Large Sum to Invest

I recently sold my property making a tidy profit. Prior to investing in a new property I want to kill two birds with one stone, by waiting to see what way the property market goes and also by living the dream of moving to the sunny climate of the mediterranean for a year, beats sitting on the M50 every morning and evening!

Anyway my question is this. While I disappear to work on my tan for a year, I plan to deposit approx 120,000 in a savings fund or some sort of product that will provide with me a return. So can you please advise me on the best rate offered among the banks on a deposit sum like and/or any low risk funds worth investing in for a year or so.

I reckon my year in the sun will cost approx 20,000, so a savings/investment return of 8% would almost cover half of this cost. Is 8% a realistic rate to get from a bank for 12 months savings?

Obviously upon my return the sum will be used to invest in a new home together with a new noose (mortgage) around my neck

I look forward to your recommendations

Check out the Best Buys section here.
http://www.askaboutmoney.com/showthread.php?t=27891

If you want a greater return than these, you'll need to be prepared to accept more risk, which is not generally considered suitable for a short time period like one year. What happens if the value of your investment drops substantially during the course of the year and you have to wait a couple of years for it to recover?

Don't forget that taking a year off may affect your ability to get a mortgage when you get back, unless you're not breaking your employment.

But it sounds like a lovely idea.

Liam D. Ferguson
www.ferga.com

Thanks for the reply Liam. Just wondering, would having a lump sum of 120k increasing my borrowing power when I go hunting for a new mortgage or would it just come down to my salary?

Mortgages are assessed on ability to repay so it will come down to your salary.
Obviously having €120k will make your profile stronger than someone with zero savings so if you are borderline for a certain amount you have a better chance of getting that amount than the person with no savings.

On the 8% return on investment covering half of your cost, don't forget that there will be a DIRT liability of 20% so you will need a real rate of return somewhere in the region of 10% not 8% to cover half the cost.

I haven't heard of 8% on a savings account Kellyr4. I have been looking myself for a while and the best I can find is a bit over 4%. There are regular savings plans that offer up to about 6% but these have maximum limits well below what you are looking to invest. If you find one let me know!

kellyr4 said:

Is 8% a realistic rate to get from a bank for 12 months savings?

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No - what bank is going to pay you ECB + 4.25% gross CAR on deposits?

Whopper said:

the best I can find is a bit over 4%.

There are regular savings plans that offer up to about 6% but these have maximum limits well below what you are looking to invest. If you find one let me know!

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The best standard demand deposit rate on offer is from Rabo at 5% gross CAR on up to €10K. NR offer 4.30% gross CAR on amounts over €1K. The best regular saver rates are 7%+ but with terms & conditions and the caveat that because you are drip feeding contributions you don't get the full rate on the full amount saved over a year. All explained in the financial best buys lists.