Could someone advise me please. I have little experience in the wild world of finance, normally I lurch from pay day to pay day and just scrape by. However, I am about to receive around 60k from the sale of my house and have no idea of the best way to deal with this money. I would ask the bank (first direct) but need a bit more info for myself so that I ask the right questions.
I want to spend around half of this paying off all debts, buying a new car and one or 2 other things, the rest I think will keep as deposit for a new house. I haven't found anything yet and live in a very long term cheap rented house which I love so there's no urgency although I am looking.
Is it most sensible to buy another house? What sort of account should I put this money into until I find one? What would anyone advise.
Make sure there is no CGT to pay. It's not clear, from what you say, how long you've lived in this cheap rented place and whether the sold house has actually been your home.
Depends on how happy you are where you are. Prices are high at the moment, so it's a bad time to buy and if you can sit tight, prices may fall and you can get more bang for your buck. Chances are your mortgage outgoings would far exceed the rent you're paying, so by saving the difference, you'll end up with a bigger deposit when you do buy.
If you don't want to take risks by investing in the stockmarket, you're probably as well keeping it in bank deposits. Internet-managed accounts are pretty good value, such as ING or Halifax's websaver. It's worth drip-feeding £3k each tax-year from these into a cash ISA to give the interest a bit of a boost.
Do NOT buy a new car - I think a recent Which report showed that most cars lose half their value within 3 years with many models - Ford Mondeo being one example - losing an INCREDIBLE half their value in 12 months. It is worth spending 4.95 buying a copy of Whatcar magazine to read their reviews on performance, reliability and depreciation of each model. Also, seriously consider the running/insurance/service costs of any car you buy.
The Whatcar website is also very good as is Parkers website. They both have good info on how to buy a car, how to haggle, how to get the best deal. I like Whatcar as they tell you what the value of a car should be and they basically tell you to walk away if the dealer will not match the price. The second hand car market has not only seen prices fallings for over a year now but there are some incredibly keenly priced bargains of 1, 2 and 3 year old cars out there right from small super minies right up to big executive cars.
Go visit
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and learn about 'STRs' - an increasing number of people in the UK are 'selling to rent' at the moment as they believe the UK housing market is in a BIG bubble that is about to burst and will see house prices crash in the coming months. Some Economists think house prices in the UK will crash by 20% in the next 2 years, others think up to 40% and a senior guy at American Express in London recently said that the housing market in the UK was the 'mother of all bubbles'.
First thing though, as another poster has said, make sure you have paid off any taxes and debts that you might owe before you spend a penny. CGT being the biggie to think about... then get rid of those debts.
I would look at a mixture of a cash ISA for 3K - maybe put 3K in now before April 5th and another 3K after April 8th to maximise tax free interest, putting some money into a few high interest saving accounts (I like to spread the risk by using a few accounts) and also conside a few thousand into Premium Bonds. You never know, you may get lucky and win a million but, unlike the lottery, you can get your stake back when you wish.
I personally would not consider the stock market myself at present as if the housing market goes I personally think it will bring down the stock market also.
Egg savings account is 5.5% during the first 6 months. If you're happy to shuffle the money about, go for it and then move it in half a year.
Halifax websaver is 4.9% at the moment. But there are various other offers just above 5% AER, see links below.
I think the min-cash ISA is going down to £1000 p.a. from next year on. But for this year you could still put £3000 in an ISA.
If you're organized you can also drip-feed various high-interest regular savers:
1) Halifax Regular Saver 7% (up to £250/month)
2) Abbey National Fixed Rate Monthly Saver 7% (up to £500/month). Hurry up, offer about to expire
2) Derbyshire Building society 5.85% (up to £1000/month)
for comparison check out
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or
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which if you subscribe will update you regularly on the best deals currently available.
I have been wondering whether one should always keep the amount deposited at one bank below the £35K backed up by the Financial Services Compensation Scheme...
Do you want the good news or the bad news first? :-(
Bad News:
To qualify for full CGT exemption, it simply having been your home for part of the time isn't enough. It has to have been your home for all the time you owned it. If you lived there only a quarter of the time, then three quarters of the gain will be taxable.
Good News:
The nice taxman will let the last 3 ownership years count as "home" years, but the status of the 2 years prior is critical.
If you've owned the place for N years and it has been your home for the entire N-5 years, then 2/N of the gain will be taxable, unless you've been renting it out during those 2 years, in which case Letting Relief will reduce the CGT liability, quite possibly to zero.
It's worth looking into. In any case you will need to declare details in your forthcoming tax return. Chances are the tax bill will be very low because of indexation allowance, taper relief, and of course the first £8200 of gain are exempt.
Tell us in which month you bought it and how much you paid for it, including buying fees (legal, survey, estate agent, stamp duty, but not mortgage arrangement fees), or if you inherited or were gifted it, when it was and how much it was valued at. This will determine the indexation allowance.
Confirm that you have actual home status for the full first N-5 years (or give details if not), and for how many of the "middle" 24 months it was let (if at all). Then we'll be able to work out your CGT bill. Oh, actually the selling price will be needed too, minus the selling expenses (estate agent & legal fees, etc), since this will make clear how much of your £60k is actual gain and how much is really a return of your deposit.
Yes, I personally think so. Having said that, the money I have saved for my house deposit is mostly in one place and I do keep meaning to spread it out a bit more. I must do that this month. I keep thinking of the Japanese housing crash where supposedly rock solid banks went bankrupt and savers lost their life savings.
I am an Internet Consultant by trade and, um, personally I would never keep any money in any online bank at the current time. In the future, possibly and quite likely I will move to online but I have my concerns about security and verification of online systems personally at the current time.
Good thinking. Good introductions here - (and the discussion boards here are a superb source of information)
That's probably the single best investment you can make.
Please don't buy a new *new* car, you lose so much money in depreciation and there's so many great value for money cars for £3,000. Someone mentioned Parkers, Honest Johns website (Telegraph motoring correspondent) is also superb. Which? best buys under £5,000 at your local library or free trial online at
Great value for money breakdown cover from AutoAid
Sit back, wait and watch. With the lenders persisting with their mortgage multiples, too many people have been priced out of the market (P/E=6.6) although affordability is average at ~37% of salary. I think house prices will either stay around this level +/-5% or drop by 40% back to their average P/E of 3.7 over the next few years.
Perhaps you should spend the money doing it up, you know your landlord would appreciate it ;-)
I can't foresee the prospect of anymore large rises >10%pa, so you can afford to watch what happens and enjoy your current place with a nice sum in the bank.
I don't buy new cars- can't afford them- but I've always been very cynical of those figures. If they lose half their value in 12 months, how come I cannot buy a 12 month old one at half new price? In the recent figures a Nissan Primera lost 74% of its new price in 3 years, but again there's no chance of buying one at that price.
Simple...second hand dealerships. In the main, they exist to rip people off on both sides of the bargain and take a large fat cut for themselves.
I'm certain that the statistics that you see are based on dealership prices, and probably not even on the BEST price obtainable when you sell but the average.
What about private deals then? They are slightly better than dealers, but they still do not come close to the depreciation figures quoted by the car magazines.
According to a recent aticle I read on Whatcar's website alot of dealers inflate the price of second hand cars on their forecourt because, um, people would never buy new if they saw how much a 1 or 2 year model cost. Apparently there is a ripe trade in having pre-registered ones parked round the back out of sight for the real depreciated figures. They won't tell you about them unless you ask.
Actually, I'm in the market for a good quality second hand car of around
1-2 years of age. It's just dawned on me that I could do a lot worse than arm myself with a copy of the official depreciation statistics before going to a dealer so that (a) I have some kind of idea how much room for manouevre the dealer is likely to have (b) I have something to barter with. Surely if you can convince the dealer that you know the true present value of the car (not what he's trying to sell it for) and you have a number of other options elsewhere where you've bartered the price down he might be prepared to budge that little bit more on the price to get your sale.
I know...I just wonder if there aren't any particular anomalies to be found among the statistics reported in the likes of What Car where the depreciation seems far worse than that shown in Parkers. If that's the case, there could be more mileage to be had with *some* dealers if you use the What Car stats rather than Parkers to broker your deal.
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