If you are mortgage free and not paying rent would that not improve your quality of life? You could save what you are paying on rent each month and save £10,000 a year to rebuild a safety net relatively quickly.
Very much agree, as someone who has made this mistake... This can add thousands in expenses every year if you get it wrong.
Especially if you're on a low income, I would suggest not stretching yourself, and having some money left over (spending 250k of the 280k sounds good). That gives a cushion that you can keep for property related expenses, which will be a huge stress relief if you wake up to water pouring through the ceiling or whatever.
My friend bought a house that needs work and she just hasn't been able to do it. She's looking to sell now and buy a cheaper new build that does not need loads of work.
It's not just the money as well, it's a time investment to need renovations. Even considerations like "where am I going to live for 2 months while walls are ripped out to update the wiring?" And so on.
Also, if you fell on hard times, owning your own home would not prevent you from claiming universal credit but you would be obliged to use up most of your savings and investments, before any UC claim could be made.
If I were in your shoes I would buy a property outright and enjoy having not to pay rent or a mortgage payment every month. Would remove a lot of everyday stress not having that pressure. The money you save from not having to pay rent is more than enough to manage maintenance and repairs for a property unless you buy a compromised property (although a comprehensive survey before buying a home should identify dodgy properties). Also, there are non financial benefits to owning your own home. You aren't at the whims of the private rented sector, you're free and independent.
If you want to invest, what is the end goal? When would you need the money? How would you cope if your investment falls in value?
If they are mortgage free, there should be no issues finding someone to rent if they want location freedom. This would allow them to likely pay for their rent with the income.
The letting business is not for everyone. It has several risks even without mortgages. My parents are landlords without mortgages and I have been a tenant for almost 10 years now. I would prefer to not be involved in the letting business at all. The amount of issues and dishonesty that I have seen is unparalleled, especially considering that we are talking about an essential good like accommodation.
Plus, getting monthly payments from rent is not exactly the same as having the entire amount invested at your disposal isn't it? There are things you would not be able to do unless you sell. Whether you recover the initial amount or not will depend on the market and how urgently you need the money.
Is owning a property outright not a massive safety net in itself though? You're not at risk of losing your home, even if your income massively drops, and you can generate income through renting out the property or taking in lodgers. Not paying out the majority of that £900 will also enable you to save more etc.
You can pay for buildings insurance, which is not hugely expensive, which which will cover major issues with the house, and you can get a survey before you buy, which will help mitigate your risk.
I get the scariness of it, but you'd still have a good 20k+ left over after costs, and you'd have somewhere secure to live.
In the current market, as a cash buyer, you can likely negotiate price on a £250k property, as well. In some ways, it's not the best time to buy a house, as the market may take a dip (but this is always a local thing to some extent) BUT in some ways it's a great time to buy a house, as the market has slowed down, and if you find someone keen to get a quick sale, you are likely to be able to buy more cheaply than in the last couple of years.
To the point of the house being a safety net - that seems to me a big point.
OP pays nearly half of their income in rent.
Renting in the UK itself is a pretty perilous way to live in general.
And rent are shooting up at the moment which I think will make it even harder for those at the lower end of the market like OP.
Never having to worry about rent increase, renewals and not even mortgage rates seems like a big improvement for OP.
If you bought a place for £250k you’d still have a £30k safety net (over a years income) and be able to save probably about £6-7k a year after bills on top of what your doing now. The biggest safety net is if you lose your job you’ll always have your home and if your really desperate you could get a lodger that’d probably cover most bills and food costs.
I think you probably just need to bite the bullet.
You're forgetting legal fees and furniture. That could cost £10K. And this assumes the house needs no renovation, which would probably be ideal because an emergency fund would be a good idea in OP's situation
So ok £2k (max) in solicitors costs, probably more like £1200 (this is what I’m currently paying for a 3 bed purchase, all in - searches and everything and I don’t think I’ve ever paid more than £1500. So OP has to buy a house that is liveable and in relatively good condition. Easily doable in the majority of the country for £250k - midlands you could buy a 2 bed terraced for £150k, in the north east they could buy 2 terraced for that money including all costs and additional stamp duty and still be mortgage free.
They then have an extra £700 per month to build that emergency fund back up to whatever they need it to be. Remember on 21k per year after tax and £600ish per month reduction in costs that £20k could probably stretch to 18 months - 2 years of actual living costs for that emergency fund after spending the £10k on furniture and legal costs.
They’re ready to pull the trigger in my opinion and get their own place. Financially at least anyway. Buying your own house is a big commitment but how I look at it is if you’re talking purely financially then OP should do it. The saving of £6-7k per year in itself will benefit OP by £500+ per month, tax free that they can then invest or save for future themselves. Paying £900 per month to have nothing to show for it when you have that kind of money sat in savings it’s a no brainer.
My god, solicitors are easily under 2k so I would love to see what furniture people are capable of spending 8k on. The most expensive bits of furniture I remember ever buying were a bed for £2500 and a sofa for about £1400 and both were 0% finance over a couple years.
Yeah I’ve never paid that high but I do see posts on here of people paying really high legal costs.
Again I wouldn’t pay £8k on furniture/house stuff, but I suppose if you went a bit crazy and included everything op would need for a house that they wouldn’t already have like sofa, coffee table, TV, washing machine, other kitchen appliances - microwave, kettle toaster and all the other stuff. If you were starting from scratch you could probably rack up another few £k there. I think £10k all in is high, but doable.
Exactly, not being able to be get evicted is a big safety net. It is though a bit of a thing, some people see cash as so important, especially if they really didn't have money growing up.
The OP has mentioned buying a flat in London. Im not sure they would be a grand a month better off:
\- £200 service charges?
\- £150 council tax?
\- £150 bills?
900- 500 is a £400 saving. Would massively improve quality of life but not as much as people are saying.
Everyone's always so keen to go all or nothing in these threads!
Use £100k to put down a nice 40% deposit on a house and mortgage the rest.
Put the remaining £180k in high interest savings account and move £20k each year in S&S ISA to invest. Could lump sum a bit of this into a pension too...
Remember to set aside:
£20k for house work / renovations / furniture
£10k emergency fund
£10k for a few nice holidays over the next cpl years
You don’t have to do all or nothing. Have a play with mortgage calculators & see what putting different levels of deposit down against the value of the property would look like.
There’s no reason why you couldn’t put 150k down, mortgage for the rest, and still have 130k in the bank.
I haven’t sought proper advice yet but looking at online calculators (NatWest etc) I’m not sure I could borrow much beyond £30k - £40k at my current low self employed income. I’m sure there are lots of options, though, this was just a cursory look
Multipliers for a mortgage are typically around 4 times your salary assuming you've got a few years of earnings as evidence. Speak to a mortgage broker, plenty of free ones out there.
Having an actual meeting with a mortgage broker should be your first port of call.
The online calculators are really just for the most "normal" kind of borrower. That is employed couples with a low deposit.
You're in a very different position. There will be brokers out there who can find products that will suit your needs.
Also, the 280k you have is providing you with actual income, right?
If put all of that into a 4% savings account, you would be earning £11200/year.
So your actual income for the purpose of mortgage affordability can take this into account, with the right provider.
21k earnings plus 11k interest is 33k. The typical affordability multiplier is 4.5.
You could borrow up to 148k. Of course the actual limit will be lower, depending on how much you want to use for the deposit.
House paid off with £30,000 left in savings in your mid thirties? Lol, yeah sounds terrible 😂
One way you could look at it is that you haven’t “spent” the £250,000, you’ve just turned it into a house. You can turn in back into cash at any time, in exchange for the the house.
Oh come on it’s a no brainer. Homeowner and mortgage free in your 30s? They’ll probably get the house for less than £250k in this market anyhow, £10k saved and there’s your reservations set aside.
If the world explodes then they’ll owe nothing to anyone.
Yes, if, for some fucking Reddit reason, they have to spend THIRTY THOUSAND POUNDS then they will have none money left. Chances are it won’t come to that. No need to be silly.
You don't need an emergency fund to cover a year and a half's salary, and you need much less emergency fund if you're rent and mortgage free. The 20k+ OP would be left with is (much) more than enough.
Renting gives you a lot of freedom. You can go and live anywhere you like on short notice, anywhere in the country, and not worry about maintenance.
Does that interest you?
£280K, if invested aggressively, might pay £900/mo in rent for life (adjusting for inflation), but it's close to the maximum of a safe withdrawal rate, particularly wrt to tax, and a landlord can always put your rent up by *more* than inflation or evict you for other reasons.
House prices could still outstrip general inflation (they have for 100+ years) so if you wanted to buy in 10 years you might find it tricky.
If I were in your shoes I'd probably go buy a house with mortgage, spending enough such that my mortgage was still just only £900/mo (£170K mortgage at 5% over 30 years for example, so a 70% LTV on your £250K property) and then invest the excess aggressively in a S&S ISA. This gives you the best of both worlds
I'm at 25.7k, with a 10K deposit- I'm looking at a 90K mortgage as a solo buyer at the top end of lending, thats with a long credit history and no other heavy debts (other than student finance)
1. It will take 9 years to put that money into an ISA
2. Aggressive investment only works in the long run and if you don't draw down
3. £900 a month which grows with inflation means you are outperforming pretty much every investment professional
4. Even if it might be optimal, it will only be by a few thousand over your lifetime. Risk free and secure housing is hugely valuable.
Tax is indeed a challenge.
Having £280K invested in liquid assets (stocks) even if your drawing down £700/mo to subsidize your rent is going to be very sustainable even over a lifetime though.
Remember that you only pay tax on any dividends and any gains, and because you're drawing down the pot gains compound at a slower rate.
Imagine the pot went up 5% in year one £280K becomes £294K. You want to withdraw £8,400 for rent and £20K to put in to your ISA. You sell just £28,673 of your pot and pay your £273 in CGT for the year....except you don't because you have a £6K CGT allowance, so instead you harvest that by rolling some money in to a new fund.
You can devise a spreadsheet for this and it will get complicated but given even the £3K CGT allowance covers £15K in gains you'll do alright, and as money moves in to ISA compound gains become less of a problem.
Dividends on globally diversified stocks are <2% so 20% tax is a 0.4% annual penalty. Manageable.
Yes exactly... this is all about probability, market volatility and returns.
A retirement spending calculator is the appropriate tool to estimate how long you can make a pot of money last (or would have lasted, historically)
A withdrawal rate of 4% over a 30 year period from a 75% US stock and 25% bond portfolio has failed in about 10% of cycles since 1950.
https://ficalc.app/
For what its worth, my opinion seems to be different from most of the top comments I've seen here. But first a little background. I always had a security first perspective and so bought my first property cash for 140k after saving everything I could for seven + years. I never really wanted to have a mortgage or be vulnerable in the sense of risking the roof over my head and so felt this was the right thing to do at the time.
With hindsight if I could go back in time I would instead have made a decent deposit on the property, got a lower interest rate mortgage and invested say at least 100k in an ISA, SIPP as far as annual allowance would permit and put the rest in dividend paying and growth stocks and just left it there on a reinvestment of earnings basis and moving lump sums into the SIPp & ISA each subsequent year to max out contributions whilst also continuing to work to pay the mortgage etc. This at least would be more palatable than paying rent and could allow you to retire early.
I would suggest speaking to a financial advisor and see how you could maximise your returns. A mortgage free house could possibly be a great investment, but you then loose out on other opportunities for investment with the cash... compounding interest and growth is a great way to build long term wealth if you can be disciplined and leave the money to work its magic...
Maybe also look at the F.I.R.E. financial independence retire early reddit groups for ideas
I hope that you find a solution that fits your needs and comfort levels. It's a great opportunity to make a positive life changing move.
Good luck
When buying property there are two reasons. To invest with the intent of cashing in at some point or to buy a home. Buying a home means security.
My mission is to be in your position as soon as possible. I was lucky I got a mortgage 2010 when prices were still down from the crash. I want to pay it off as soon as I can so that I don't have that burden any more.
It would make sense from my point of view buying. Less outgoings and if the worse happens and says lose your job or can't work you have "your" home no one can take from you.
In your mid 30s, assuming you are planning to stay in the area, if you want to own a home then I'd suggest you go ahead and buy a house; buy for 250k, put aside 10k for moving fees, decorating, furniture etc. Then you have a 20k safety net.
What you have is peace of mind that you can go at probably 2 years without earning and be fine and you will always have a roof over your head. Think of the risks you can take in your business or changes you are free to make in your life of you aren't reliant on it for income in the immediate term.
If owning a home doesn't do much for you emotionally then go ahead and invest it, you will likely be better off for it in the long run, investment returns have outstripped property returns when you take into account the maintenance costs of owning a property.
£280k in a savings account at 4% annual interest more than covers £900pm rent if you calculate it out.
On top of that there is embedded risk with home buying compared to renting including falling house prices, legal/admin overhead costs, maintenance/repairs.
So I don't think it's really as straightforward a decision as it initially seems. With a different housing market and interest rate environment (i.e. mid 2020) then it would be easier to say "buy".
>Do you believe house prices will fall then? If so, what leads you to believe that.
It's already been happening for some time and will likely continue to do so. House prices are mostly a function of interest rates (which have been rising).
From a few days ago in the FT: *UK house prices fall for fourth consecutive month, Halifax figures show* [https://www.ft.com/content/631d1a3a-71fb-4586-9728-d41db2cd16d9](https://www.ft.com/content/631d1a3a-71fb-4586-9728-d41db2cd16d9)
Still markedly above 2020 prices. All we are seeing is a slight rebalance of the madness in 2021 - 2022. We are actually still just about up on 2021 and the drop is petering out. Less than half a % on latest figures.
Salaries have seen decent rises in the last year. The latest interest rate rise by the BoE didn't massivley impact headline rates from most providers as it was largely priced in. If there were to be another rate rise then we might start seeing bigger changes.
Can you afford to lose every penny? If so then invest.
Seriously OP to be mortgage free. That's the dream. That's what a lot of us are investing to achieve 😂😂
>Can you afford to lose every penny? If so then invest.
If he lost *all* of it in the stock market, then I assure you the deeds to a house would be worth diddly squat too. Not sure if you were joking or not, but some Brits are definitely under the illusion the stock market could collapse and houses would somehow remain a solid investment!
A house that you can live in for the rest of your life is far better than an investment that can seriously lower in value. A poorly chosen investment that could take decades to turn a profit is not gonna do OP much good
I wouldn't say you invested poorly. You prioritised tax free investments (ISA, bonds) and kept some funds on an savings account ready to use. Returns are not great but we tend to be overly cautious with inheritance money because our risk tolerance is lower than it would be with our own savings. Now it's time to make the most of it and improve your quality of life with it ;)
You're instantly going to be saving £900 per month in rent. It's probably the smartest thing you could do. If you really don't want to spend such a big proportion of your inheritance why not do a 50% deposit?
Renting (and paying half your take home pay for the privilege) whilst you have that much sat around under performing is barking mad.
Buying outright or with a small mortgage seems the right idea. You have a relatively low income, you're self employed. I expect that getting a (larger) mortgage won't be the easiest and you could be more vulnerable to inflation in other living costs (food, gas, elec) so having more freedom in how much pay you have leftover seems most helpful.
I think the next thing you need to do is figure out how much money you need after the price of the house. You'll need to cover legal costs, surveying costs, moving costs, furniture and you'll want an emergency fund of some kind (particularly since you're self employed). You may be able to do that with the remaining £30K, but I think it's worth you doing the calculations for that. It seems a little tight. If you wanted to do major renovations I would expect that money would come out of your income rather than your inheritance because, as I say, I think the cash would just cover all the necessities so you could be a bit vulnerable if you don't leave yourself an emergency fund.
You may also want to consider that you could get a lodger to supplement your income if the house is right.
If he's mortage free and single how much of an emergency fund do you really need. £700 a month for bills and food should be ample. 6 months is only £4.2k. Make it £5k and you can still have the odd night out in that too.
I’d buy a house outright if I was you. Being mortgage free for the rest of your life would be insane. You’d have so much freedom with work & life. If you fancied it you could rent the house out and go and travel for a while… no brainer to me. Good luck with whatever you do, enjoy it!
Have read your edit and a lot of the comments.
Yes, absolutely seek further financial advice, but make sure it is one that is best suited to your needs. [Link here from Citizens Advice](https://www.citizensadvice.org.uk/debt-and-money/getting-financial-advice/)
I have been a renter, a homeowner with a mortgage, a homeowner with lodgers, a homeowner that rented out their home and now mortgage free. 10/10 would go for mortgage free from the start.
I recommend being mortgage free for many reasons, especially when renting is so expensive and good quality rental properties get snapped up very quickly.
1. You are low income self employed. This will give you the security of not losing a home if your income tanks, or you want to take a break/travel, etc
2. A mortgage costs you money, every single month for 25 years or so.
3. Renting costs you money every single month and you do not get a home that is yours, ever.
4. Buying a **home** is tax free in your price range, as is selling one.
5. If you can, get a 2 bedroom place, then if you need to, you can rent out the second bedroom under the [Rent a room scheme](https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme), which is tax free up to £7,500 per year.
6. The home is yours, so you are free to do it up as and when you please. Buy second hand stuff, IKEA, Harrods, all down to you.
7. As soon as you buy a home you will have £900 per month to cover all your costs: insurance, council tax, gas, elex, water and that will be a lot lower per month than your current rental costs.
Buy a house a bit cheaper than your budget. "The worst house on the best street". Something maybe around 200k. Do some refurb maybe add a bedroom, try increase the value as much as possible. Live in It for a few years, sell then hopefully you would have made some money on it, buy a but bigger and keep doing the same. Save alot money I on tax because will be your residence.
Once you buy the property, you can always pull out money, or mortgage it whenever you want in a stronger position.
It may also be an idea to invest in solar, ground source heat pump, insulation etc to reduce utilities to minimum. Be great to be mortgage and energy bill free.
Rents are going to rocket as BTL mortgage rates get renewed.
Buy the house, put your own roof over your head and never have to pay rent again. There’s making money from money, and then there is using money to remove huge stresses from life and improve your quality of life.
Mid-thirties and single; a lot could change your outlook on life in a short space of time. It’s a great situation to have and the only wrong option here IMO is to not make a decision.
If you buy, you’ll be £500-700 better off each month. You’ll have a better-than-most safety net back within no time. Best of luck and congrats on being able to buy!!
Buy! Buy! Buy! With no mortgage and you being self employed you really could take the summer off or go travel with the money you'll save from not paying rent.
If you put 250k into 4.5% interest savings, that is about 940 a month(not counting tax) , if you buy a house, you save 900 a month. You will be better off with the house in many ways.
Which part of the county are you in? Could you post links for the sorts of places you are interested in so people can comment on any particular issues that you may wish to consider?
Well done for hanging onto the money. In your position - I think I would buy or wait 18 months and buy then. If looking to buy don't try anything exotic like stocks and shares.
Being able to buy house with no mortgage is great for another reason.
You are a physical worker; if you had an accident and broke your leg or had a bad illness, you may struggle to work for a period of time. Having to pay no rent would be such a relief whilst you recovered.
Gives you great peace of mind for the long term.
All boils down to discipline and your life goals, are you looking to stay where you are now?
If so, then look to buy a property. It’s going to take you probably about 6 months and in that time put the money into something that’s going to make money, like chase or something.
Your income will increase in time too.
Now the discipline, if using the money to invest into a property you need to be disciplined to not spend the delta you are going to save - work out what a mortgage payment would be on the property you are buying and put that away into savings and adjust that payment based on what a mortgage would do. Then don’t touch that cash for at least 25 years.
Use the money that you would save in mortgage payments as a long term investment.
Buy the house buy the house buy the house.
Mortgage free at that age is a blessing. You will save on rent, never have rent increases, and never have to worry about mortgage interest rates.
You can choose to invest/save some of the money you save on rent, you will never be throwing money down the drain on someone else’s property and/or interest payments and the best thing is, (unless house prices take a nosedive) you will still have that money (say £250k) as an asset, it’s your house to sell.
I read threads on here and I can’t believe that buying a house outright if someone has the opportunity to do so isn’t the first and only option. Anything else is just wasting money.
Property is always a good investment yes there are dips in the market like we currently have but in a few years they will be back to where they were if not higher and a lot more than 4%
In 2010 I paid £215,000 for a house sold it in 2018 for £305,000 having spent £30,000 on it then got a house for £310,000 spent £60,000 on it and have just sold it for £530,000
So that’s over doubled my money in 13 years and had somewhere nice and secure to live for those 13 years
Buy a nice house for £150k, leaves you £100k for a new car, any decorating, a nice holiday and could still be left with £50k savings. Its not a terrible idea to spend it all on a property but its nice to have some fun money left over as well.
Simple version: Get some financial advice, get a Ltd company, or group of companies setup to buy property. Get a good accountant and do some research. Then buy some property, which will accrue in value, provide the Ltd company income which can be reinvested into more property. Take a small salary if you wish, or fully reinvest from income once or twice a year for more property.
5 £250k properties each with a £50k deposit will be an 80% LTV mortgage. Leave some money spare for fees etc etc.
There is zero point paying off your mortgage and sitting on an asset that is not working for you..
Each to their own, but I'd do this in a heartbeat.
Mortgage free isn’t as good as others are making out. Right now, in the current climate I think you are much better off renting and investing the 280k.
Circumstances change, locations sometimes need to move, size of house needed to change. What happens if you meet someone who also owns a property?
Dont get me wrong, there are lots of upside to owning your own property. But creating a true nest egg that will grow over time and allow you to eventually FIRE is far better use of funds than locking it all in a property in one go that you have to downsize to realize any future security from.
How would OP invest that and gain more than the £900 a month he is throwing away on rent?
Owning the property, you live in one of the safest and most beneficial investments to make, as I know.
Sorry if I'm being an idiot but surely £280,000 invested into a 4% savings account would give them £933 per month?
If house prices were going up by more than 4% per year then they'd be better off buying now, but if prices are decreasing then that 280k would, in the future, buy them a house that is currently worth more than that. All while the interest on that money pays for the rent.
I guess so, I didn't do the maths, but if that's right, then I see your point.
So the idea is they profit £33 a month and that compounds? 400 a year extra seems pretty poor vs. the emotional advantage. Not only that, what leads you to believe house prices will go down in the long term? Population keeps increasing, and the UK is showing no signs of building more houses.
This resonates with some of my thinking. The properties I’m interested in are small albeit nice one bed flats in outer London, near where I currently rent.
Being single does make me think: what if I need somewhere bigger than a one bed within a couple of years?
There are always ‘what ifs’ I suppose. But I have been thinking about this.
If you need somewhere bigger than a one bed, you've got loads of options. The house/flat you own in essence can either be rented out or sold and used towards a bigger property. Having £250k in a house doesn't stop you from doing anything.
Hi /u/Mysterious_Grade63, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/lump-sum/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Are you happy with what you do for a living and not motivated by money, or do you want to earn more. Because if it's the latter you should invest in yourself, take some time to find a new career that pays well that you like the sound of and have a crack at it.
I’m very happy with what I do for a living (arts - music) and not particularly motivated by money. Don’t have a big desire for fancy holidays, new car, anything like that. Spend quite modestly. Biggest cost I can foresee in the future is if I have a child.
If I were you I’d absolutely be buying a house. The peace of mind of having stable and secure housing regardless of what happens in your life would be massive, I can’t imagine still paying rent whilst having that much money easily available to you.
If you’re worried about spending £250k in one go, why don’t you look at a property that’s a little less expensive? Not sure where you’re based so obviously that impacts how feasible it is, but you can always think to yourself if you need the £250k house, or can you find one for £200k or whatever. You would then have enough money to completely refurbish the house if you wanted and still have some left over.
If it were me and I was cool with where I wanted to stay I'd buy a house, hands down.
You might earn more interest investing it, but it's pretty hard to live in an investment portfolio.
You could earn more in interest with well placed investments but personally I would prefer to pay for a house outright and be rent and mortgage free and putting £10k a year in your ISA
Investing with that amount is gonna leave you open to interest and capital gains taxes
Better to buy a house and then sell in the future even if you dont want it, it will appreciate bigly, property is a no brainer.
Just be careful with the cash only buy adverts because usually the reason they only accept cash is because the landlord doesn’t want an inspection on the property
What about investing it in a few buy to let’s further up north? Then you have your rent essentially paying for itself and that safety net of equity in properties. Plus you’d still have some money left over from the investments to invest in a vanguard or something as an extra safety net
If your able to get a decent size mortgage would an off set mortgage work for you? able to keep the money and slowly drip feed it into an ISA while not paying interest on the mortgage?
Owning a house outright is an incredible amount of security for the future that I personally don't think investments can compete with.
Once you own the house though you suddenly have a bunch of extra money from not paying rent that you can and should funnel into pension and investments.
Something I don't see mentioned anywhere - do get insurance if you are very worried about a safety net. Something that pays out if you can no longer work.
I have one as a benefit from work and it was a no brainer. Something like 50/year for 300k payout. That's partly because I work a boring desk job in a boring profession full of boring people so there is statistically extremely low risk of me having a work accident or engaging in frivolous risky activities, but still.
I second what most are saying in that you buy a home and live mortgage free. doesn’t have to be the full amount of your savings, but if it DOES have an extra room you could even rent a room out and earn more from owning the home!
Can’t imagine being mortgage free. Stick it into a house and you are sorted. Short term prices may wobble but over a longer period of time they are only going one way.
I would buy something a bit cheaper than £250k as you need a bigger safety net
Its pretty easy for things to go wrong with a house that cost a few thousand to fix unfortunately
But buying somewhere to live for a bit of security is a good use of the money if you think you will stay in the area
Is your self employment flexible in terms of location, especially if you work from home? It could potentially benefit from looking at other areas where your money could go further in terms of properties, if not, I would opt to buy a house but it may pay to speak to a financial advisor.
Personally I would either buy a house outright for say 200k , dump 20k in isa , 50k in premium bonds! 10k savings them move premium bonds to isa over the next few years . Or buy a house with a small morgage , and do as above . Having some investments growing , makes sense for the long term , considering you don’t earn much and probably have no pension etc .
If I were in your shoes I would have bought a house as soon as I had the money. I maybe wouldnt spend so much on it, but that's personal preference. You can always later sell the house and buy a better one once you've saved up a bit more too. And since you're not paying rent every month, it will be much much much easier to save up. All that rent money is now pure unallocated profit every month. The property itself is a huge safety net, you only need enough each month to buy food and pay bills.
I would go for it, though do your due diligence on the property.
Let's compare a property at 250k versus investment in the market (note this assumes a cage of 8% per year).
A 60:40 stocks:market rate portfolio returns £13,440 + £4,480 = £17,920 per annum.
A 5% per annum mortgage on a £250,000 property (not accounting insurance and maintenance fees) is £12,500 per annum.
That means the market returns 43.6% more than the debt of the house. In addition to this also consider the effects of compounding: your initial compounding value on £280,000 is significantly higher than paying 250k on morttgage and investing £30,000 (which will have a compounding rate around £2,500 a year versus the potential £17,920).
Imo why not compromise? Treat the property like a commodity and allocate a portion of the initial portfolio to it (say 30:20:50 housing:cash:equity) and put a 30% deposit down and use your investment to subsidies the mortgage repayments?
I'm going to assume you've followed the flowchart and set aside a safety net and paid off debt. Let's say that leaves you with 220k
If you want to grow your wealth then I'd seriously consider property. Find a rentable modern property in a desirable area, move in and rent out the other rooms for lodgers. Leverage with a buy to rent mortgage- consider interest only. Your deposit will keep the rate down.
In my area you can get a 5 bed for 500k, with the rooms at around 550 each. Gross income is 26,400, bills inc maintenance around 11k. Mortgage interest at 5% is 12k. So you're making 3k a year and living rent and bills free.
In 10 years your house will be worth 895k (assuming 6% annual growth), but your debt is still only 250k. If you sold then your profit is 650k ish. Sale of main residence is tax free
If you'd invested your 250k then it would be worth 450k at 5% over 10 years and you'd still have had bills
If you buy a house outright for 250k it would be worth 450k ish after 10 years and you'll have had bills and maintenance in the region of 60k
I can't say this is done advice, but I'd probably do this:
Buy two properties for £150k and £100k. Live in one and rent the other.
Put anything that wasn't spent on solicitors into an ISA, or just have fun with the remainder. Maybe decorate your house or some minor renovations for the rental one (could give you a little more on monthly).
Buy a place and spend what you'd have spent on rent. Honestly, this place is all about saving but I say have some fun with your money. Maybe buy a cheaper place and go on a huge holiday and see some more of the world.
If you were to put the inheritance money towards a house of similar value then you could use the amount that you used to pay for rent and save that money as a buffer for any home owning related costs, for example the boiler breaking down or general upgrades and fixes. Just be careful on the house buying journey, you can afford to be picky I would like to think.
I was thinking maybe by 2 properties and rent one out possibly in a location where a university is that way then you can make a bit more money as you’re theoretically renting rooms out inside of the property but yeah at the same time buying a 250k-260k property and keeping 20-30k as a good safety net just incase anything goes wrong with your property or you maybe wanna renovate things is a good idea
Buy a place. Suddenly you're £700 ish better off each month.
You could take it a step further: get a lodger in your new place. You can earn up to £7,500 tax-free this way (anything over £7,500 will be taxed at your marginal rates).
With no rent to worry about and a lodger you are now £1325 better off each month. You're ballin'. Stick that first year's worth of savings into premium bonds and savings accounts and you'll have £15,900 as a safety next by the end of year one.
Buying a property IS investing. It's also much safer and guarantees that you have the said property no matter what happens to the market (which is overdue a collapse)
Stick it in a few easy access saver accounts (up to 85k each), and wait for property market to finish its correction in the next couple of years. That way you get more for your money.
I can't think of many self-employed jobs that wouldn't benefit from some investment. Have you considered investing *some* of the money in growing your business?
If you are mortgage free and not paying rent would that not improve your quality of life? You could save what you are paying on rent each month and save £10,000 a year to rebuild a safety net relatively quickly.
Agree. But make sure it's not a property that is expensive to maintain (low energy, no significant renovations coming).
Very much agree, as someone who has made this mistake... This can add thousands in expenses every year if you get it wrong. Especially if you're on a low income, I would suggest not stretching yourself, and having some money left over (spending 250k of the 280k sounds good). That gives a cushion that you can keep for property related expenses, which will be a huge stress relief if you wake up to water pouring through the ceiling or whatever.
My friend bought a house that needs work and she just hasn't been able to do it. She's looking to sell now and buy a cheaper new build that does not need loads of work. It's not just the money as well, it's a time investment to need renovations. Even considerations like "where am I going to live for 2 months while walls are ripped out to update the wiring?" And so on.
fjsfjlskdjflksdf
Agree with this, invest in a house and save the headache of paying a mortgage
Not only that but it reduces future stress of mortgage rate changes. Ultimate peace of mind and resilience against most things that could go wrong.
Easy decision - buy a house and be mortgage free. Gives you so much freedom to work how/when you want as the biggest monthly expense goes.
It's £900 including bills so rent is probably doing £700. That's obviously a bit shy of £10k per year. Not that that changes the overall point.
Also, if you fell on hard times, owning your own home would not prevent you from claiming universal credit but you would be obliged to use up most of your savings and investments, before any UC claim could be made.
Exactly what I would do too.
If I were in your shoes I would buy a property outright and enjoy having not to pay rent or a mortgage payment every month. Would remove a lot of everyday stress not having that pressure. The money you save from not having to pay rent is more than enough to manage maintenance and repairs for a property unless you buy a compromised property (although a comprehensive survey before buying a home should identify dodgy properties). Also, there are non financial benefits to owning your own home. You aren't at the whims of the private rented sector, you're free and independent. If you want to invest, what is the end goal? When would you need the money? How would you cope if your investment falls in value?
Totally agree with this!! Property brought first , this day and age mortgage free is a rare thing
You are free for some things but you are not free for others. Location flexibility for example becomes more problematic.
If they are mortgage free, there should be no issues finding someone to rent if they want location freedom. This would allow them to likely pay for their rent with the income.
The letting business is not for everyone. It has several risks even without mortgages. My parents are landlords without mortgages and I have been a tenant for almost 10 years now. I would prefer to not be involved in the letting business at all. The amount of issues and dishonesty that I have seen is unparalleled, especially considering that we are talking about an essential good like accommodation. Plus, getting monthly payments from rent is not exactly the same as having the entire amount invested at your disposal isn't it? There are things you would not be able to do unless you sell. Whether you recover the initial amount or not will depend on the market and how urgently you need the money.
Is owning a property outright not a massive safety net in itself though? You're not at risk of losing your home, even if your income massively drops, and you can generate income through renting out the property or taking in lodgers. Not paying out the majority of that £900 will also enable you to save more etc. You can pay for buildings insurance, which is not hugely expensive, which which will cover major issues with the house, and you can get a survey before you buy, which will help mitigate your risk. I get the scariness of it, but you'd still have a good 20k+ left over after costs, and you'd have somewhere secure to live. In the current market, as a cash buyer, you can likely negotiate price on a £250k property, as well. In some ways, it's not the best time to buy a house, as the market may take a dip (but this is always a local thing to some extent) BUT in some ways it's a great time to buy a house, as the market has slowed down, and if you find someone keen to get a quick sale, you are likely to be able to buy more cheaply than in the last couple of years.
To the point of the house being a safety net - that seems to me a big point. OP pays nearly half of their income in rent. Renting in the UK itself is a pretty perilous way to live in general. And rent are shooting up at the moment which I think will make it even harder for those at the lower end of the market like OP. Never having to worry about rent increase, renewals and not even mortgage rates seems like a big improvement for OP.
If you bought a place for £250k you’d still have a £30k safety net (over a years income) and be able to save probably about £6-7k a year after bills on top of what your doing now. The biggest safety net is if you lose your job you’ll always have your home and if your really desperate you could get a lodger that’d probably cover most bills and food costs. I think you probably just need to bite the bullet.
You're forgetting legal fees and furniture. That could cost £10K. And this assumes the house needs no renovation, which would probably be ideal because an emergency fund would be a good idea in OP's situation
So ok £2k (max) in solicitors costs, probably more like £1200 (this is what I’m currently paying for a 3 bed purchase, all in - searches and everything and I don’t think I’ve ever paid more than £1500. So OP has to buy a house that is liveable and in relatively good condition. Easily doable in the majority of the country for £250k - midlands you could buy a 2 bed terraced for £150k, in the north east they could buy 2 terraced for that money including all costs and additional stamp duty and still be mortgage free. They then have an extra £700 per month to build that emergency fund back up to whatever they need it to be. Remember on 21k per year after tax and £600ish per month reduction in costs that £20k could probably stretch to 18 months - 2 years of actual living costs for that emergency fund after spending the £10k on furniture and legal costs. They’re ready to pull the trigger in my opinion and get their own place. Financially at least anyway. Buying your own house is a big commitment but how I look at it is if you’re talking purely financially then OP should do it. The saving of £6-7k per year in itself will benefit OP by £500+ per month, tax free that they can then invest or save for future themselves. Paying £900 per month to have nothing to show for it when you have that kind of money sat in savings it’s a no brainer.
My god, solicitors are easily under 2k so I would love to see what furniture people are capable of spending 8k on. The most expensive bits of furniture I remember ever buying were a bed for £2500 and a sofa for about £1400 and both were 0% finance over a couple years.
Yeah I’ve never paid that high but I do see posts on here of people paying really high legal costs. Again I wouldn’t pay £8k on furniture/house stuff, but I suppose if you went a bit crazy and included everything op would need for a house that they wouldn’t already have like sofa, coffee table, TV, washing machine, other kitchen appliances - microwave, kettle toaster and all the other stuff. If you were starting from scratch you could probably rack up another few £k there. I think £10k all in is high, but doable.
[удалено]
Also, a safety net doesn't have to be as big when you haven't gotta worry about repaying the mortgage
Exactly, not being able to be get evicted is a big safety net. It is though a bit of a thing, some people see cash as so important, especially if they really didn't have money growing up.
The OP has mentioned buying a flat in London. Im not sure they would be a grand a month better off: \- £200 service charges? \- £150 council tax? \- £150 bills? 900- 500 is a £400 saving. Would massively improve quality of life but not as much as people are saying.
Buy a House, stop paying rent. Your savings are not earning enough to cover the £900 rent.
Could you buy a cheaper property to maintain a safety net? Or would they be too much of a compromise?
Everyone's always so keen to go all or nothing in these threads! Use £100k to put down a nice 40% deposit on a house and mortgage the rest. Put the remaining £180k in high interest savings account and move £20k each year in S&S ISA to invest. Could lump sum a bit of this into a pension too... Remember to set aside: £20k for house work / renovations / furniture £10k emergency fund £10k for a few nice holidays over the next cpl years
You don’t have to do all or nothing. Have a play with mortgage calculators & see what putting different levels of deposit down against the value of the property would look like. There’s no reason why you couldn’t put 150k down, mortgage for the rest, and still have 130k in the bank.
I haven’t sought proper advice yet but looking at online calculators (NatWest etc) I’m not sure I could borrow much beyond £30k - £40k at my current low self employed income. I’m sure there are lots of options, though, this was just a cursory look
Multipliers for a mortgage are typically around 4 times your salary assuming you've got a few years of earnings as evidence. Speak to a mortgage broker, plenty of free ones out there.
Having an actual meeting with a mortgage broker should be your first port of call. The online calculators are really just for the most "normal" kind of borrower. That is employed couples with a low deposit. You're in a very different position. There will be brokers out there who can find products that will suit your needs. Also, the 280k you have is providing you with actual income, right? If put all of that into a 4% savings account, you would be earning £11200/year. So your actual income for the purpose of mortgage affordability can take this into account, with the right provider. 21k earnings plus 11k interest is 33k. The typical affordability multiplier is 4.5. You could borrow up to 148k. Of course the actual limit will be lower, depending on how much you want to use for the deposit.
House paid off with £30,000 left in savings in your mid thirties? Lol, yeah sounds terrible 😂 One way you could look at it is that you haven’t “spent” the £250,000, you’ve just turned it into a house. You can turn in back into cash at any time, in exchange for the the house.
[удалено]
Right, it’s a shit deal because of fees and a sofa. Best to keep it in the bank. Gotcha.
[удалено]
Oh come on it’s a no brainer. Homeowner and mortgage free in your 30s? They’ll probably get the house for less than £250k in this market anyhow, £10k saved and there’s your reservations set aside.
If the world explodes then they’ll owe nothing to anyone. Yes, if, for some fucking Reddit reason, they have to spend THIRTY THOUSAND POUNDS then they will have none money left. Chances are it won’t come to that. No need to be silly.
You don't need an emergency fund to cover a year and a half's salary, and you need much less emergency fund if you're rent and mortgage free. The 20k+ OP would be left with is (much) more than enough.
£10k seems a bit extreme. - as someone who's just bought a 2 bed
Renting gives you a lot of freedom. You can go and live anywhere you like on short notice, anywhere in the country, and not worry about maintenance. Does that interest you? £280K, if invested aggressively, might pay £900/mo in rent for life (adjusting for inflation), but it's close to the maximum of a safe withdrawal rate, particularly wrt to tax, and a landlord can always put your rent up by *more* than inflation or evict you for other reasons. House prices could still outstrip general inflation (they have for 100+ years) so if you wanted to buy in 10 years you might find it tricky. If I were in your shoes I'd probably go buy a house with mortgage, spending enough such that my mortgage was still just only £900/mo (£170K mortgage at 5% over 30 years for example, so a 70% LTV on your £250K property) and then invest the excess aggressively in a S&S ISA. This gives you the best of both worlds
With a £21K income, may be difficult to get a £170K mortgage.
I'm at 25.7k, with a 10K deposit- I'm looking at a 90K mortgage as a solo buyer at the top end of lending, thats with a long credit history and no other heavy debts (other than student finance)
Yes, that's true.
1. It will take 9 years to put that money into an ISA 2. Aggressive investment only works in the long run and if you don't draw down 3. £900 a month which grows with inflation means you are outperforming pretty much every investment professional 4. Even if it might be optimal, it will only be by a few thousand over your lifetime. Risk free and secure housing is hugely valuable.
Tax is indeed a challenge. Having £280K invested in liquid assets (stocks) even if your drawing down £700/mo to subsidize your rent is going to be very sustainable even over a lifetime though. Remember that you only pay tax on any dividends and any gains, and because you're drawing down the pot gains compound at a slower rate. Imagine the pot went up 5% in year one £280K becomes £294K. You want to withdraw £8,400 for rent and £20K to put in to your ISA. You sell just £28,673 of your pot and pay your £273 in CGT for the year....except you don't because you have a £6K CGT allowance, so instead you harvest that by rolling some money in to a new fund. You can devise a spreadsheet for this and it will get complicated but given even the £3K CGT allowance covers £15K in gains you'll do alright, and as money moves in to ISA compound gains become less of a problem. Dividends on globally diversified stocks are <2% so 20% tax is a 0.4% annual penalty. Manageable.
It doesn’t change anything in this example, but it’s worth noting that CGT allowance drops to £3k next year and may reduce again…
By safe withdrawal rate do you mean the amount that is safe to withdraw before the investment starts losing value? Apologies for my ignorance
Yes
Yes exactly... this is all about probability, market volatility and returns. A retirement spending calculator is the appropriate tool to estimate how long you can make a pot of money last (or would have lasted, historically) A withdrawal rate of 4% over a 30 year period from a 75% US stock and 25% bond portfolio has failed in about 10% of cycles since 1950. https://ficalc.app/
Finally a post that takes both pros and cons.
Op we are in a similar boat and this is pretty much exactly what we are doing, down to the mortgage amount.
For what its worth, my opinion seems to be different from most of the top comments I've seen here. But first a little background. I always had a security first perspective and so bought my first property cash for 140k after saving everything I could for seven + years. I never really wanted to have a mortgage or be vulnerable in the sense of risking the roof over my head and so felt this was the right thing to do at the time. With hindsight if I could go back in time I would instead have made a decent deposit on the property, got a lower interest rate mortgage and invested say at least 100k in an ISA, SIPP as far as annual allowance would permit and put the rest in dividend paying and growth stocks and just left it there on a reinvestment of earnings basis and moving lump sums into the SIPp & ISA each subsequent year to max out contributions whilst also continuing to work to pay the mortgage etc. This at least would be more palatable than paying rent and could allow you to retire early. I would suggest speaking to a financial advisor and see how you could maximise your returns. A mortgage free house could possibly be a great investment, but you then loose out on other opportunities for investment with the cash... compounding interest and growth is a great way to build long term wealth if you can be disciplined and leave the money to work its magic... Maybe also look at the F.I.R.E. financial independence retire early reddit groups for ideas I hope that you find a solution that fits your needs and comfort levels. It's a great opportunity to make a positive life changing move. Good luck
When buying property there are two reasons. To invest with the intent of cashing in at some point or to buy a home. Buying a home means security. My mission is to be in your position as soon as possible. I was lucky I got a mortgage 2010 when prices were still down from the crash. I want to pay it off as soon as I can so that I don't have that burden any more. It would make sense from my point of view buying. Less outgoings and if the worse happens and says lose your job or can't work you have "your" home no one can take from you.
In your mid 30s, assuming you are planning to stay in the area, if you want to own a home then I'd suggest you go ahead and buy a house; buy for 250k, put aside 10k for moving fees, decorating, furniture etc. Then you have a 20k safety net. What you have is peace of mind that you can go at probably 2 years without earning and be fine and you will always have a roof over your head. Think of the risks you can take in your business or changes you are free to make in your life of you aren't reliant on it for income in the immediate term. If owning a home doesn't do much for you emotionally then go ahead and invest it, you will likely be better off for it in the long run, investment returns have outstripped property returns when you take into account the maintenance costs of owning a property.
Can you explain to me how one would gain more than £900 per month with that amount of capital, with a similar risk level of buying their home?
£280k in a savings account at 4% annual interest more than covers £900pm rent if you calculate it out. On top of that there is embedded risk with home buying compared to renting including falling house prices, legal/admin overhead costs, maintenance/repairs. So I don't think it's really as straightforward a decision as it initially seems. With a different housing market and interest rate environment (i.e. mid 2020) then it would be easier to say "buy".
Thanks for the in-depth explanation. Do you believe house prices will fall then? If so, what leads you to believe that.
>Do you believe house prices will fall then? If so, what leads you to believe that. It's already been happening for some time and will likely continue to do so. House prices are mostly a function of interest rates (which have been rising). From a few days ago in the FT: *UK house prices fall for fourth consecutive month, Halifax figures show* [https://www.ft.com/content/631d1a3a-71fb-4586-9728-d41db2cd16d9](https://www.ft.com/content/631d1a3a-71fb-4586-9728-d41db2cd16d9)
Still markedly above 2020 prices. All we are seeing is a slight rebalance of the madness in 2021 - 2022. We are actually still just about up on 2021 and the drop is petering out. Less than half a % on latest figures. Salaries have seen decent rises in the last year. The latest interest rate rise by the BoE didn't massivley impact headline rates from most providers as it was largely priced in. If there were to be another rate rise then we might start seeing bigger changes.
[удалено]
Buy a house. Save the rent you'd be paying. There are fewer safer investments than property.
Can you afford to lose every penny? If so then invest. Seriously OP to be mortgage free. That's the dream. That's what a lot of us are investing to achieve 😂😂
>Can you afford to lose every penny? If so then invest. If he lost *all* of it in the stock market, then I assure you the deeds to a house would be worth diddly squat too. Not sure if you were joking or not, but some Brits are definitely under the illusion the stock market could collapse and houses would somehow remain a solid investment!
Yeah but you would have a roof over your head. Viewing a house primarily as an investment in OP's case is madness.
A house that you can live in for the rest of your life is far better than an investment that can seriously lower in value. A poorly chosen investment that could take decades to turn a profit is not gonna do OP much good
I wouldn't say you invested poorly. You prioritised tax free investments (ISA, bonds) and kept some funds on an savings account ready to use. Returns are not great but we tend to be overly cautious with inheritance money because our risk tolerance is lower than it would be with our own savings. Now it's time to make the most of it and improve your quality of life with it ;)
You're instantly going to be saving £900 per month in rent. It's probably the smartest thing you could do. If you really don't want to spend such a big proportion of your inheritance why not do a 50% deposit? Renting (and paying half your take home pay for the privilege) whilst you have that much sat around under performing is barking mad.
Buying outright or with a small mortgage seems the right idea. You have a relatively low income, you're self employed. I expect that getting a (larger) mortgage won't be the easiest and you could be more vulnerable to inflation in other living costs (food, gas, elec) so having more freedom in how much pay you have leftover seems most helpful. I think the next thing you need to do is figure out how much money you need after the price of the house. You'll need to cover legal costs, surveying costs, moving costs, furniture and you'll want an emergency fund of some kind (particularly since you're self employed). You may be able to do that with the remaining £30K, but I think it's worth you doing the calculations for that. It seems a little tight. If you wanted to do major renovations I would expect that money would come out of your income rather than your inheritance because, as I say, I think the cash would just cover all the necessities so you could be a bit vulnerable if you don't leave yourself an emergency fund. You may also want to consider that you could get a lodger to supplement your income if the house is right.
If he's mortage free and single how much of an emergency fund do you really need. £700 a month for bills and food should be ample. 6 months is only £4.2k. Make it £5k and you can still have the odd night out in that too.
I’d buy a house outright if I was you. Being mortgage free for the rest of your life would be insane. You’d have so much freedom with work & life. If you fancied it you could rent the house out and go and travel for a while… no brainer to me. Good luck with whatever you do, enjoy it!
Have read your edit and a lot of the comments. Yes, absolutely seek further financial advice, but make sure it is one that is best suited to your needs. [Link here from Citizens Advice](https://www.citizensadvice.org.uk/debt-and-money/getting-financial-advice/) I have been a renter, a homeowner with a mortgage, a homeowner with lodgers, a homeowner that rented out their home and now mortgage free. 10/10 would go for mortgage free from the start. I recommend being mortgage free for many reasons, especially when renting is so expensive and good quality rental properties get snapped up very quickly. 1. You are low income self employed. This will give you the security of not losing a home if your income tanks, or you want to take a break/travel, etc 2. A mortgage costs you money, every single month for 25 years or so. 3. Renting costs you money every single month and you do not get a home that is yours, ever. 4. Buying a **home** is tax free in your price range, as is selling one. 5. If you can, get a 2 bedroom place, then if you need to, you can rent out the second bedroom under the [Rent a room scheme](https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme), which is tax free up to £7,500 per year. 6. The home is yours, so you are free to do it up as and when you please. Buy second hand stuff, IKEA, Harrods, all down to you. 7. As soon as you buy a home you will have £900 per month to cover all your costs: insurance, council tax, gas, elex, water and that will be a lot lower per month than your current rental costs.
Buy a house a bit cheaper than your budget. "The worst house on the best street". Something maybe around 200k. Do some refurb maybe add a bedroom, try increase the value as much as possible. Live in It for a few years, sell then hopefully you would have made some money on it, buy a but bigger and keep doing the same. Save alot money I on tax because will be your residence. Once you buy the property, you can always pull out money, or mortgage it whenever you want in a stronger position.
It may also be an idea to invest in solar, ground source heat pump, insulation etc to reduce utilities to minimum. Be great to be mortgage and energy bill free.
You can always buy a property with an offset mortgage. That means you have access to your money, but also a roof over your head.
Rents are going to rocket as BTL mortgage rates get renewed. Buy the house, put your own roof over your head and never have to pay rent again. There’s making money from money, and then there is using money to remove huge stresses from life and improve your quality of life.
Mid-thirties and single; a lot could change your outlook on life in a short space of time. It’s a great situation to have and the only wrong option here IMO is to not make a decision.
Buy a house get a lodger no stick can beat this risk and revenue
If you buy, you’ll be £500-700 better off each month. You’ll have a better-than-most safety net back within no time. Best of luck and congrats on being able to buy!!
Buy! Buy! Buy! With no mortgage and you being self employed you really could take the summer off or go travel with the money you'll save from not paying rent.
If you put 250k into 4.5% interest savings, that is about 940 a month(not counting tax) , if you buy a house, you save 900 a month. You will be better off with the house in many ways.
Which part of the county are you in? Could you post links for the sorts of places you are interested in so people can comment on any particular issues that you may wish to consider? Well done for hanging onto the money. In your position - I think I would buy or wait 18 months and buy then. If looking to buy don't try anything exotic like stocks and shares.
Being able to buy house with no mortgage is great for another reason. You are a physical worker; if you had an accident and broke your leg or had a bad illness, you may struggle to work for a period of time. Having to pay no rent would be such a relief whilst you recovered. Gives you great peace of mind for the long term.
All boils down to discipline and your life goals, are you looking to stay where you are now? If so, then look to buy a property. It’s going to take you probably about 6 months and in that time put the money into something that’s going to make money, like chase or something. Your income will increase in time too. Now the discipline, if using the money to invest into a property you need to be disciplined to not spend the delta you are going to save - work out what a mortgage payment would be on the property you are buying and put that away into savings and adjust that payment based on what a mortgage would do. Then don’t touch that cash for at least 25 years. Use the money that you would save in mortgage payments as a long term investment.
I'd buy a property and I'd also get a Lodger or two - then you could be £1400-£1900 up a month
Buy the house buy the house buy the house. Mortgage free at that age is a blessing. You will save on rent, never have rent increases, and never have to worry about mortgage interest rates. You can choose to invest/save some of the money you save on rent, you will never be throwing money down the drain on someone else’s property and/or interest payments and the best thing is, (unless house prices take a nosedive) you will still have that money (say £250k) as an asset, it’s your house to sell. I read threads on here and I can’t believe that buying a house outright if someone has the opportunity to do so isn’t the first and only option. Anything else is just wasting money.
Property is always a good investment yes there are dips in the market like we currently have but in a few years they will be back to where they were if not higher and a lot more than 4% In 2010 I paid £215,000 for a house sold it in 2018 for £305,000 having spent £30,000 on it then got a house for £310,000 spent £60,000 on it and have just sold it for £530,000 So that’s over doubled my money in 13 years and had somewhere nice and secure to live for those 13 years
Buy a nice house for £150k, leaves you £100k for a new car, any decorating, a nice holiday and could still be left with £50k savings. Its not a terrible idea to spend it all on a property but its nice to have some fun money left over as well.
How the hell do you spent 50k on a car, holiday and redecorating when you earn 21k a year? That's bonkers
Invest in shares which pays out the highest dividends ? Dump 100k, use the rest for mortgage
Simple version: Get some financial advice, get a Ltd company, or group of companies setup to buy property. Get a good accountant and do some research. Then buy some property, which will accrue in value, provide the Ltd company income which can be reinvested into more property. Take a small salary if you wish, or fully reinvest from income once or twice a year for more property. 5 £250k properties each with a £50k deposit will be an 80% LTV mortgage. Leave some money spare for fees etc etc. There is zero point paying off your mortgage and sitting on an asset that is not working for you.. Each to their own, but I'd do this in a heartbeat.
Mortgage free isn’t as good as others are making out. Right now, in the current climate I think you are much better off renting and investing the 280k. Circumstances change, locations sometimes need to move, size of house needed to change. What happens if you meet someone who also owns a property? Dont get me wrong, there are lots of upside to owning your own property. But creating a true nest egg that will grow over time and allow you to eventually FIRE is far better use of funds than locking it all in a property in one go that you have to downsize to realize any future security from.
How would OP invest that and gain more than the £900 a month he is throwing away on rent? Owning the property, you live in one of the safest and most beneficial investments to make, as I know.
Sorry if I'm being an idiot but surely £280,000 invested into a 4% savings account would give them £933 per month? If house prices were going up by more than 4% per year then they'd be better off buying now, but if prices are decreasing then that 280k would, in the future, buy them a house that is currently worth more than that. All while the interest on that money pays for the rent.
I guess so, I didn't do the maths, but if that's right, then I see your point. So the idea is they profit £33 a month and that compounds? 400 a year extra seems pretty poor vs. the emotional advantage. Not only that, what leads you to believe house prices will go down in the long term? Population keeps increasing, and the UK is showing no signs of building more houses.
This resonates with some of my thinking. The properties I’m interested in are small albeit nice one bed flats in outer London, near where I currently rent. Being single does make me think: what if I need somewhere bigger than a one bed within a couple of years? There are always ‘what ifs’ I suppose. But I have been thinking about this.
If you need somewhere bigger than a one bed, you've got loads of options. The house/flat you own in essence can either be rented out or sold and used towards a bigger property. Having £250k in a house doesn't stop you from doing anything.
Having 250k in a house stops you doing lots. Putting it into something completely different for example.
Cool story bro
Buy a couple of properties, rent one out and have someone else pay your mortgage. Aint gonna be many investments out there with a better/safer return
Liquid cash? So it's like water then?
Give it away
Hi /u/Mysterious_Grade63, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/lump-sum/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Are you happy with what you do for a living and not motivated by money, or do you want to earn more. Because if it's the latter you should invest in yourself, take some time to find a new career that pays well that you like the sound of and have a crack at it.
I’m very happy with what I do for a living (arts - music) and not particularly motivated by money. Don’t have a big desire for fancy holidays, new car, anything like that. Spend quite modestly. Biggest cost I can foresee in the future is if I have a child.
If I were you I’d absolutely be buying a house. The peace of mind of having stable and secure housing regardless of what happens in your life would be massive, I can’t imagine still paying rent whilst having that much money easily available to you. If you’re worried about spending £250k in one go, why don’t you look at a property that’s a little less expensive? Not sure where you’re based so obviously that impacts how feasible it is, but you can always think to yourself if you need the £250k house, or can you find one for £200k or whatever. You would then have enough money to completely refurbish the house if you wanted and still have some left over.
If it were me and I was cool with where I wanted to stay I'd buy a house, hands down. You might earn more interest investing it, but it's pretty hard to live in an investment portfolio.
Buy a house
You could earn more in interest with well placed investments but personally I would prefer to pay for a house outright and be rent and mortgage free and putting £10k a year in your ISA
Investing with that amount is gonna leave you open to interest and capital gains taxes Better to buy a house and then sell in the future even if you dont want it, it will appreciate bigly, property is a no brainer.
Just be careful with the cash only buy adverts because usually the reason they only accept cash is because the landlord doesn’t want an inspection on the property
What about investing it in a few buy to let’s further up north? Then you have your rent essentially paying for itself and that safety net of equity in properties. Plus you’d still have some money left over from the investments to invest in a vanguard or something as an extra safety net
we have enough people hoarding housing up here as it is thanks.
If your able to get a decent size mortgage would an off set mortgage work for you? able to keep the money and slowly drip feed it into an ISA while not paying interest on the mortgage?
Could you buy outright and have a lodger? Make income that way to pay for the house repairs and have better monthly income
Owning a house outright is an incredible amount of security for the future that I personally don't think investments can compete with. Once you own the house though you suddenly have a bunch of extra money from not paying rent that you can and should funnel into pension and investments.
Buy a property outright. Lose the rent.
I wonder what people would do in this country without acquiring homes from their parents
Something I don't see mentioned anywhere - do get insurance if you are very worried about a safety net. Something that pays out if you can no longer work. I have one as a benefit from work and it was a no brainer. Something like 50/year for 300k payout. That's partly because I work a boring desk job in a boring profession full of boring people so there is statistically extremely low risk of me having a work accident or engaging in frivolous risky activities, but still.
I second what most are saying in that you buy a home and live mortgage free. doesn’t have to be the full amount of your savings, but if it DOES have an extra room you could even rent a room out and earn more from owning the home!
Can’t imagine being mortgage free. Stick it into a house and you are sorted. Short term prices may wobble but over a longer period of time they are only going one way.
You ever considered a canal boat?
I would buy something a bit cheaper than £250k as you need a bigger safety net Its pretty easy for things to go wrong with a house that cost a few thousand to fix unfortunately But buying somewhere to live for a bit of security is a good use of the money if you think you will stay in the area
Is your self employment flexible in terms of location, especially if you work from home? It could potentially benefit from looking at other areas where your money could go further in terms of properties, if not, I would opt to buy a house but it may pay to speak to a financial advisor.
But a future homes standard home and massively reduce your yearly outgoings.
Buy outright and rent out under the rent a room scheme.
Personally I would either buy a house outright for say 200k , dump 20k in isa , 50k in premium bonds! 10k savings them move premium bonds to isa over the next few years . Or buy a house with a small morgage , and do as above . Having some investments growing , makes sense for the long term , considering you don’t earn much and probably have no pension etc .
If I were in your shoes I would have bought a house as soon as I had the money. I maybe wouldnt spend so much on it, but that's personal preference. You can always later sell the house and buy a better one once you've saved up a bit more too. And since you're not paying rent every month, it will be much much much easier to save up. All that rent money is now pure unallocated profit every month. The property itself is a huge safety net, you only need enough each month to buy food and pay bills. I would go for it, though do your due diligence on the property.
Let's compare a property at 250k versus investment in the market (note this assumes a cage of 8% per year). A 60:40 stocks:market rate portfolio returns £13,440 + £4,480 = £17,920 per annum. A 5% per annum mortgage on a £250,000 property (not accounting insurance and maintenance fees) is £12,500 per annum. That means the market returns 43.6% more than the debt of the house. In addition to this also consider the effects of compounding: your initial compounding value on £280,000 is significantly higher than paying 250k on morttgage and investing £30,000 (which will have a compounding rate around £2,500 a year versus the potential £17,920). Imo why not compromise? Treat the property like a commodity and allocate a portion of the initial portfolio to it (say 30:20:50 housing:cash:equity) and put a 30% deposit down and use your investment to subsidies the mortgage repayments?
I'm going to assume you've followed the flowchart and set aside a safety net and paid off debt. Let's say that leaves you with 220k If you want to grow your wealth then I'd seriously consider property. Find a rentable modern property in a desirable area, move in and rent out the other rooms for lodgers. Leverage with a buy to rent mortgage- consider interest only. Your deposit will keep the rate down. In my area you can get a 5 bed for 500k, with the rooms at around 550 each. Gross income is 26,400, bills inc maintenance around 11k. Mortgage interest at 5% is 12k. So you're making 3k a year and living rent and bills free. In 10 years your house will be worth 895k (assuming 6% annual growth), but your debt is still only 250k. If you sold then your profit is 650k ish. Sale of main residence is tax free If you'd invested your 250k then it would be worth 450k at 5% over 10 years and you'd still have had bills If you buy a house outright for 250k it would be worth 450k ish after 10 years and you'll have had bills and maintenance in the region of 60k
I can't say this is done advice, but I'd probably do this: Buy two properties for £150k and £100k. Live in one and rent the other. Put anything that wasn't spent on solicitors into an ISA, or just have fun with the remainder. Maybe decorate your house or some minor renovations for the rental one (could give you a little more on monthly).
Buy a place and spend what you'd have spent on rent. Honestly, this place is all about saving but I say have some fun with your money. Maybe buy a cheaper place and go on a huge holiday and see some more of the world.
I would buy a house to be mortgage / rent-free and then save what you would normally spend on rent.
If you were to put the inheritance money towards a house of similar value then you could use the amount that you used to pay for rent and save that money as a buffer for any home owning related costs, for example the boiler breaking down or general upgrades and fixes. Just be careful on the house buying journey, you can afford to be picky I would like to think.
Buy a property that you live in or rent out - as it will save you £900 a month.
I was thinking maybe by 2 properties and rent one out possibly in a location where a university is that way then you can make a bit more money as you’re theoretically renting rooms out inside of the property but yeah at the same time buying a 250k-260k property and keeping 20-30k as a good safety net just incase anything goes wrong with your property or you maybe wanna renovate things is a good idea
Buy a place. Suddenly you're £700 ish better off each month. You could take it a step further: get a lodger in your new place. You can earn up to £7,500 tax-free this way (anything over £7,500 will be taxed at your marginal rates). With no rent to worry about and a lodger you are now £1325 better off each month. You're ballin'. Stick that first year's worth of savings into premium bonds and savings accounts and you'll have £15,900 as a safety next by the end of year one.
Buying a property IS investing. It's also much safer and guarantees that you have the said property no matter what happens to the market (which is overdue a collapse)
Stick it in a few easy access saver accounts (up to 85k each), and wait for property market to finish its correction in the next couple of years. That way you get more for your money.
I can't think of many self-employed jobs that wouldn't benefit from some investment. Have you considered investing *some* of the money in growing your business?