Wealth Check: 'I want my investments and savings to work harder'

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The Independent Online

Matt Watkins works as a commodities analyst in the City, and bought a flat in London last year. He is married and, in the future, would like to settle in a large house in the country. He therefore wants to organise his savings and investments to make them work harder.

Matt is considering purchasing another property for around £250,000 as a long-term investment - he would either let the flat he is currently in, or the property he purchases, and would like advice on this.

We asked three financial advisers for their suggestions: Nick Gardner, of Chase De Vere Mortgage Management; Donna Bradshaw, of IFG Group; and Colin Jackson, of Baronworth Investments.

PROPERTY

Nick Gardner says that Matt's plan to purchase and let another property makes sense, especially since the demand for rented property shows no sign of abating.

Gardner says that Matt needs a reasonable deposit - 5 per cent of the purchase price as a minimum - so he can get a good interest rate on the mortgage for his new property. Matt could raise sufficient funds for a deposit depending on the equity in his existing property, and then find the balance with a buy-to-let mortgage.

Another option for Matt and his wife is a 100 per cent mortgage, even though these normally cost up to 1 percentage point more than standard deals. The couple must also consider higher lending charges, which many lenders add to loans of 90 per cent or more of the property value.

Gardner suggests that the current best 100 per cent two-year fixed-rate mortgage that doesn't levy such a charge is from Portman, and costs 5.45 per cent a year. A £250,000 mortgage would cost around £1,545 a month. By contrast, if Matt saved a 5 per cent deposit, Northern Rock has a two-year fixed-rate of 4.99 per cent with no higher lending charge, with repayments of £1,403 a month. That would save Matt £3,432 over the two-year term, compared with Portman's 100 per cent deal.

SAVINGS

Colin Jackson says that Matt seems to have his finances well balanced - his income exceeds his outgoings, and he has savings worth three to six months of normal expenditure, in cash, as a rainy-day fund in his ISAs.

In terms of investments in the longer term, a good deal will depend on Matt's risk profile. Jackson suggests that the tracker fund is not wise, and for medium- to long-term growth in his savings and investments, Matt should be looking at actively-managed funds.

Donna Bradshaw thinks that Matt needs more of a mix of UK, foreign and specialist funds. She suggests Artemis Capital, Invesco Perpetual Income and Jupiter Income in the UK, and Fidelity South East Asia, or New Star European Growth abroad, and for a Balanced Managed Fund, Neptune Balanced.

Case notes

Matt Watkins, 29, analyst, London

Income: £49,500 a year

Spending: monthly outgoings amount to £4,100, including £144 pension contribution.

Savings: Matt has £3,000 in a cash mini ISA; a Tessa-only ISA with £1,100; plus investments in a FTSE-All Share Tracker Fund currently worth £3,300; and shares in HBOS, which he received when Halifax converted to a bank.

Debt: £800 outstanding from his student loan, costing 2.7 per cent a year.

Property: Flat bought last year for £190,000, with a two-year fixed-rate mortgage from Nationwide with a 30-year term.

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