Does money used as deposit need to be immediately accessible?

[ClaireC]

Apologies if some of this has been covered already in previous posts as I have come across aspects of this, but not all.

Myself and fiance are hoping to build on a family site and hoping to get mortgage for same. Based on previous posts here we would hope to self-build a 2,500 - 3,000 sq foot 2 storey for between 200,000 and 250,000€. We have yet to do up plans, apply for permission etc but hope to have plans submitted by Easter this year and then start building by March 2008.

At the moment we have combined savings of €45,000 and this is in low return accounts right now (about 28,000 just in current account getting basically no return for the last three years - his money not mine!). My question is, if we were to combine this money now we would probably get most return by putting it in a 3 - 5 year investment scheme of some sort, however if we are using this money to get a mortgage would we have to be able to access this money immediately or would it be enough to show the bank that we have this in savings,even though it would be locked in until after the house is built? Or we would be better off leaving this where it is now and getting that much less of a mortgage?

Also say if the house was €220,000 to build (including kitchen, bathroom fittings etc) do we ask for that amount from bank and then get furnishings etc from savings or would people normally say house is x to build so add another 30,000 onto that for furinshings? I know building is slightly different anyway as we have the site and therefore don't need a deposit as such and the final value of the house would probably be twice the cost of the mortgage.

Thanks very much, and apologies if this should perhaps be in the savings forum as it is partially about what it best to do with money we have now.

 

[Dreamerb]

I think - and this is a thoroughly subjective opinion - you'd almost certainly be better off keeping the money more available. Rabo and Northern Rock are the AAM favourites though I use neither myself. Or you should be able to put it into a twelve month bond, though that won't get you much over ECB.

 

[ClubMan]

At the moment we have combined savings of €45,000 and this is in low return accounts right now (about 28,000 just in current account getting basically no return for the last three years - his money not mine!).

At the very least move it to a higher rate demand deposit account while you make up your mind. See the .

My question is, if we were to combine this money now we would probably get most return by putting it in a 3 - 5 year investment scheme of some sort

That's a key issue here - exactly what "sort"? What sort of risk/volatility might be involved? What charges? What other terms and conditions?

Or we would be better off leaving this where it is now and getting that much less of a mortgage?

In general it doesn't make sense to save while borrowing. However this is not a hard and fast rule. And some people have even posted here about possible strategies for borrowing and then investing/saving the money in order to make a net gain. A lot depends on the individual. Personally I would be more inclined to use savings not required in the short/medium term for other purposes to reduce my (even relatively low cost mortgage) borrowings and thus the overall cost of credit.

Also say if the house was €220,000 to build (including kitchen, bathroom fittings etc) do we ask for that amount from bank and then get furnishings etc from savings or would people normally say house is x to build so add another 30,000 onto that for furinshings?

You need to consider what value the lender will put on property as this will be relevant to working out the maximum loan to value ratio amount that you can borrow.