Best Investment for around £7k - Left over savings from buying house

Ben3991

Ben3991

Ben3991

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18 Sep 2011
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167
Hi,

Not the most active member here but wondering if anybody had some helpful ideas!

Myself and my partner purchased our first property last August and we are now at a point where we have finished decorating and spending money on the property.

The decorating came in under budget and I have myself around £7k left in savings.

It is just sitting in an ISA at the moment, not really earning anything. I was wondering what the best thing to do with this money is.

We are both young (22 & 23) so took out a 35 year mortgage. We have around £81,500 to pay off plus interest. Is it best just to pay some of this off or is there a better way of using the money? We don't plan on moving for at least 4-5 years and wont need the money for anything else.

I'm not looking for risky but high return, just a slow and steady return that is better than an ISA interest rate! Any ideas?

Thanks
 
I'm not sure on the investment side of things but if i was you i'd keep a few grand for emergencies.

We bought our first house last august and already 3 weeks ago our washing machine dumped all it's water out flooding the downstairs so had to buy a new washing machine and have to get new carpet which is expensive.

If the boiler or something went now i'd be stuffed.

I stupidly didn't get insurance which may have covered the cost so i assume you are not as idiotic as me in the first place!
 
Hi Ben,

You can't afford a serious investment(which comes with risks) at the moment due to your debt/savings ratio.

I would keep the money in the bank, preferably in US dollars until we see the Brexit negotiations results.
 
Fiocca said:
I'm not sure on the investment side of things but if i was you i'd keep a few grand for emergencies.

We bought our first house last august and already 3 weeks ago our washing machine dumped all it's water out flooding the downstairs so had to buy a new washing machine and have to get new carpet which is expensive.

If the boiler or something went now i'd be stuffed.
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Thanks for your reply.

Yes, understand what you are saying. I would still keep a bit of money for things such as this, and luckily we both have fairly well payed jobs so monthly cashflow is OK.

The £7k I want to use still leaves me with emergency funds.
 
Keep it in the ISA.

You should have a readily available emergency fund that's enough to cover your expenses for around 6 months. This gives you some insurance should one or both of your lose your job, or if some disaster befalls your new house - the boiler could explode, roof might start leaking, damp on the walls... the £7k should be good as a starting point.
 
Zethor said:
Hi Ben,

You can't afford a serious investment(which comes with risks) at the moment due to your debt/savings ratio.

I would keep the money in the bank, preferably in US dollars until we see the Brexit negotiations results.
Click to expand...

Thanks - maybe investment is the wrong word. I just want to use the money to best effect. They may be a small invesment, it may best to pay off some of the mortgage, it may be best to keep in an ISA or there may be something else I don't know about!
 
I would put a good chunk into the mortgage, checking how much you can overpay without fees, then hold onto the rest for a rainy day.
 
Ben3991 said:
Thanks - maybe investment is the wrong word. I just want to use the money to best effect. They may be a small invesment, it may best to pay off some of the mortgage, it may be best to keep in an ISA or there may be something else I don't know about!
Click to expand...

You are using it to best effect. Don't pay off the mortgage, the interests are low and it's good to always have some cash close at hand. :)
 
I'd personally just whack it off the mortgage, to be honest. In the long run, you'll be better off (just be careful on how much you can repay early to avoid charges).
 
Kuros said:
I'd personally just whack it off the mortgage, to be honest. In the long run, you'll be better off (just be careful on how much you can repay early to avoid charges).
Click to expand...

The difference between £82k and £75k on a 35 year mortgage @ 2.5% works out to £25 per month.

I think the high interest current account(s) is probably the best option for now. Easy access in case you need it for an emergency and will make a little bit each month.
 
You're not going to get any significant return without risks with interest rates as they are.

If you know what you're doing there's some good buying opportunities in equities. If not, given the economic situation right now you're best off keeping it safe.
 
Why not keep 5k to one side as a 'just in case' rainy day fund and spend the other 2k on a nice holiday :) with all the stress of moving and decorating it would probably do you both good.
 
Now that the rules on tax-free savings have changed, there's almost no point in putting it in an ISA just now. You can now earn up to £1000 (for basic tax payer, £500 for higher) in interest each year without paying extra tax on those 'earnings'. Most people won't come anywhere near this, as you'd need to have £10k earning 5% to gain £500 in interest.

https://www.gov.uk/apply-tax-free-interest-on-savings/how-much-tax-you-pay

ISA rates are terrible (~1.3%) compared to some bank accounts which pays half decent interest (3-5%). It's also now possible to move money out of an ISA and then put it back later in the year without losing any of your ISA allowance. So I recently took almost all of my ISA savings out of my ISA and put them into a Santander 123 account. I've always got the option to move it all back into my ISA before April (if I want) and I'll have earned far more interest than leaving it where it was.

Some half decent bank accounts to consider:

Santander 123, costs £5/month but pays up to 3% interest on up to £20k savings.
TSB, 5% on up to £2k savings, plus £5/month cashback
Nationwide FlexDirect, 5% on up to £2.5k savings, but only for 1 year
Also check for similar offers from Tesco, HBOS, Lloyds

Most of the above require that you pay in at least £500/month (possibly £1000/month) to the account - but you can always set up a direct debit to move it straight back out again afterwards.

Lots of options much better than any ISA and they keep your money handy for 'emergencies'. If you've got about £7k to put away, that's where I'd be looking.
 
Give it to me and I'll pay you it back plus 10% interest over a couple of years (works out cheaper then my CC interest is)

:)
 
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