What to do with this £10k?

rentingmillennial87

Hello all,

I am a newbie 🙂

A relative has kindly offered my husband and me £10k to go either towards a house deposit or therapies for our disabled child. We are in our late 30s/40s and are currently renting to be near our child’s special school (housing very expensive there). We hope to one day move out of the city and buy a place, but it would need to be near a school suitable for our child.

We both have the old-style help to buy ISAs which contain the max we can save to get the government top-up (£12k each).

We also both have normal ISAs. His has about £25k in it, mine fluctuates as I am freelance and use it to pay my tax (am self-assessment), but it usually has £15k at a minimum.

We are both earning and have been putting our child’s DLA and child benefit into a savings account in their name. This now has about £12k in it and we dip into it when something is needed for child (we might to pay some of the child benefit back this year as my husband has had a pay rise). I gather we probably can’t use any of this money towards a home even if a stable home is in our child’s interests. Child also has £1,000 in premium bonds.

I want to put the £10k somewhere where it won’t get dipped into until it’s needed (so not my ISA). What do I do with it? I don’t want it ruled out as a house deposit so putting it in child’s name seems tricky. It’s my relative so I don’t want husband to have it as relative won’t fancy that. So where to put it? I want relative to feel confident it will go to its intended purpose. I want to be able to access it in a year, two years, whenever it’s needed really.

We have no debt and no credit cards.

My husband and I are both depressed not to own a home yet but are trying to save as much as we can. I might possibly be due an inheritance in the next couple of years but am choosing not to rely on that, so am working on the assumption that it will be used up by care home fees.

Any advice appreciated!

eskbanker

What's your assessment of how much it would cost for your first property purchase (i.e. within HTB ISA value cap?) and how much of a deposit would you need, which ultimately influences how long it's likely to be until you can buy? The HTB ISA expires in a few years so you'd need to buy by 2030 or consider alternative products, such as Lifetime ISA or the new first time buyer one.

If it's important to you to lock it away in a product in your sole name then you'd probably need to pick a fixed term account of a suitable duration, so that duration becomes an important factor…

wmb194

https://forums.moneysavingexpert.com/discussion/6687357/what-to-do-with-this-10k

There are fixed rate, fixed term Isas. You can access them but usually with a c.90 day interest penalty to put you off doing so.

https://moneyfactscompare.co.uk/savings-accounts/

Exodi

I'm curious as to the area and your incomes - £10k (gift) + £15k (HTB ISA + bonus) + £15k (Partner HTB ISA + bonus) + £25k (Partner ISA) + £15k (Personal ISA buffer) = £80k without thinking about any money in your child's name.

At first I thought 'Either this person lives in Mayfair or they don't truly want to buy' but then you say:

rentingmillennial87

My husband and I are both depressed not to own a home yet

So I guess the issue is affordability (as obviously minimum deposits for lenders are typically only 5-10% which would make you eligible for most properties in the UK, even in London). Most lenders will offer 4.5x joint income, what is your husbands and yours average annual income (appreciate you have a fluctuating income)?

Have you done the sums at all? E.g. how much you could get a mortgage for, what the cost of an appropriate house might be, therefore having a target for how large deposit you need to save? Also worth considering the opportunity cost, part of the money paid on a mortgage goes to equity, none of the money paid to rent does - and this is while people pay similar amounts in mortgages and rent (with the added benefit that mortgages decrease in real term over time whereas rents does not unless you get a very nice landlord).

rentingmillennial87

https://forums.moneysavingexpert.com/discussion/comment/82174397#Comment_82174397

Yes it’s the sheer prices of property in our area of Zone 2 London. I earn on average about £45k and my husband just started earning £60k after a promotion. Our rent while substantial is significantly below market rate in the area. There are other considerations such as factoring in the fact that our son is only going to get bigger and potentially more challenging so being stuck in a poky London flat we can’t sell is a bit of a worry.

rentingmillennial87

https://forums.moneysavingexpert.com/discussion/comment/82174382#Comment_82174382

It depends where we buy, but I’ve been looking at houses that cost about £400k outside of the city. Education is a big worry, though.

Could we put the £10k in my help to buy ISA just to store it there, even though the government top up is capped at £12k?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82174499#Comment_82174499

HTB ISA can only be used towards properties valued at £450K within London boroughs but just £250K outside London, so the location of your purchase will affect whether or not you qualify for the HTB ISA bonus - if it looks like you won't then you'd be best advised to move the money elsewhere.

And no, you can't pay more than £200 per month into a HTB ISA…

friolento

If one of the many savings accounts doesn’t suit, how about putting the lot into Premium Bonds?

Exodi

https://forums.moneysavingexpert.com/discussion/comment/82174493#Comment_82174493

Then you're on to a loser unfortunately as the HTB ISA bonus is capped at £450k.

From what you've said, you would currently be able to get a mortgage for ~£475k plus £80k deposit = a maximum property value around ~£550k.

To flip it on it's head, how much house do you think you need? £600k? £700k? £800k? More?

Are you at risk of not seeing the wood from the trees? At some point should you ponder whether saving into your fifties for your first house so you can live next to your child's school makes sense? Should you ask yourself what levers can you pull to make home ownership a reality sooner than later (e.g. thinking about transport/commuting options/changing education setting/etc).

I think the suggestion that you'll be 'stuck in a poky London flat' is a bit excessive, searching Zone 2 properties within your price range yield many freehold house options - but of course if you're insistent that it must be detached, in the best area, have a big garden and a driveway for 3 cars you will obviously struggle.

I think my first suspicion may be valid - do you think there's any subconscious reasons preventing you from buying a house? E.g. fear of the house prices collapsing, being fixed to one location, anxiety of being responsible for all repairs, hesitance to forfeit cheap rent in lieu of higher mortgage payment, etc? All are valid concerns of course, I'm just trying to understand if this is about more than just money.

rentingmillennial87

https://forums.moneysavingexpert.com/discussion/comment/82174523#Comment_82174523

You’ll have to trust me that anything for £550k around here or within a distance where mobility isn’t an issue would be very small indeed and not suitable for our child’s needs. We certainly don’t want a detached house, we couldn’t afford a terrace even. As for flats, one the size we currently have - which is just about liveable - would be £800k minimum. We are priced out and accept that but are staying because the education is so good.

You are probably right that there is something subconscious going on, too. I am not sure I would want such a large mortgage (by which I mean £550k) keeping me awake at night if we were to try and buy in outer London far from school.

It’s a pain about the help to buy ISA limit but I am still proud we were able to save. I expect we will move out of the city but are unlikely to find a school as good. It’s a shame that £250k wouldn’t get us very far in the area outside London we had our eye on.

rentingmillennial87

https://forums.moneysavingexpert.com/discussion/comment/82174520#Comment_82174520

Yes I think that might not be a bad suggestion - thanks! It just needs to be in my name not my child’s!