Investing for a house deposit

MaxiRobriguez

Tonys101 said:

True I am just looking for ways to get extra money so I have less to pay if I take out a mortgage. 

If you want to pay less you could take out the mortgage over a longer term, say 30 or 35 years...

.. and use the difference in monthly cost from a 25 year term to push into a pension instead, and take advantage of tax efficient vehicle AND stock market returns over a longer period, which you can then use in the final ten years of your mortgage term as cash flow towards paying off the mortgage.

That gives you exposure to market gains but would be a much less risky proposition than investing for a couple of years. It will also likely leave you better off in pure £ terms over the long run too.

moneysaver1978

How much do you have right now and how much do you need for a deposit? When are you looking to buy a house?

sevenhills

steampowered said:

This article has a very good explanation of what level of risk you would be taking, if you were to invest in a fund which tracks the stock market.

As you can see, if you were investing for 1 year, you have about a 28% chance of making a loss. If you were investing for 6 years, you have a 10% chance of making a loss.

So that would mean a six-year investment would have a 90% of making a profit, as opposed to a 100% chance of making a loss in an ordinary savings account. Having said that, I think the OP should go for premium bonds.

wmb194

It isn't all or nothing: you can partly invest and partly use savings accounts. "Investing" isn't a standard unit of measure anyway ie. the risk of loss will vary depending on what you're investing in.

MaxiRobriguez

sevenhills said:

steampowered said:

This article has a very good explanation of what level of risk you would be taking, if you were to invest in a fund which tracks the stock market.

As you can see, if you were investing for 1 year, you have about a 28% chance of making a loss. If you were investing for 6 years, you have a 10% chance of making a loss.

So that would mean a six-year investment would have a 90% of making a profit, as opposed to a 100% chance of making a loss in an ordinary savings account. Having said that, I think the OP should go for premium bonds.

There's also the scale of profit/loss to consider.

Money lost to inflation is over six years is likely to be <5%.

Money lost in the markets has the possibility of being ten times that.

bostonerimus

I would save for a deposit. Investing is a long term activity. You should save money into a saving account with some interest every month. This will also help you to get use to paying a mortgage every month.

gozaimasu

@Tonys101 The UK money podcast with Jason Mountford recently did an episode on this question about investing for a house deposit - might be worth a listen. Think about how you'd feel if you invested and lost half your deposit. That might push your housebuying goal further into the future.

sevenhills

MaxiRobriguez said:

There's also the scale of profit/loss to consider.

Money lost to inflation is over six years is likely to be <5%.

Money lost in the markets has the possibility of being ten times that.

Inflation is 3% at the moment, <5% over 6 years is way out

grumiofoundation

sevenhills said:

MaxiRobriguez said:

There's also the scale of profit/loss to consider.

Money lost to inflation is over six years is likely to be <5%.

Money lost in the markets has the possibility of being ten times that.

Inflation is 3% at the moment, <5% over 6 years is way out

Savings accounts do pay some interest though. 

A savings account will only return near 0 if you don’t bother to chase higher rates. 

Tonys101

Great advice people