Protecting Your Home Against Life’s Curveballs

Protecting Your Home Against Life’s Curveballs

If you own (or are thinking of buying) your own home, then you need to think about protecting it.  After all, it’s what literally protects you against the elements.  Even if you’re renting, you need to think about protecting your tenancy.  Here are some tips to help.

Always have an emergency fund

If you’re a homeowner, then your emergency fund will cover minor issues and/or insurance excesses.  If you’re a renter, then ideally, you should have enough money to cover a deposit on a similar property and moving costs to it.

In either case, you should also have enough money to cover any unexpected expenses in other areas of your life.  These might not be directly related to your housing but could impact your ability to pay your mortgage or rent.

Take insurance seriously

It’s great to have an emergency fund.  Realistically, however, the average person is not going to be able to put aside enough of an emergency fund to cover serious expenses.  As a rule of thumb, if something could create major legal or medical bills (including vet’s bills) then you should at least consider insurance for it.  For completeness, this includes human medical bills as this will give you options outside the NHS.

You should also think about serious repair bills and if there’s any way you can be exposed to third-party claims for damages.  For example, cyclists and pet owners should definitely consider taking out insurance to cover themselves for potential damage claims.

Homeowners should think about buildings insurance, potentially outbuildings insurance, possibly accidental-damage insurance and contents insurance.  Renters should look at having their own contents insurance.

Last but definitely not least, you should think about protecting your finances.  There are policies out there to assist, speak to an advisor to find the right one for your circumstances.

Insurance and employment

Your employment status may have implications for your insurance cover.  For example, some types of insurance may only be available to people in employment.

Likewise, some employers may provide some types of insurance to their employees.  For example, many employers provide death-in-service cover.  Technically, this is not life insurance, it’s relevant life insurance.  From an employee’s perspective, however, the end effect is the same.  If you die, your designated beneficiaries will receive a payout.

Be aware, however, that the insurance you receive from your employer may not be sufficient for your needs, let alone your wants.  You, therefore, need to do your own calculations and, if necessary, top it up.  Similarly, you’ll need to arrange cover for anyone who is not in employment, even if they’re not directly earning an income.

In particular, it’s vital to have suitable insurance for home-makers.  If anything happens to them, you will need to pay someone else to do what they do without payment.  You will quickly discover how expensive this can be particularly if they have caring responsibilities.

Take care of your credit record

Your credit record will be taken into account if you need to get a mortgage.  This includes remortgaging.  Many landlords will check it as part of their tenant-vetting process.  Some employers check it as part of pre-employment due diligence.

Managing your credit record doesn’t usually require a great deal of effort.  Basically, it amounts to paying all your bills in full and on time, avoiding taking on excessive debt and making sure all information held on you is complete and accurate.  You should check your credit file at least once a year to see if there are any mistakes on it.  If there are, get them corrected as quickly as possible.  Do not ignore them until you want credit.

For mortgage advice, please get in touch

Can Innovation Solve The Housing Shortage?

Can Innovation Solve The Housing Shortage?

The Stamp Duty holiday is now (finally) at an end and the housing market is back to business as usual.  Part of business as usual is the fact that many buyers (and would-be buyers) are frustrated by the continual lack of suitable, affordable housing stock.  Given that this has been a problem for, literally, decades, is now the time to take a radical new approach?

Housing in the UK

There are many reasons why the UK has a housing shortage.  Most, if not all of them, however, ultimately hinge on two key facts.  Firstly, the UK is a small and densely-populated country.  Secondly, the UK is in a continual process of social and economic change.

The UK’s small size means that there is a lot of pressure on land.  This can lead to significant conflicts of interest.  For example, while some people want more new homes, others want more agricultural land and more of the countryside to be preserved.

The UK’s social and demographic changes mean that it’s challenging to predict what people are going to need and want in their homes.  This means that housing can effectively become obsolete.  If it does, it either needs to be updated or torn down and rebuilt.  There is inevitably a cost to this and hence a risk.

Right now, costs are extremely high and hence so is the risk.  Brexit, COVID19 and inflation have all hit the construction industry hard.  Necessity, however, is the proverbial mother of invention.  The UK absolutely needs more homes.  It, therefore, needs to come up with innovative solutions to the housing shortage.

Repurposing existing buildings

The first obvious solution is to repurpose existing buildings.  That includes buildings that were originally intended for residential use but have now become obsolete.  There is nothing whatsoever new about this concept.  What is, however, continually changing is the efficiency with which it is done.

Although some people might complain about “rabbit hutch” dwellings, the truth is that innovation has made it practical to live in much smaller spaces.  IKEA recently took this to a new level with its $1-a-month apartment in Shinjuku, Tokyo.

With a floor space of just 10 square metres, the apartment packs in everything a young single person could need for a comfortable life.  Whether or not an older person or a couple could live there is another question but it does show what’s possible.  It also highlights the principle of squeezing every last drop of functionality from existing spaces.

Building new homes

The second obvious solution is to build new homes.  This is, however, not as simple as it might sound.  The first challenge is to find the land on which to build them.  The second challenge is to create a building project which satisfies legal requirements and makes a reasonable profit for the homebuilder.

This was hard enough before Brexit, COVID19 and the current rate of inflation.  Now it’s even harder but again, necessity is the proverbial mother of invention.  While the construction industry is still very dependent on human labour, it is also starting to move towards automation.  For example, there are now bricklaying robots that can replace or work alongside human bricklayers.

Another option would be to expand the use of prefabricated housing.  This shifts the production burden away from the building site.  It thus makes it easier to apply standard manufacturing strategies to the construction sector.  Appropriately enough, prefabricated housing is already being produced by the acknowledged masters of the flatpack IKEA, or more accurately, by BoKlok, jointly owned by IKEA and Skanska.

Leaving aside jokes about putting together IKEA products, the fact remains that “flatpack housing” could be a very cost-effective and quick way to expand the UK’s housing stock.  Sadly, BoKlok’s intended entry to the UK market has had to be delayed due to circumstances.  It is, however, still actively interested in developing homes for the UK market and looking for suitable sites.

For mortgage advice, please get in touch.

How To Get A Mortgage Lender To Say Yes

How To Get A Mortgage Lender To Say Yes

When it comes to getting a mortgage, it helps a lot to prepare in advance.  Firstly, you need to build your deposit.  That can literally take several years.  Secondly, you need to make sure that you make yourself an attractive mortgage candidate.  Ideally, you want to allow at least 6 months for this.  Then you need to put in the right mortgage application in the right way.

Building your deposit

Everybody is different so it’s really impossible to say how long you should allow for this process.  It is, however, possible to say that you should learn about lenders’ rules on deposits.  Firstly, you need to know what percentage of a property’s price you will need to have in order to be even considered for a mortgage.

Secondly, you will need to know what sources of funds you are allowed to use to build it.  In particular, research the rules around gifted deposits and make sure that you comply with them in letter and spirit.  If you don’t, then there is a strong chance that your future mortgage application will be turned down even if you are a perfect candidate in every other way.

Making yourself an attractive mortgage candidate

You want to allow at least 6 months for this.  Your first step is to make sure that you have ID.  If necessary get or renew your passport and/or driving licence.  Next, check and see if you need to do any administrative cleaning.  Before you apply for a mortgage, you want to be on the electoral roll at the address given on your financial statements.

At a minimum ensure that your current account and payslips/accounts all show the same address as your electoral-roll listing.  Ideally, check the details of all financial products you hold.  This may be a nuisance but you should be doing it anyway.

Check your credit records with TransUnion, Equifax and Experian.  Make sure that they are all complete and accurate.  If there are any mistakes contact the agency immediately to have them corrected.  Similarly, if you have failed to mark accounts as closed, do so promptly.  For example, if you have an old credit card you never use, call the lender and close it properly.

During this period, think about your finances with particular care.  Remember that your lender is going to scrutinise your bank statements so think about how they are likely to appear to an objective third party.  If necessary, get an objective third party to look at your bank statements as they currently stand.  Ask them if they think you should change your spending habits, at least for now.

Putting in the right application in the right way

You might find it very helpful to use a mortgage broker.  They can guide you to the best deal for you and advise you on how to apply for it.  The key point to keep in mind is that lenders really want to know the answer to three key questions.  These are:

  • Can you afford the mortgage?
  • Will you repay the mortgage without any hassle?
  • Can they recoup their money from the sale of the property if there are any problems?

The more convincingly you can answer yes to all three questions, the more options you are likely to have.  With that said, you don’t need to give up in despair if you’re not a “perfect” candidate.  You may still find a more niche lender who will take you on.

As a final point, when you do submit your application, obvious as this may sound, make sure that you follow all the instructions given.  Answer all questions fully and accurately and upload/send any requested documents.  Administrative errors might not get your application declined but they may get it delayed.

For mortgage advice, please get in touch

Managing A Mortgage Post Retirement

Managing A Mortgage Post Retirement

Two trends are combining to create what could be a major issue for the mortgage market and, indeed, for the UK as a whole.  Firstly, people are waiting longer to get on the housing ladder (or being forced to do so).  Secondly, mortgage lenders are now offering multi-decade fixed-rate mortgages.

A new mortgage time bomb?

If you buy your first home in your mid-thirties and take out a forty-year mortgage (fixed-rate or otherwise), then it will end in your mid-seventies.  Of course, this assumes that you never change your mortgage.  In reality, people who bypass starter flats and make their first purchase of a family home may well choose to downsize once the children have flown the nest.

Then again, they may not.  Even if they do, they may not be able to pay the full price in cash.  From a financial perspective, downsizing isn’t as cut and dried as it might appear.  There are a lot of variables to consider.  It definitely has the potential to save people money but this is not guaranteed.

It also needs to be acknowledged that some relationships come to an end.  When they do, the two halves of a former couple both need to find themselves suitable accommodation.  This has clear implications for personal finances in general and mortgages in particular.

This means that, whatever way you look at it, there is at least the strong potential that people will still be paying off their mortgages well into their later years.  Whether or not this means that they will be paying them off post-retirement will depend on individual circumstances.  The most obvious of these is when, or indeed if, the individual retires.

What and when is retirement?

Retirement used to be pretty cut and dried.  If you had bought a house, you had paid off your mortgage (or were at least very close to it).  You had a defined benefits pension and/or a pension pot you used to buy an annuity.  This gave you a liveable income for your (relatively short) retirement years.

Now retirement is a combination of what any given individual says it is and what they can afford it to be.  Some people are able and willing to go on working indefinitely, at least in some capacity.  Some people are able to work but do not wish to do so.  Some people are simply not able to work indefinitely regardless of whether or not they wish to do so.

Realistically, despite the benefits of modern science, age is a lot more than just a number.  Anybody can be rendered incapable of working even if they would like to.  What’s more, even if you’re willing and able to work, the work might not be there for you to do.  This means that it’s extremely risky to rely solely on continued income from work to pay your mortgage at any time.  It’s particularly risky in your later years.

Mitigating the risk

The most obvious way to mitigate the risk of carrying a mortgage into retirement is to do as much as possible to pay it off before you retire.  This may involve making sacrifices in the present to benefit your future self.  For example, you might choose to let out a room in your house (even if it means the children sharing rooms for a while) and forgo treats like holidays.

You should definitely look at protecting your income so you can continue to pay your mortgage if hit by one of life’s curveballs.  If you’re employed, you could look at payment protection insurance.  Regardless of your employment status, you could look at critical illness cover, income protection insurance and life insurance.

Last but definitely not least, you should look at maximising your savings and income for retirement.  One potential strategy would be to use your Lifetime ISA to build up a pot you could use to pay down your mortgage upon reaching retirement age.  They use a pension and/or other savings/investment vehicles to save for your living expenses.

For mortgage advice, please contact us

For pensions, savings, investments, and payment protection insurance we act as introducers only

What Would An Increase In The Base Rate Mean For You?

What Would An Increase In The Base Rate Mean For You?

The base rate is the rate set by the Bank of England and charged to banks which borrow from it.  It then feeds through into the interest rates charged by lenders and paid to those with savings.  Currently, the base rate is 0.1% and inflation is sitting at around 3%.  This means that a rise to the base rate has to be a possibility everyone should consider.

Understanding the base rate and inflation

The Monetary Policy Committee of the Bank of England is tasked with keeping inflation at 2%.  They get a 1% margin of error either way.  If inflation drops too far below target, the BoE can choose between lowering interest rates or applying quantitative easing.  If, however, inflation goes too far above target, then the BoE’s only option is to raise interest rates (or do nothing).

Currently, inflation is already above target and is forecast to increase further.  This means that the BoE has to choose between raising interest rates and doing nothing.  In reality, the BoE might opt to do a combination of both.  In other words, they might increase the base rate slightly but hold off any major raises.

For example, they could return the base rate to the pre-pandemic level of 0.5%.  This might take the edge off inflation without hurting borrowers too hard.  Of course, such a small increase wouldn’t be thrilling news for savers.  That said, right now, savers would probably consider themselves fortunate just to be in the position to save.

The base rate and the mortgage market

What an increase in the base rate would mean for the mortgage market would largely depend on your position in it.  If you already have a mortgage then the first key point is whether it is variable rate or fixed rate.  The second key point is when you are eligible to remortgage.

If you’re on a fixed rate and have an extended period before remortgaging then you can essentially ignore any increase to the base rate, at least as far as your mortgage is concerned.  It could still have implications for your family finances in general.

If you’re on a fixed rate and coming to the end of your initial fixed-rate term then you should definitely be thinking about remortgaging.  Similarly, if you’re on a variable rate and coming to the end of an introductory deal/lock-in period, then remortgaging should also be high on your agenda.  This holds true at any time but particularly now that an interest-rate rise could be on the cards.

If you’re on a variable rate and not able to remortgage, then you need to start thinking about how you will meet your repayments if interest rates go up.  In addition to looking at your overall budget, you might want to check if you need to increase your insurance provision.  For example, if you have PPI, income-protection insurance and/or critical illness cover, are you still happy with the level of protection you have?

The base rate and your finances

If you have any debt, including non-mortgage debt or savings, then changes to the base rate definitely have the potential to impact your finances.  How long it takes for changes to be felt and how much of an impact they have will depend on the nature of your debt or savings.

For example, products sold on a fixed rate will remain on that rate at least until the agreed term ends.  Products coming to market, however, will be priced to reflect the changes.  Products sold on a variable rate will have that rate updated to reflect the changes.  How quickly these updates will be applied will depend on the company behind them and the nature of the product.

In short, therefore, if interest rates start to go up, you can expect non-mortgage debt to get more expensive.  You can also expect to get more interest on your savings.  You should therefore consider what this would mean for your overall finances.

The Overlooked Costs Of Moving

The Overlooked Costs Of Moving

In one sense, completing on a property is “job done”.  Emotionally and financially, that is the biggest part of moving.  Practically, however, it’s just the start, literally.  You still have to get your possessions from A to B.  You also need to get settled into your new home.  This needs to include updating your contact details with relevant parties.  This all comes at a cost.

Moving your possessions

If you have anything more than a car boot’s worth of belongings, you’re probably going to need to get help getting them from one home to another.  This typically means either renting a van or getting movers.  If you’re offered the chance to borrow a vehicle, make sure that you’re properly insured to drive it.

If you’re using movers, it’s advisable to look at their reputation as well as their headline price.  Quality of service really is worth paying for especially in a potentially stressful situation, like a house move.  You may, however, be able to save yourself some money by booking in advance and/or timing your move strategically.  For example, move mid-week instead of at the weekend.

Also, only move what you need to move.  Use up consumables (like food) as much as you can.  Declutter anything you’re not using and not going to use.  If you can start this process well in advance, you may have the option to sell some of your unwanted belongings.  Even if you can’t, however, moving them on will reduce the amount of stuff you need to move.

Do you need temporary storage?

If you’re moving to a bigger home, you should be able to get all your possessions inside it.  If, however, you’re downsizing, you might want to consider using temporary storage.  Generally, you want this to be near to your new home so you can access it easily.  This may require you to move your stuff and have the movers deliver it to two locations.

Using temporary storage allows you to do the bulk of your decluttering after you move.  This can be a better option if you have a lot of personal items to deal with.  It puts you under less pressure but the fact that you’re paying for storage can be motivation to tackle the job.

The insurance issue

You should have insurance on your new home itself from the moment you exchange on it.  In general, the buyer will be responsible for any issues with the property from that point.  You should also ensure that you have insurance cover for the moving process.  If you use professional movers check that they are insured.  Likewise, if you’re using temporary storage, it’s advisable to have insurance cover for that too.

Redirecting post

You probably do just about everything online these days.  Even so, it can be worth setting up a postal redirect, at least for the first month if not the first quarter.  Some organizations do still use letters for certain forms of communication.

What’s more, there may be a delay between you informing them of your move and them updating their systems.  If letters were already in the pipeline, they may still end up at your old address.  A postal redirect will catch them.

Think about cleaning

This one is a personal decision but it’s worth considering.  If you want your new home given a proper deep clean before you move into it then you either need to do it yourself or pay someone to do it for you.  There is a fairly strong argument for hiring professionals as they may have tools, products and skills you don’t.

Budget for new purchases

Assume that you’re going to have to buy some new items for your new home and budget for them.  It’s better to have the budget and not use it than to find yourself needing to spend money on unplanned expenses.

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