If we sell and then move into rented, where to put the equity?

[KimGa]

If we can’t find the property we want in the next 2 months (keep failing to win best and final on the few that come up), we are begrudgingly thinking of moving into rented in Oct so we have the right address to apply for schools this autumn. We will have to stay there at least 12 months and then we’ll try and get back on the ladder again (schools admission rules). At least after that time we can buy right on the edge/just outside catchment which will give us more options.

Where should we put the money from our sale that will be the deposit for our next home in 12-18 months time? Where will it be safest/earn a bit of interest? Do we need to split it up? We’re talking 350k though will need to spend some on the rent as it’s double what our mortgage payments would be! Would be grateful to hear from anyone who has done this / has better financial insight than I do!

Money is protected up to £85,000 under the FSCS. There are special provisions - and house-proceeds normally fall under this - but they only operate for 6 months. See here

I would spread the money about, some at low risk and some at higher-reward. It might be worth getting an IFA involved so they can talk through your risk-profile & your time-scales and make recommendations accordingly.

I will be in this situation soon as selling an inherited house...funds go to premium bonds and several deposit bank accounts as need easy access to funds to buy relative another house at some point....they all pay miserable amounts even if you do the one or two year accounts.

If you are thinking 12 - 18 months and buying from renting I would make sure you can get your hands on the money within a month or less . So if you think you will find a house I would stick a lot in a savings deposit account where you can access it easily . It won't earn you lots of money but you may get the house you want because you can exchange and complete quickly - but it will be a slightly nervous time. We got our house because we had instant access to the money. But that is one instance only.

Premium bonds and cash - chase or similar not a lot else you can. We did this had it in Marcus. Can’t risk investing it too short time.

We were in the same position and have used premium bonds (2 x 50k max investment
and the NS&I Direct Saver for the rest (instant access and covered more than the standard 85k). Interest rates were terrible everywhere at that point though things may have improved in that respect over the past couple of months.

We did exactly the same while we were between properties.
Liked the way you could access your money and the security you get.

i read your previous thread. I really hope you find something, in catchment, to buy, even if it's not perfect, it's better than renting for a year!

Thanks for your kind words. It’s such a hard choice. We have a great 3 bed semi with large kitchen diner, parking and garden just outside catchment (was in catchment when we bought and extended, but not now). Everything we can afford in catchment is so much smaller as well as having other compromises like no garden or parking. I’m scared of the financial implications of renting (we will have to use some of equity to cover the cost every month as rental price so high) but after a year should in theory be able to buy close to what we have now again. There are people trying to sell lovely homes just outside catchment for the same reason all the time. That’s all dependent on mortgage rates etc though, and how much equity we have left/whether banks are still loaning the same.

If we buy something that’s small with all the compromises we’ll want to sell up again asap so will lose money in 2x stamp duty etc that way. And the market is so high now it might not go up in value, it could go down. We won’t want to fix a mortgage for 5 years because won’t want to stay there that long, so hard to know which bad option is the least bad.

And thanks everyone else for advice on where to put equity the if we do go for the renting option, very helpful.

I had to do exactly this so I maxed my premium bonds, my cash isa and a savings account.

Premium Bonds and check out Hargreaves Landsdown Active Savings. It's easy to move money around between different savings accounts operating different terms, e.g. 6 month account expires then it's easy to move to a new product. You CAN get better rates direct BUT the hassle of form filling and moving all the time is a real pain. Just make sure that neither partner holds more than 85K with any one institution to ensure protection continues after the government scheme for home equity ends.

And CHASE? Forget it. They have me waiting 5 weeks before that can get around to opening my account. This is not an outfit worthy of doing business with.

We were in this situation - you get six months cover under the financial services compensation fund for the whole lot if it's from a house sale. We were intending to purchase within six months so left it in easy access savings. As it is, we'll go over the six months by a few weeks but I'm not shifting it around at this stage!

We also put the max into premium bonds (£50k each name - can't be held jointly) as potential for getting a prize and can be retrieved very quickly. As it is, that money in premium bonds has won a few £25 prizes and so far exceeded the interest earned by the rest of it!

Watch out for which banks belong to which group so aren't actually separate banks at all.

When you make an offer you'll need to evidence it, probably very quickly, to get the house taken off the market. So be ready with scanned copies/downloads of bank statements for the whole lot.

And don't make the mistake of assuming that your money is safe in a savings account(or PB). At present it will be losing nearly 10% of its purchasing value every year because of inflation. 20%+ over two years. Obviously we have no idea what house prices will do but perhaps that's the gamble you are making?

If your timescales are longer than 12mo then you might consider an allocation (say 10-20%) to Gold and Silver (lots of options here but Bullionvault is easy to manage). And you might like to set up a Stocks and Shares ISA and buy some solid FTSE100 companies that will pay you nearly 2% every quarter in tax free dividends. You can lose money here too - just like "safe" savings accounts. But a broad diversified mix of investments may be better over a longer period.