Smart Money
If you are
considering the sale of your home and renting it back to
release cash then you will also be interested in reducing
your monthly payments that you will be required to make in
rent. One way of lowering your monthly outgoings is to
offset the equity released from your home against your rent.
This is achieved by investing the cash you have released by
selling your home. For example if you have released £40,000
and invest this at a rate of 10% you will receive £4,000
in interest each year. This is a great way to retain your
capital and minimise your monthly fixed costs.
How to earn more with your money
So where can
you receive a 10% return on your money? There are several
ways to invest to achieve this kind of income, it is
unlikely that a high street bank will offer rates like this
but one facility that I have found to be particularly
successful is an online “money market” called
Zopa. This
banking service enables you to place your money in the
market and set a rate of return that you require over a
specific time, typically one , two or three years. You will
specify that you want a return of say 10% APR and how much
you are prepared to offer at that rate. This money is then
loaned out to borrowers who borrow money from lots of
separate lenders in the market. Your contract will be for a
small part of their total loan, this has the effect of
limiting the exposure risk to the value of your contract
which can be as little as £10. The level of defaults is
extremely low as
Zopa is a very “human” site. People lend
money to people so there is a strong sense of responsibility
associated with paying back the loan. The introduction of
this financial market means that you can earn a good return
on your money and it is open to anyone who has an interest
in lending or borrowing.
“How can I save money?”
As an example if you
sell your property for £100,000 and have a £60,000 mortgage
you will release £40,000 in cash which is available to
invest. If this is invested with
Zopa at a good rate of
return you could earn £4,000 per year. We base our rental
figures on 8% of the sale price of your property so on a
£100,000 house or flat the rental would be £8,000 per year
or £666 per month . If you now subtract the interest earned
on the invested money : £8000 (rent) - £4000 (interest
earned) = £4000 or £333 pounds per month or £76 per week.
Kill the debt
You can see that by
making your money work for you efficiently a huge saving can
be made. The savings can be even greater if you have credit
cards which typically have high interest rate charges and
late payment penalties. The rates are often over 20% APR and
by paying these off first you will have even less outgoings
and be able to save more money each month. Rentback.org
offer a comprehensive service and will buy your property
from you and rent it back to you so you can stay in your
home. Unlock the value of your house or flat and release the
funds for investment or to pay off bills and credit cards.
If you plan your finance strategy wisely you can
dramatically reduce your monthly outgoings and have more
money in your pocket.
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