Financial Advice

[Kev Mc]

Right, straight to the point: I'm about to get a mortgage on a buy-to-let property I'm buying (erm, to let) & I've basically got a spare 10 grand that I've saved hard to get hold of, thinking I'd need it for this purchase but now I don't necessarily need it.

It leaves me with 3 options:

1. Put it down as a bigger deposit anyway, saving me £60 a month on mortgage payments

2. Put it into a high-interest savings account where I probably wouldn't get as much as £60 a month (feel free to prove me wrong though) but which would leave the money more accessable if something major happened

3. Blow it on a load of stuff I don't need (never happening this 1)

With things as they stand, with the rent due to be coming in from a long-term tenancy, I can comfortably afford the mortgage whether I give them the 10 grand or not (with the £60 saving, the rent coming in would be a bit more than the mortgage repayment, without it I'd have to put a few quid towards it), but I could put 1 or 2 hundred quid to it if I needed to without it really affecting my life. Just not sure whether it's worth tying the money up to save £60 a month for the next 3 years until I can remortgage it etc.

-----------------------------------------------

Some more details: The person renting the property is my auntie & she's looking to stay there in the long term. The house has been completely refurbished from top to bottom since I bought it & it's always been the plan to move her in, I've had a lot of work done & bought a lot of fixtures etc to her tastes & along with her son/my cousin she's done a fair bit of work to the place so the plan is definately a long term tenancy so there shouldn't be any time in the forseeable future that I've got to pay the mortgage on my own. Also, I work for my dad & have no plans to leave so there should be no time where I'm not earning for the time being either

-----------------------------------------------

Any advice for me?

Thanks all

[Johndcfc]

Last time you asked I said put a bet on derby getting relegated on betfair for a £500 return or buy nighthawk shares (which have doubled since christmas)

My recommendation this time is to buy shares in Irvine Energy (oil company) hovering around 3-4p at the moment - I hope (and pray!) they'll get to 8-11p by the end of the year.

Thats my opinion and I like taking risks as the rewards are higher - but only put it into shares if you accept they can go down as well as up!

[Kev Mc]

Nah, not putting it into shares because it's a gamble & I never gamble what I can't afford to lose, there's no way I could live with myself if I lost 10 grand

[john1944]

Right, straight to the point: I'm about to get a mortgage on a buy-to-let property I'm buying (erm, to let) & I've basically got a spare 10 grand that I've saved hard to get hold of, thinking I'd need it for this purchase but now I don't necessarily need it.

It leaves me with 3 options:

1. Put it down as a bigger deposit anyway, saving me £60 a month on mortgage payments

2. Put it into a high-interest savings account where I probably wouldn't get as much as £60 a month (feel free to prove me wrong though) but which would leave the money more accessable if something major happened

3. Blow it on a load of stuff I don't need (never happening this 1)

With things as they stand, with the rent due to be coming in from a long-term tenancy, I can comfortably afford the mortgage whether I give them the 10 grand or not (with the £60 saving, the rent coming in would be a bit more than the mortgage repayment, without it I'd have to put a few quid towards it), but I could put 1 or 2 hundred quid to it if I needed to without it really affecting my life. Just not sure whether it's worth tying the money up to save £60 a month for the next 3 years until I can remortgage it etc.

-----------------------------------------------

Some more details: The person renting the property is my auntie & she's looking to stay there in the long term. The house has been completely refurbished from top to bottom since I bought it & it's always been the plan to move her in, I've had a lot of work done & bought a lot of fixtures etc to her tastes & along with her son/my cousin she's done a fair bit of work to the place so the plan is definately a long term tenancy so there shouldn't be any time in the forseeable future that I've got to pay the mortgage on my own. Also, I work for my dad & have no plans to leave so there should be no time where I'm not earning for the time being either

-----------------------------------------------

Any advice for me?

Thanks all

I rent out two properties, and calculate that your interest rate is 7.2%, which is considerably more than any rate you could get on investing that £10k Remember also that all interest that you receive will be subject to income tax. I had a two year fixed mortgage on both my flats, but when that period expired the lender wanted nearly eight grand to re-negotiate another fixed period. Fortunately the sale of another property allowed me to pay off the borrowing, otherwise my repayments would basically have doubled. You could try premium bonds for say 12 months in the hope that you get a windfall, but at the end of the day I would be inclined to pay some off your mortgage.

[JappyBeast]

I'm upset Derby County FC has been brought into this thread, should I edit it out? :P

[Bizarra]

Don't know the circumstances, but personally I'd hate to rent to a close relative. If anything went wrong, God forbid, you really couldn't repossess. I know that isn't what you were asking.

When my wife died, I wanted to put the house into the Joint names of my Son & Daughter. My Solicitor ( very long time friend) said I would need a written agreement that I had the right to live there for the rest of my life. I scoffed, but he said he had seen it happen too often. House is still in my name & he was right. Long story.

I would say , pay it off your mortgage, or put on long term deposit. Interest rates, borrowing & Deposit, look set to rise considerably.

[hertsnminds]

I use this website for financial advice http://www.moneysavingexpert.com/

Having a quick look on the site the theory is before you put money into a savings account pay off as much debt as possible.

Questions you have to ask in the current market

Will the value of your property go up or down? Is it possible the property will go into negative equity, even if it is only in the short term?

Will the mortgage repayments go up or down? It is not likely that interest rates will be coming down soon.

How much have you put aside to run the property? Even though it has just been refurbished, if it is being rented out all gas and electrical appliances require servicing and certification. It depends how formal your rental agreement is with your relative as to how much paperwork you go through, but as you have declared it is a buy-to-let mortgage the lender will probably have some minimum requirements as will any insurance company (for the buildings insurance).

In my experience with premium bonds a minimum £10,000 investment is required to get any regular return (between £10 and £50) every month or so. However the prizes are all tax free.

Unless you know what the state of the economy will be in 10 years it is difficult to predict things. I have been in the situation where I was told by a financial advisor the best thing to do was get on the property ladder and take out an endowment mortgage. 5 years into that plan the value of my flat had halved and my endowment was never going to pay off the mortgage. I was fortunate enough to be in a situation where I could wait things out, it took another 5 years but in the end the flat sold for more than the mortgage and I was able to move on.

Look to the long term and make sure you are covered if the worst happens.

[Beachbuggy]

Keep the 10K and should you then feel for some reason you can't pay the mortgage, you have that to fall back on, but should you give them it now and then find you can't afford later on, you have nothing saved to help you!

IMHO

Collin

P.S. i'm 21 so you may think my say is irrelavant, but my parents have been having a lot of ideas likt this and thats exactly what their advisor said. (but I just saved you £200) using their answer lol

[Kev Mc]

Thanks for the opinions everyone, I keep leaning towards 1 then the other & I've got somebody coming to see me in just over an hour so I'm just going to see what she recommends & probably go with that, I'm thinking I'll probably pass it over & save myself more money on the mortgage than interest would generate in another account but I'll see what she thinks

I'd hate to rent to a close relative. If anything went wrong, God forbid, you really couldn't repossess.

Wanna bet? :P

P.S. i'm 21 so you may think my say is irrelavant

I'm only 23 mate, your opinion is as valid as anyone elses

[john1944]

Thanks for the opinions everyone, I keep leaning towards 1 then the other & I've got somebody coming to see me in just over an hour so I'm just going to see what she recommends & probably go with that, I'm thinking I'll probably pass it over & save myself more money on the mortgage than interest would generate in another account but I'll see what she thinks

I'd hate to rent to a close relative. If anything went wrong, God forbid, you really couldn't repossess.

Wanna bet? :P

P.S. i'm 21 so you may think my say is irrelavant

I'm only 23 mate, your opinion is as valid as anyone elses

The trouble with getting financial advice from professional sources, is that they tend to suggest products which line their own pockets. Nice to hear some sound comments from two youngsters; nevertheless I would definitely reduce your mortgage. With a Buy to Let mortgage, you should not have any problems raising money in an emergency, possibly by strategic use of a credit card.

[Parts-King]

Get yer money in the Halifax paying 10% AER Put 5K in one Halifax account and the other 5K invested over 12 months and the rate goes up to 12%. Everyone is giving good rates to invest, nobody wants to loan with good rates. Stick it in the bank and let her rent elsewhere, less hassle and wait for the market to flatten out. Just my thoughts

HALIFAX INFO

Kingo

[Johndcfc]

Nah, not putting it into shares because it's a gamble & I never gamble what I can't afford to lose, there's no way I could live with myself if I lost 10 grand

Betting on horse's randomly is gambling, shares are more of a calculated risk if you do the research properly.

I'd say have a look and ask on moneysavingexpert.com forums too, they probably know every maximum savings rate account ever invented!

[Robie]

I would do neither.

If I was you I would keep the 10k in a bank account and use it to over pay your mortgage each month. This will reduce the length of time you will pay off the mortgage and of course the amount of interest you end up paying on it.

Make sure your mortgage allows over payments without penalties.

At least you have the money there if you need it and you are still decreasing the interest you pay.