space when they are older (or there are more of them), and you may want to avoid moving during crucial school years. In your case, do these factors point you towards settling in a more permanent home in the near future, or give you a few years' grace?

musehead

SRob5on said:

Hi everyone, just wanted some advice on what do do with money from the sale of a property? So, we were looking at putting £100 to £150k into an account to earn some interest and add extra to it monthly (but don’t want to be tied into having to do this every month). We don’t necessarily want to have instance access to those funds either. What do you think would be the best way forward and what type of account do you think we should go for? Thank you

I was in a similar situation to you around 2011, I had the funds to buy a property but I decided to wait a couple of years because I was expecting a house price crash. I was reading the "housepricecrash" forums a lot and it seemed a foregone conclusion that a massive crash was expected.

In the end, house prices in the area I was buying increased a further 20% or so between then and when I did finally buy in 2013. Since then, they increased a fair bit more and then stagnated/decreased slightly for the last several years, but are still above 2013 levels and well above 2011 levels.

Lesson learned: Don't think you can predict what will happen with house prices.

If you do decide to rent for 2-5 years though, I'd just split the money between the best savings accounts/fixed rate bonds you can find. Don't take any risks with it for that short time period. You'll have to accept that you'll probably lose some money in real terms to inflation.

SRob5on

musehead said:

SRob5on said:

Hi everyone, just wanted some advice on what do do with money from the sale of a property? So, we were looking at putting £100 to £150k into an account to earn some interest and add extra to it monthly (but don’t want to be tied into having to do this every month). We don’t necessarily want to have instance access to those funds either. What do you think would be the best way forward and what type of account do you think we should go for? Thank you

I was in a similar situation to you around 2011, I had the funds to buy a property but I decided to wait a couple of years because I was expecting a house price crash. I was reading the "housepricecrash" forums a lot and it seemed a foregone conclusion that a massive crash was expected.

In the end, house prices in the area I was buying increased a further 20% or so between then and when I did finally buy in 2013. Since then, they increased a fair bit more and then stagnated/decreased slightly for the last several years, but are still above 2013 levels and well above 2011 levels.

Lesson learned: Don't think you can predict what will happen with house prices.

If you do decide to rent for 2-5 years though, I'd just split the money between the best savings accounts/fixed rate bonds you can find. Don't take any risks with it for that short time period. You'll have to accept that you'll probably lose some money in real terms to inflation.

I really appreciate the advice. Thank you! It’s also good to hear from someone who’s been in this situation. We may not rent, as we’re exploring all options. It’s all ifs, buts and whens. There’s loads to take into consideration and weigh up so, we’ll see but thank you again for the help  

SRob5on

2unlimited91 said:

It's a very bold move to expect house prices to move in a direction that helps you out. By which I mean: reckless.

IMHO, rethink your strategy before you do anything. Look at all the options open to you. You have a mortgage-free home, and (I assume) at least one of you is working, so borrowing with a mortgage is a possiblity. The 2 main options to consider are selling and buying a more expensive property, taking out a mortgage to cover the difference in price; or taking out a home-improvement mortgage on your current property, to cover the cost of required work on your home, perhaps including an extension or loft conversion (if that's feasible). Both these options should be considered carefully.

I imagine you've already found out what mortgage you could get, and added that to the approximate value of your current house, and decided that isn't enough to buy a property you'd like. But now do that again, trying different criteria for what property you would buy: different types of property, different areas, etc. What features do you really need in a home, what would you just like if possible? Most of us can't afford our ideal property, so we compromise.

Do also consider seriously what could be done to make your current property more suitable for you. Including extensions, reconfiguring use of rooms, etc.

You say your property is no longer big enough, so I assume that involves children . Most people value the stability they get from owning their own home, rather than renting, especially when they have children, so I would think very carefully before giving that up. This also affects the timing of any move, since children may need more space when they are older (or there are more of them), and you may want to avoid moving during crucial school years. In your case, do these factors point you towards settling in a more permanent home in the near future, or give you a few years' grace?

Thank you for your advice and taking the time to reply. However, my original question was what to do with a large sum of money from the sale of a property in the hope to earn some interest on it and save to it for the next 2 to 5 years to have a larger deposit on another property. I didn’t really want to delve into my personal circumstances even though, I have had to answer some other queries, which maybe I shouldn’t have, as now, it would seem a picture has been painted, which isn’t a true reflection of our circumstances at all. All I wanted was some advice on what would work best, as I’m not a banking expert.
Again, thank you for taking the time to reply but you have made a lot of assumptions here. Whilst I appreciate that some people might be a little naive to things, these are all factors that my husband and I have considered. One of them being that my 8 year old son is in an excellent school, currently, and I do not want to take him out of it. So, we are looking to stay in the area. Another factor is whether we will get a mortgage or not. So, no, we haven’t done this part yet. Again, I thought what I was asking was a simple question. If we can get a mortgage, that will change things entirely. As I said to someone else, it’s all ifs, buts and whens. It’s about weighing up options and considering all scenarios. One of them being, what if we sold this and then ended up with a large sum of money that we needed to put away for a little while, which is why I asked the question on here. Maybe I was naive to think that people would just give me some advice on savings and investments without wanting to know the reasons behind it.
One thing I am not naive to though is that it is a risk to assume that property prices will plummet. This isn’t actually a huge factor. It was just some advice that we have been given by two different estate agents and it is something that I have actually seen first hand. I bought my first home in April 2008. Within a year, it was worth £35k less than what we paid for it. I never made that money back on it. I actually lost £20k when it was sold. Again, not being naive to it or assuming this could happen again, it’s just a factor that we have considered.
I do also value the stability of owning my own home. Another reason why I want to get rid of the house I have at the moment. I mentioned before that the property was an inheritance. An inheritance for both myself and my Mother. As she has an interest in the property, I am paying her rent, if you like, each month. I don’t know if you have ever rented from a parent but it is a horrible feeling when they ask you are you paying each month when you have never missed a payment. I know I shouldn’t take that personally, as she is a little older and is set in her ways. Also, I have a lot of memories in this house, as does my Mother. She lived here from when she was 8 years old. I doesn’t feel like mine and it certainly doesn’t feel like my husbands.
As for compromise, I’m not a materialistic individual that must have the best. Compromising is exactly what I am trying to do at the moment. We haven’t taken this decision lightly and of course I don’t want to pay someone else’s mortgage for the rest of my life but at present, something needs to give because for a number of reasons, we are extremely unhappy in our current home. 

2unlimited91

SRob5on said:

Thank you for your advice and taking the time to reply. However, my original question was what to do with a large sum of money from the sale of a property in the hope to earn some interest on it and save to it for the next 2 to 5 years to have a larger deposit on another property. I didn’t really want to delve into my personal circumstances even though, I have had to answer some other queries, which maybe I shouldn’t have, as now, it would seem a picture has been painted, which isn’t a true reflection of our circumstances at all. All I wanted was some advice on what would work best, as I’m not a banking expert.
Again, thank you for taking the time to reply but you have made a lot of assumptions here. Whilst I appreciate that some people might be a little naive to things, these are all factors that my husband and I have considered. One of them being that my 8 year old son is in an excellent school, currently, and I do not want to take him out of it. So, we are looking to stay in the area. Another factor is whether we will get a mortgage or not. So, no, we haven’t done this part yet. Again, I thought what I was asking was a simple question. If we can get a mortgage, that will change things entirely. As I said to someone else, it’s all ifs, buts and whens. It’s about weighing up options and considering all scenarios. One of them being, what if we sold this and then ended up with a large sum of money that we needed to put away for a little while, which is why I asked the question on here. Maybe I was naive to think that people would just give me some advice on savings and investments without wanting to know the reasons behind it.
One thing I am not naive to though is that it is a risk to assume that property prices will plummet. This isn’t actually a huge factor. It was just some advice that we have been given by two different estate agents and it is something that I have actually seen first hand. I bought my first home in April 2008. Within a year, it was worth £35k less than what we paid for it. I never made that money back on it. I actually lost £20k when it was sold. Again, not being naive to it or assuming this could happen again, it’s just a factor that we have considered.
I do also value the stability of owning my own home. Another reason why I want to get rid of the house I have at the moment. I mentioned before that the property was an inheritance. An inheritance for both myself and my Mother. As she has an interest in the property, I am paying her rent, if you like, each month. I don’t know if you have ever rented from a parent but it is a horrible feeling when they ask you are you paying each month when you have never missed a payment. I know I shouldn’t take that personally, as she is a little older and is set in her ways. Also, I have a lot of memories in this house, as does my Mother. She lived here from when she was 8 years old. I doesn’t feel like mine and it certainly doesn’t feel like my husbands.
As for compromise, I’m not a materialistic individual that must have the best. Compromising is exactly what I am trying to do at the moment. We haven’t taken this decision lightly and of course I don’t want to pay someone else’s mortgage for the rest of my life but at present, something needs to give because for a number of reasons, we are extremely unhappy in our current home. 

Sorry about making so many assumptions. I hope some of the earlier replies answered your direct question adequately.

Given the information that your mother owns part of your current property, I could mention the possibility of trying to raise a mortgage to buy out her share. However, it may be that you have good non-financial reasons not to attempt that, so feel free to ignore this idea.

SRob5on

2unlimited91 said:

SRob5on said:

Thank you for your advice and taking the time to reply. However, my original question was what to do with a large sum of money from the sale of a property in the hope to earn some interest on it and save to it for the next 2 to 5 years to have a larger deposit on another property. I didn’t really want to delve into my personal circumstances even though, I have had to answer some other queries, which maybe I shouldn’t have, as now, it would seem a picture has been painted, which isn’t a true reflection of our circumstances at all. All I wanted was some advice on what would work best, as I’m not a banking expert.
Again, thank you for taking the time to reply but you have made a lot of assumptions here. Whilst I appreciate that some people might be a little naive to things, these are all factors that my husband and I have considered. One of them being that my 8 year old son is in an excellent school, currently, and I do not want to take him out of it. So, we are looking to stay in the area. Another factor is whether we will get a mortgage or not. So, no, we haven’t done this part yet. Again, I thought what I was asking was a simple question. If we can get a mortgage, that will change things entirely. As I said to someone else, it’s all ifs, buts and whens. It’s about weighing up options and considering all scenarios. One of them being, what if we sold this and then ended up with a large sum of money that we needed to put away for a little while, which is why I asked the question on here. Maybe I was naive to think that people would just give me some advice on savings and investments without wanting to know the reasons behind it.
One thing I am not naive to though is that it is a risk to assume that property prices will plummet. This isn’t actually a huge factor. It was just some advice that we have been given by two different estate agents and it is something that I have actually seen first hand. I bought my first home in April 2008. Within a year, it was worth £35k less than what we paid for it. I never made that money back on it. I actually lost £20k when it was sold. Again, not being naive to it or assuming this could happen again, it’s just a factor that we have considered.
I do also value the stability of owning my own home. Another reason why I want to get rid of the house I have at the moment. I mentioned before that the property was an inheritance. An inheritance for both myself and my Mother. As she has an interest in the property, I am paying her rent, if you like, each month. I don’t know if you have ever rented from a parent but it is a horrible feeling when they ask you are you paying each month when you have never missed a payment. I know I shouldn’t take that personally, as she is a little older and is set in her ways. Also, I have a lot of memories in this house, as does my Mother. She lived here from when she was 8 years old. I doesn’t feel like mine and it certainly doesn’t feel like my husbands.
As for compromise, I’m not a materialistic individual that must have the best. Compromising is exactly what I am trying to do at the moment. We haven’t taken this decision lightly and of course I don’t want to pay someone else’s mortgage for the rest of my life but at present, something needs to give because for a number of reasons, we are extremely unhappy in our current home. 

Sorry about making so many assumptions. I hope some of the earlier replies answered your direct question adequately.

Given the information that your mother owns part of your current property, I could mention the possibility of trying to raise a mortgage to buy out her share. However, it may be that you have good non-financial reasons not to attempt that, so feel free to ignore this idea.

Thank you. To be honest, only one person has made a suggestion of splitting any funds between savings and investment accounts so aside from that, I think I’m still going to have to walk into a bank and ask these questions to some sort of financial advisor because that’s what I would have thought to do but still unsure what account types are best.
As for buying my mum out; we were going to do this before we even decided to sell but then that doesn’t alleviate the fact that the house doesn’t feel like ours. You mentioned earlier about having work done on the house to make it more suitable for our needs; We have considered this too. For the amount of work it needs and comparing that to the money we have already put in, plus buying my mum out, we might as well go and buy another property that is more suitable when considering all other factors because if anything, we may save ourselves money over the longer term. Even if that does mean renting for a time. Thanks again.

coyrls

To answer your original question directly, I wouldn’t be thinking about investing any of the money unless you know that you won’t want to access it for at least 5 or preferably 10 years.

Always check for FSCS cover.  Unless you are using NS&I, make sure that you don’t put more than £85K with a single institution and look out for instances where the single £85K cover is shared across multiple brands.

If you know that you will not need access to some of the amount for a number of years you could look at fixed term accounts for the portion of the money that you definitely will not need access to.

If you want instant access, you may as well stick with NS&I as they have the current best interest rate and you can then forget about the £85K limit.  Check the rates and restrictions out here: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

2unlimited91

SRob5on said:

To be honest, only one person has made a suggestion of splitting any funds between savings and investment accounts so aside from that, I think I’m still going to have to walk into a bank and ask these questions to some sort of financial advisor because that’s what I would have thought to do but still unsure what account types are best.

Selecting savings accounts is something you can do yourself. For investments, the usual suggestion is not to walk into a bank, where they will only offer their own, poor-value products, but either to find an Independent Financial Advisor, or to learn to do it yourself.

However, 2-5 years is perhaps too short to consider investments. Investments are, on average, likely to give higher returns than cash savings, but that is the average of years including some with large percentage gains and others with large percentage losses. 2-5 years is short enough that there's a significant chance of losing money, if you are unlucky and get a few bad years. Usually 5-10 years is thought of as a more sensible minimum time to be invested.

Certainly, if it's more likely to be only 2 years, I'd be more inclined to keep it all in cash savings. If it's more likely to be 5 years, it might be worth considering investing part of the cash, partly because there's more danger of house prices rising significantly over that time, outpacing cash savings rates.

happy_hazelnuts

To answer you question, put the £100-150k into ns&i. 

You will get some interest and can add to it as and when you want to. It is 100% safe.

2-5 years is too short a timescale for 'investments' 

fangled

happy_hazelnuts said:

To answer you question, put the £100-150k into ns&i. 

You will get some interest and can add to it as and when you want to. It is 100% safe.

2-5 years is too short a timescale for 'investments' 

Iv'e just taken a look at the rates at the NS&I, they are pretty low, as I guess all banking accounts are.

Direct ISA has an AER of 0.9%. Direct Saver has 1.0% gross (tax to be paid).Income bonds of 1.15 % gross (tax to be paid) and all the rates are variable.

So if you put 100k into the Direct Saver, this would earn £1000 in a year, of which you would need to pay tax.

Perhaps it might be worth not selling just yet, but instead, get a tenant in - you'd get alot more than £1000 in a year. Having said that, you'd have to pay for insurance, pay a letting agent, gas boiler safety certificates  etc ... I still think you'd get more than £1000. I guess by selling, you wouldn't have all that headache!