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If you rented in between selling and buying what did you do with the equity?

(24 Posts)
mrsfarquhar Mon 10-Nov-14 20:06:26

We've had a good offer on our house but can't find anything to buy and probably won't be anything new on until the spring. We'll have just over 500,000 in equity. Renting is much more expensive than our mortgage and I was wondering if there was anyway of earning interest on the mortgage.

We live in London so we've been lucky enough to amass a healthy equity over the years but with our max mortgage we are still really tight for a 4 bedroom so can't afford to reduce the equity too much with rental costs.

atoughyear Mon 10-Nov-14 20:08:11

Premium bonds?

Serenitysutton Mon 10-Nov-14 20:14:48

We did premium bonds. The return is shit but you might win a mil. It's also very very safe . You can only do £30k each though

PigletJohn Mon 10-Nov-14 20:31:39

Premium Bonds limit is £40k per person now.

Prize fund is currently at 1.35%

CleanLinesSharpEdges Mon 10-Nov-14 20:34:15

We split ours up and put it into a bunch of easy access savings accounts, each account was only insured for 80k hence the need to split it over a number of accounts.

AnnOnymity Mon 10-Nov-14 20:38:11

Premium bonds to the max for each family member, rest in savings account.

Bragadocia Mon 10-Nov-14 20:39:23

We bought a few weeks ago, two years after we sold (was meant to be 6 months, but we dithered. A lot...) So, the 90k we had went in a high street (Barclays) savings account, earning about £130 a month. Not a lot! But it was paid monthly and no notice, so if the right house had come along, we could have accessed the funds straight away.

specialsubject Mon 10-Nov-14 21:09:44

there are no savings accounts AT ALL which keep up with inflation at the moments - the banks are still being flooded with government money and so have no need for more. So you won't get much but you might as well get something.

Concern no 1 is to keep it safe: no more than £85k per person per banking licence (£170k for a joint account). Here is the list of banking licences related to brands. Boring but important - banks CAN go bust.

to get any interest, you need to use current accounts. Only Santander takes more than a tiny amount of your cash, and that is only 20k per account; 1 each. Other reasonable payers are Club Lloyds (£5k each). TSB Classic Plus (£2k each account, 2 accounts each IF YOU ARE QUICK), Bank of Scotland Vantage (3% on 5k, 3 accounts each), Tesco current (£3k, 3%, one each)

this will need standing orders and direct debits set up. Same cash goes round the accounts. Draw a diagram!

put the rest in ISAs where you can always take it out, premium bonds and finally the easy access savings accounts where you can scrape 1.6%.

get a shift on finding your next home because inflation is higher than they say and will be eating away at your cash.

atoughyear Mon 10-Nov-14 21:50:26

I suggested Premium Bonds because we found ourselves with a large amount of cash we had to set aside for a short time. We invested the maximum we could and won several hundred pounds. I don't think we'd have made anywhere near that had we stuck it in n account. There is as someone has points out the added bonus of a chance to win a very substantial amount of money.

PigletJohn Mon 10-Nov-14 21:54:45

Premium Bonds have the advantage that the prizes are tax free, which makes them more valuable than interest payments, if you are a taxpayer.

If you have £40,000 worth then on average luck you could hope to win £45 a month (but prizes are of £25 or multiples thereof) and dream of winning a million.

mrsfarquhar Mon 10-Nov-14 21:55:41

wow I hadn't realised it was so complicated. Lets hope house prices don't surge too.

Apatite1 Mon 10-Nov-14 23:39:05

We had a similar problem with the amount we saved for a house deposit (bit more than your amount) we did EXACTLY as specialsubject has advised. I'd follow her v good advice if I were you. We've also got a shift on and bought the house, she's very right about inflation eroding your money!

Our next lot of savings is going into premium bonds first, then further property, then savings account only if the interest rates pick up.

Serenitysutton Tue 11-Nov-14 08:10:33

Good news that you can invest more in PB! We did win a few hundred pounds each (in about 6 months so probably comparable or more than the best savings accounts but obviously there is no guarantee!

Spindelina Tue 11-Nov-14 09:13:00

Before you despair too much, remember that you are putting yourself in a very good position to buy, and you may be able to do so at a slightly lower price because of it.

That said, if house prices are going up in your area, I agree that you do need to minimise the time in rented - unless you are happy to pay the price for waiting, of course.

specialsubject Tue 11-Nov-14 09:58:24

be aware that the minimum period for an assured shorthold tenancy is 6 months. You can get shorter-term ones but it needs a lot of trust. We had one on a month-by-month, all was fine, but it turned out we were there five months anyway by the time we'd found the place and completed, and we started looking the day after we moved in.

of course I'm just whinging because my whole £500 of premium bonds has never won anything. smile

mrsfarquhar Tue 11-Nov-14 10:46:35

Thanks all for your help. We've owned our own homes for 15 years with no break so its a bit nerve racking. Yes I'm budgeting for 6 months. Its going to be roughly £700 per month more than our mortgage + an extra cost of removals so approx £6-7,000 assuming we are ready to move in 6 months. When our max budget is around the cost of 4 bed house, that's quite a chunk in terms of the offer we can make.

Are there any other costs we should be aware of?

Gingerandcocoa Tue 11-Nov-14 10:53:24

We were in that exact situation. Sold our house, but buying a new build that wasn't going to be ready for another few months. Main costs was removal, deposit with the new flat (which we got back in full thankfully), rent higher than mortgage, and also a 3 month overlap (rent, Bills etc!!) as we had to complete on the new place and started paying the mortgage!!
Make sure your rental place has a six month break clause and then turns into a two month notice contract. Imagine if you find a place to buywhen you're just 6
Months into your contract and then have to pay rent for another 6 months!!!

specialsubject Tue 11-Nov-14 12:45:59

don't forget your tenants insurance, although that isn't very much. And if you need storage budget for that, plus its insurance.

oh, and two redirects although that is lost in the noise!

BTW standard tenant to landlord notice is 1 month after the first six months. Don't give notice until you have exchange.

nottheOP Tue 11-Nov-14 12:49:00

atticusclaw Tue 11-Nov-14 12:55:05

We just had ours (£300k) in a savings account but it was five years ago and we were earning ten percent. Unheard of now.

specialsubject Tue 11-Nov-14 13:15:54

looks like investment sense don't know about current accounts!

mandy214 Tue 11-Nov-14 13:54:28

This is going back a few years and my mother advised me to put ours in an Icelandic account because the interest was so high (about 7% I think at the time). Fortunately it all worked out ok, but I nearly swerved off the road when I heard (on the radio whilst I was driving) that the country's banking system had collapsed and then had a very stressful 48hrs thinking we'd lost it all.

So moral of the story, do your homework to make sure its safe and don't be tempted by something that sounds too good to be true and never listen to your mother

mrsfarquhar Wed 12-Nov-14 08:42:02

Thanks Mandy - that's a good point. We tend to assume things won't happen but they do!

Hughfearnley Thu 13-Nov-14 23:42:48

We've just done this.
We managed 60k split in 3 Santander accounts to get 3% (one each and one joint account)
The rest in ISAs premium bonds etc etc.

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