Best home for £200k

greco_2

I have £200k from sale of a property and a £200k mortgage with Woolwich. The mortgage is a tracker at 0.39% over base with no penalties for early repayment other than a £275 exit fee.

My wife and I are both higher rate taxpayers but intend to retire in under two years and live off our ISAs for 3 or 4 years so will become non-taxpayers. We intend to build a retirement home in Greece for about £250k. We will need to draw on the £200k over the next 18 months or so to meet stage payments on the house. On completion, we will sell our UK home to clear the debt.

My question is what is the best way to invest the £200k to balance out the cost of the mortgage? My feeling is that an offshore vehicle such as the JPM Sterling Liquidity fund recommended by Hargreaves Lansdown might be suitable as it allows interest to be rolled up and remain untaxed until withdrawn.

We could of course also repay the existing mortgage and refinance when we need the money but the current rate is very cheap.

Thoughts please.

stv1x

greco wrote: »

My question is what is the best way to invest the £200k to balance out the cost of the mortgage? My feeling is that an offshore vehicle such as the JPM Sterling Liquidity fund recommended by Hargreaves Lansdown might be suitable as it allows interest to be rolled up and remain untaxed until withdrawn.

Thoughts please.

Just out of interest, what rates are JPM offering at the moment?

Also, does Greece offer any tax breaks to immigrants, as does NZ for the first 4 years, where you could, potentially, withdraw the £200k tax free further down the line?

Rafter

Well, you aren't going to be able to earn 5.39% after tax on regular savings, but you need to keep the cash fairly short to make stage payments on your house - presumably in Euros too?

Given the timescales, the advantages of some offshore vehicle to defer tax payments seems fairly limited.

Might be worth talking to your advisor about pension options though - is there a way you could make a big lump sum contribution to your pension fund and then draw it out tax free in 2 years to clear your mortgage? Doesn't help with stage payments on your greece property though.

I'd be tempted just to spread it between a range of UK instant access savings accounts and 1-2 year bonds. You should be able to earn 6.5% to 7% gross on most of it given current rates.

Other option might be to see if woolwich have an offset product? That way you are earning 5.39% after tax on your savings, without reducing your ability to use the funds for your greek property.

R.

greco_2

It's an offshore money market fund which returns around 5% per annum on average.

http://www.h-l.co.uk/fund_research/security_details/sedol/B1FN022.hl

The Greeks don't appear to offer any tax breaks to migrants.

greco_2

Simultaneous posting!

Payments will be in Euros but I'm fairly relaxed about potential exchange rate fluctuations. I think the bad news is out of the way. Painful though.

Woolwich do have an offset product but it costs more and has a fee attached but it's worth looking at. That would avoid any downside.

The pension option is an interesting one and I'll investigate that. As you say, it doesn't help with the stage payments but some money could be put in there.

Otherwise, the bond/ISA route looks like the way to go. It would mean that it would cost me about 1.5% (mortgage rate less after tax interest) which isn't too bad but I'm a skinflint Yorkshireman who watches the pennies.

Any other thoughts would be welcome.

Tom_Jones

Just a point the exit fee of £275 by the Woolwich is too high, and I reclaimed about £190 2 years ago when I paid off one of my mortgages, so you should expect to pay around £80.

greco_2

It was clearly shown on the offer documents. There's no basis to challenge it.

dunstonh

Tom_Jones wrote: »

Just a point the exit fee of £275 by the Woolwich is too high, and I reclaimed about £190 2 years ago when I paid off one of my mortgages, so you should expect to pay around £80.

That is not the correct interpretation of the FSA ruling. If your original contract letter said £275 then you pay £275 with no right to get any refund. If your contract letter said £85 and you paid £275 then you can claim back £190.