Property rental paid for by interest on savings

Hi,

We are moving to a different part of the country in a couple of months, as I ditch my high paid IT job for a job in teaching (seems like a good idea at the moment - hope I feel the same way in a years time!).

Anyway, we have almost sold our house and are looking at making about £180,000 equity, which we were hoping to sink into a new house without the need for a mortgage (teachers dont get paid much!).

We are having trouble finding a house, and time is starting to run out. Looking at building society interest rates, it looks like I would get over £500 a month if I put this cash into a savings account (sound about right?), which would allow us to rent a house while we continue looking and not have to dig into savings.

Apart from the fact that we will be out of the housing market for a while, and so at risk of being priced out of the market, does anyone see any problems with this idea. It seems too good to be true to me, but then I suppose I have never had very much cash in my savings account, and so I am not used to making much cash from my interest.

Cheers,

Dave.

Reply to
Dave Dixson
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You will have to check that your account pays interest monthly.

Have you included capital gains tax ?

how did you calculate that figure ?

Did you remember to include tax on the interest ?

Reply to
Zoe Brown

There's none on you main house (PPR)

ING pays 4.7%AER which is approx. £8,460pa gross, approx. £6,768pa net of 20% tax. I believe you will pay 40% tax if your a higher rate taxpayer.

Be aware that the compensation scheme only covers about £30,000 with any one financial institution, so it might be worth spreading the money over several companies.

Daytona

Reply to
Daytona

Yes, sounds right if you're not a HRTP, which even if you are, you apparently soon won't be. :-)

Sounds fine. Only £500pm will probably only rent you a house downmarket from what you might expect to buy for £180k. But that's OK, you might as well get used to slumming it.

Why do you think so?

The only downside is that your savings will erode with inflation if you withdraw the interest instead of letting it accumulate. But if inflation is only 2% that may not be too big an issue.

Then there's house price inflation, but if you play your cards right, that might not be an issue either.

Of course, if the worst case Holmes scenario happens, and there is no housing bubble but a credit bubble, and the whole banking system collapses when it bursts, who's going to pay the rent then? :-)

Reply to
Ronald Raygun

One thing to be careful of if you have cash is spending it! With 180k in the bank a new car is going to look very attractive. Its very easy to spend a bit extra on meals out, a weekend away- stick it in the credit card. The bill comes in, you pay it off and suddenly you dont have 180k any more.

What I'm saying is that having money makes many people feel more able to spend and you need to be very disciplined to prevent it.

Neb

Reply to
Nebulous

Thanks for all the posts - you've give us a few things to think about which we hadnt considered, though it sounds like it will work out ok.

As we will be moving to a different part of the country, we are starting to think that renting for a short period before hand might be a better way to go anyway, as it will give us more of a chance to check out the local areas and keep more of an eye on the local property market.

Cheers,

Dave.

Reply to
Dave Dixson

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