Archive for the ‘Mortgage Advice’ Category

Why Are Mortgage Approvals At 6 Month High?

Friday, May 22nd, 2015

Why Are Mortgage Approvals At 6 Month High?The Mortgage Market Review, which took effect in 2014, imposed “affordability criteria” on lenders. In simple terms it aimed to rein in high-risk mortgages. Like any change it triggered speculation about its potential effects.

Almost a year later, mortgage approvals remain high, while house prices are currently holding fairly steady. So what does this mean in practical terms? Well if you’re thinking of buying a house, here are some questions you might want to consider.

Is Now The Right Time For Me To Buy?

One of the key points to understand about house-buying is that it involves a lot of expenses in addition to the actual price of the house. Along with the infamous stamp duty (on homes costing over £125K), there are likely to be fees for solicitors and surveyors as well as mortgage-arrangement fees. These all need to be factored in to your rent v buy calculations.

Some mortgages impose an early repayment charge if you end them before the full term of the loan (e.g. if you move house). Likewise if you use an estate agent to help sell your house, you will pay a fee for their services. Therefore it’s a good idea to think carefully about how long you will need to stay in a house to make all these expenses worthwhile. It can also be a good idea to factor in a margin for adjustment. In other words, where would you stand if house prices stayed steady rather than rising? What about if they actually fell slightly? If you feel uncertain about any of these points, then renting may be a better option for you.

I’m Ready to Buy, How Do I Reduce My Mortgage Payments?

The good news is that lower interest rates can feed through into lower rates on loan products, including mortgages. There are still great mortgage deals out there. The trick to being able to take your pick from the low-cost mortgages is making yourself as attractive as possible as a customer. There are basically three steps to doing this. Firstly, put together as much of a deposit as you possibly can. Secondly, make sure your credit record is sparkling clean. In particular make sure that you avoid being scored negatively for reasons you can easily address. For example being on the electoral roll is a plus point for your credit score so make sure you are. Also make sure that any actual mistakes are corrected. Thirdly make sure that you stay within the affordability boundaries laid down by the Mortgage Market Review.

You can expect a prospective lender to check this thoroughly, so doing your homework in advance can be a useful exercise in seeing yourself as others see you.

What Happens If Interest Rates Go Up, Or If They Go Down?

If you are on a fixed-rate mortgage deal then any changes in interest rates will only affect you once the fixed-rate term comes to an end. If mortgage rates rise then you can reasonably expect this to feed through into your mortgage repayments. Therefore in addition to all the other questions we’ve just discussed above, it is also advisable to think about how you would cope in this situation. In principle lower interest rates should also mean lower monthly repayments. It would, however, arguably be very risky to base a financial strategy on this happening. In practical terms, if you are planning to make a house a home and stay in it over the long term, say at least 5 years, then it is entirely possible that you will see interest rates rise and fall during this period. Your financial strategy needs to be able to cope with both scenarios.


You Can Invest In Property With Buy to Let

Tuesday, May 5th, 2015

You Can Invest In Property With Buy to Let

Back in the day

Ten years ago, nearly every TV show across a wide range of channels was property related. Not only was it cheap, easy TV to make, but the public couldn’t get enough of it.

A Place In The Sun, Property Ladder, that show with Kevin McLeod where people turn barns into mansions, the list was endless.

The vast public appetite for such programmes and for property investment in general was part of a vast bubble that, as we now know, burst in 2008.

It’s easy to be wise after the fact, and Britain’s property market, particularly the buy-to-let market has never quite been the same since.

A super cheap buy to let market between 1997 and 2008 saw large numbers of ‘get rich quick’ casual landlords buy properties in the hope that they would have to do very little in return for a continual income.

Many left the market in 2008, and a few limped on, realising that being a landlord is often quite demanding.

There is still a place for serious buy to letters out there who can work and think strategically to build up a business.

If you are thinking about it as an investment strategy for the future, this blog will give you some useful pointers.

Different finance

You cannot use a conventional mortgage or insurance to buy a buy to let property and switching a regular residential home over to rental use requires a special buy to let mortgage.

Scrimp on this detail and the bank might call in its mortgage altogether.

A mortgage for a rental property will typically have a much higher interest rate than a residential mortgage.

The loan to value percentage (how much of the total value of the property you can actually borrow), is higher for a buy to let mortgage than for a residential mortgage.

This shows that banks are interested in lending to serious investors who can a higher percent of the value of a property themselves.

One aspect of the buy to let mortgage that makes life slightly easier for the purchaser is the fact that they are often interest only.

This means that each monthly repayment covers just the interest payment and not the loan ‘capital’. At the end of the agreement the capital can be repaid by selling the property and the seller can retain any profits.

This presumes, of course, that there are profits. A poor purchasing decision could leave you with negative equity, or you might find, as millions have in the last decade, that markets can slump as well as boom.

Business Strategy

The bank sees the borrower as a business partner, one which it hopes will be fit, healthy and alive towards the end of the agreement.

The risk averse banking sector is no longer throwing money at house buyers (private or rental), and expect a buy to let landlord to take on the bulk of liability.

This means that if you are going into the letting business, you need to make sure that you have a viable business plan.

Are you targeting young professionals, students, married couples or commuters? If you don’t have a niche market in mind, you need to get one before you go any further.

This will determine where, and what you buy. There is no point buying a flat for wealthy young professionals in bedsit land, or a property aimed at families in a row of student houses.

Your Legal Responsibilities

You will also be responsible to the local authority as well as the bank; a rental property has to reach the basic levels of safety, hygiene and energy efficiency.

It might be worth consulting your council’s housing department for further advice on your legal requirements before you proceed.

Remember as well that your property will be liable for council tax payments, a cost that most landlords pass on to the tenants.

If you would like further advice on the kinds of finance available for fledgling buy to let businesses, speak to a financial adviser who deals in mortgage advice.




Thoughts For First Time Buyers

Tuesday, April 28th, 2015

Thoughts For First Time BuyersIf you have never taken out a mortgage before, this blog is aimed at giving you a balanced and informed view of your options and the mortgage market today by examining things you need to consider when you are buying for the first time.


Since last April, the rules surrounding lending have changed, now lenders are required to carry out far reaching audits into personal finances to determine your monthly income and prevent financial over commitment. You will need to demonstrate that you are:

  • Saving monthly
  • Reducing outgoings
  • Reducing debt or
  • Debt free
  • Receiving a regular income
  • In possession of a clean credit rating
  • You will need to calculate the total amount you will need for a mortgage deposit and plan your savings accordingly.
  • It might be worth finding out if the seller is willing to do a private deal, thus cutting out the estate agent.
  • Watch out for extortionate service charges if you are buying a flat, these can significantly add to the cost of your monthly payments.
  • It might be cheaper to see if you can bid for a property at auction instead of buying it through an estate agent.

Government Schemes:

The Government has helped first time buyers and families moving up the property ladder with a landmark schemes in the past five years, the Help to Buy Scheme.

  • Help to Buy: Sky rocketing average house prices have placed home ownership in the last five years out of the reach of countless first time buyers and made it difficult for growing families to move up the property ladder. The Help to Buy Scheme has provided loans of up to 20 percent of the overall value of properties in order to help buyers afford the deposit. Now prospective buyers have to put down just five percent of the overall value of a new home.


  • Look at the street you are buying in, if the house your are purchasing is far more expensive than the others in that post code, remember that the area will have its own ‘ceiling price’ based on what people in general are willing to pay in order to live there.
  • Is the area ‘up and coming?’
  • Are there decent schools?
  • Is it connected to good transport links?
  • What are the amenities like?

Legal Stuff:

There will be a number of compulsory costs included in the mortgage deal:

  • Legal Fees (these may be included in the overall price of the mortgage, so you don’t have to pay them outright but over the life of the mortgage they will be expensive).
  • Stamp duty.
  • Surveys on your new home (scrimp on these at your peril).

You might want to:

  • Find a cheaper solicitor than the one your lender is using.
  • Find out all the costs and ‘extras’ both estate agents and conveyancing solicitors are charging
  • Make sure everyone you are dealing with is covered by a professional charter or body and is insured.
  • Make sure your solicitor works for you, not the other way round.

You will also need to ask some searching questions to protect yourself against future heartache when you view a property for the first time, even if you’ve convinced yourself that ‘it’s the one’:

  • How long has it been on the market?
  • How many offers has it had?
  • What are the neighbours like?
  • Have there been any disputes?
  • Is there up to date paperwork for the gas and electricity?
  • Is there up to date paperwork for the boiler?
  • What is the availability of parking spaces?
  • What is the cost of council tax?
  • What furnishings or fixtures come with the house?
  • Has there been any history of subsidence or dry rot?
  • Is there anything hideous about to be built on your doorstep?

Getting clear answers to these questions will save you much misery later on. You might also want to:

  • Find out about the estate agent; are they famed for good customer service?
  • Find out about the management service (if you are buying a flat) do they have a good reputation?


You need to have a good relationship with your sellers;

  • If you see a property you really want, get them to take it off the market as a condition of your offer. There is nothing worse than being gazumped by another bidder.

Setting up home

You will need to factor in the costs of;

  • Removals (get plenty of quotes for this as prices can vary widely).
  • New furnishings, kitchen or bathroom.
  • Improving the exterior of the building and the garden

Make sure also that you have quotes from workmen for the renovations before you buy, because afterwards the jobs you need doing could become more expensive, the more desperate they sense you are.


Mortgage Options for Pensioners

Friday, March 6th, 2015

Mortgage Options for PensionersThe concept of making mortgage payments after retirement age may be a new reality for some people. When looking at this situation, be aware that you can always get advice from a professional financial adviser to help you find the solution that’s right for you.

Decide Whether You Are Ready to Downsize

There was a reason why you chose the home you live in rather than any other but that reason may no longer apply. Children’s bedrooms may now be spare rooms and a train station nearby may be less important if you are no longer going in to work every day. The internet has helped make it possible to keep in regular contact with family and friends even over significant distances. If you are really attached to your home for reasons which still apply then it makes sense to examine your options for continuing to pay for it. If, however, time has changed your situation, then moving to a more affordable home may be an appropriate course of action.

See If Your Home Can (Help to) Pay for Itself

The rent-a-room scheme currently allows resident landlords to earn up to £4,250 per year tax free from letting out furnished accommodation in their own home. Although the tax-free allowance is for the whole year, there is no requirement that the accommodation be provided for the whole year. It is perfectly acceptable to provide summer holiday lets to tourists or language students or “Monday to Friday” lets to business people. There may be other ways to earn money from your home, for example by letting out your driveway as a parking space, although some of these ways may be subject to local authority approval and/or regulation.

Remember That There Is a Difference Between Retirement Age And Retirement.

The Equality Act of 2010 means that it is illegal for companies to force people to retire purely on the grounds of age. This means that in principle it is possible for people to go on working for as long as they want (or need) to. How feasible this is in practice will depend on a number of factors, including your overall health and the physicality of your job. If, however, you are close to paying off your mortgage, working a few years longer may be an effective solution.

Make Your Current Mortgage Work Harder

Keeping tabs on your family finances can go a long way to avoiding problems or at least catching them early and having more time to deal with them. One way to reduce the challenge of having to make mortgage payments in retirement may be to make overpayments while you still have an income from employment. This may require making savings elsewhere.

Get A Better Mortgage Deal

Another possibility may be to switch to a better mortgage deal. The key to this approach is to make the switch early enough for the savings to outweigh the cost of arranging the new mortgage. It’s also worth remembering that arranging mortgages requires paperwork on the part of the lender as well as the borrower. Therefore lenders may require borrowers to agree to a minimum mortgage term and/or minimum amount. Essentially this is to make sure that they earn enough from the deal to justify their initial investment of time, effort and money to set it up.

Consider Equity Release

In equity release schemes, a business essentially buys a share of your house and you continue to live in it until you die or move into a care home on a permanent basis. The advantage of these schemes is that you get cash up-front, which may help to pay off a mortgage. The disadvantage is that you may find the sum offered to be less than the open-market value of your home. These schemes should be looked at with care and ideally with the help of a professional financial adviser.



Will We See The Return of Interest-Only Loans?

Friday, February 20th, 2015

Will We See The Return of Interest-Only Loans?There are two basic parts to any loan.  One part is the sum borrowed, sometimes known as the capital.  The other part is the fee charged by the lender.  In terms of mortgages, this fee is usually charged in the form of interest.

At this time there are three basic types of mortgage available:

Repayment – in which the monthly repayments are set at a level which ultimately repays both the capital and the interest.

Interest-only – in which the monthly repayments only pay the interest and the borrower must make other arrangements to pay off the capital at the end of the loan period.

Offset – in which the mortgage is roughly equivalent to a huge, fixed-term overdraft.


The History of Interest-Only Mortgages and The Endowments Scandal

The endowment mis-selling scandal of the 1980s still has the power to generate strong emotions.  In short buyers bought property on interest-only mortgages.  They also purchased endowment policies to go along with them.  The idea was that the endowment policy would not only pay off the mortgage capital but also make the home-buyer a profit.  Unfortunately in many cases the endowments didn’t even pay off the mortgage capital.  This meant that some home-buyers found themselves scrambling to find an alternative way to pay off the balance of their mortgage.  The resulting scandal highlighted the fact that home buyers often did not understand the product they were being sold.

Interest-Only Mortgages and Buy to Let

Notwithstanding this, interest-only mortgages remained a staple of the buy-to-let market.  The key difference here being, of course, that the legal home owner does not live in the property.  Interest-only mortgages increasingly became a means of building personal wealth by investing in property rather than for buying a home to live in.

Interest-Only Mortgages Return to The Residential Market.

Now interest-only mortgages are starting to make a comeback into the residential housing market.  Leeds Building Society, for example, is currently offering an interest-only mortgage with a choice of 3 introductory deals.  There are stringent conditions attached, such as a minimum 50% deposit.  Interestingly this mortgage allows for 10% of the capital to be repaid each year without early repayment penalties being applied.  This means that technically it could be used in a similar way to a repayment mortgage, but with more flexibility with regards to how much is paid each month.  Meanwhile the Clydesdale Bank is offering interest-only residential mortgages to high-net worth customers with a minimum 25% deposit.

The Reality of Interest-Only Mortgages

Like all financial products, interest-only mortgages need to be examined in the context of an individual’s financial situation.  There are three key points to bear in mind when considering them.

Firstly the affordability criteria introduced in 2014 applies to interest-only mortgages in the residential market.  You will therefore need to be able to provide evidence that you can afford the monthly repayments as well as having a feasible plan to repay the capital.  When considering this point, think about what would happen if you couldn’t sell your house at the end of the mortgage period.  Say there was a lull in the market or a temporary drop in house prices.  How would you cope in that situation?

Secondly deposits matter to interest-only mortgages in the same way as they do for other kinds of mortgages.  It is therefore important to have savings in place to be able to make a respectable down payment.

Thirdly, and possibly most importantly of all, it is absolutely vital to have a plan in place to pay back the capital.  It is also crucial to “stress test this”.  This includes making contingency plans for unexpected life events.  For example what will happen if you are unable to work for a time, perhaps because of illness?  It also includes thinking about unexpected financial situations.  For example, if your plan is to pay off the capital with income from investing, what will happen if your investments under-perform?

Getting some advice from a financial adviser can help to resolve these issues and give you the best chance of finding the right mortgage for you.



Becoming a property investor with buy to let

Wednesday, February 11th, 2015

FB - BecomingTalk of “the housing market” often focuses on buying property and in particular the challenges facing first time buyers. There are, however, a number of people for whom renting is an appropriate lifestyle choice. The most obvious example of this is younger people, who are still forming relationships and establishing themselves professionally. Renters, of course, need landlords, which opens up opportunities for investing in rental property. There are various ways to go about this, so those interested in this area might be well served by getting some financial advice from a qualified financial adviser before deciding which option is right for them. Those who are seriously considering buying a property to let out should think about all the implications before they start.

Financing a buy to let property

Unless you can afford to buy a rental property outright, you will need to look for a specific buy-to-let mortgage. While these are officially exempt from the affordability criteria which have been applied since April 2014, potential investors need to be aware that their application is still likely to be looked at very carefully. Buyers also need to understand that the deals on offer in the buy-to-let mortgage market can be very different from those available to people buying a home to live in. Interest rates and fees, for example, can be substantially higher and lenders may insist on bigger deposits. There may also be a preference for younger borrowers, i.e. people who will have paid off their mortgage by the time they retire or at least very shortly afterwards.

A buy to let mortgage can last longer than a tenancy agreement

One of the reasons lenders look carefully at buy-to-let mortgage applications is that mortgage repayments have to be made every month, regardless of whether or not there are tenants in the property at the time. Potential buy-to-let investors will therefore need to have funds set aside to cope with vacant periods (or problems with tenants not paying or paying late). These funds have to be viewed separately from general savings.

Be clear about the difference between rental income and rising house prices

Renting out a property will bring you an income, but you will only be able to turn rising house prices into hard cash if you sell it. It is, however, risky to assume that you can pay off a mortgage by selling the property towards the end of the term. If the market value of your investment property falls, for any reason, then you will be left to deal with the shortfall. This is a particular risk for those with interest-only mortgages, which are currently far more common in the buy-to-let market than in the residential one. Potential property investors should also be aware that profit on the sale of buy-to-let properties is liable to be subject to Capital Gains Tax.

Remember to budget for running costs

Potential landlords will need to decide whether or not they are going to work through an agency or be “hands on”. Agencies charge fees but can save time and hassle. In either case, buy-to-let properties need much the same care and maintenance as any other home and one way or another these costs will come back to the owner of the property.

Be realistic about your market

It may be an old cliché but location matters a lot in the property market. There are therefore two key questions to ask when looking for buy to let properties. These are “What is the going rate for rentals and sales in the area?” and “Who are my potential tenants?” Student towns have obvious appeal to buy-to-let investors, as do places where there are lots of young adults, particularly young professionals. There are, however, other markets, for example in some areas family homes could be a very good investment. As you can see, there’s actually quite a lot to becoming a buy-to-let property investor. The golden rule, however, is always to ensure that you can realistically expect a rental income which is at least high enough to cover all the costs involved.

How to repay your mortgage early

Friday, February 6th, 2015

How to repay your mortgage earlyGiven that a mortgage is usually a long-term commitment, sometimes a significant one, paying it off can be a major financial (and personal) milestone. For some people it may even be worth considering taking steps to repay a mortgage early.

The practicalities of overpaying a mortgage

There are essentially two parts to a mortgage. The first part is the capital – the money borrowers need when they are buying a home. The second part is the interest charged on the loan. Both the capital and the interest need to be repaid but this can be done in different ways.

With repayment mortgages, repayments are intended to pay off both the interest and the capital borrowed. In principle making overpayments reduces the amount of capital borrowed and this should reduce the amount of interest payable. How this works in practice will depend on the lender.

With interest-only mortgages, the repayments are only to cover the interest. Borrowers would need to check with their lender if there was a possibility of making overpayments to reduce the sum owed. If not then the borrower needs to make provision to repay the capital at the end of the mortgage term.

With offset mortgages, the mortgage works like a massive overdraft. As long as borrowers have reduced the outstanding balance to zero by the end of the term, they are largely free to manage their overdraft as they see fit. There is no repayment schedule as such but borrowers can manage their family finance to reduce the balance to zero as quickly as possible if they wish.

There can be a cost to repaying early

Put quite simply, the interest charged on a mortgage is the lender’s gain. Making overpayments to reduce the amount of interest payable on a mortgage means that a lender makes less gain on it. Because of this, some lenders may charge fees to repay a mortgage early. On the other hand, it also reduces a lender’s risk and therefore some lenders may be sympathetic towards the idea. With this in mind, it can be wise to check the small print on your mortgage or to contact your lender directly to see what their policy is.

Is repaying early the right decision?

Before making any significant overpayments to a mortgage, it can be a very good idea to get some professional financial advice from a qualified financial adviser who can look at your overall financial situation and your personal and financial goals and help you to take the right decisions for your own, specific, circumstances.


What first time buyers need to know

Thursday, January 29th, 2015

Fb - First time buyersBuying your first home can be an experience you’ll never forget. While the actual process of house-buying only starts once you have found a property that you might wish to call home, planning ahead can give you a huge advantage when it comes to getting the home you really want. In particular it is hard to overstate the importance of organizing the family finance so that you have savings in place to put down a respectable deposit and still be able to afford moving costs.

Bigger is better

In very simple terms, a borrower’s deposit is a lender’s protection. When deciding whether or not to accept a mortgage application, lenders have to think about the challenges potential borrowers may encounter during the life of the mortgage. These may include temporary falls in house prices, periods of unemployment, and periods of reduced income or at least reduced disposable income (for example after starting a family). The bigger the deposit a potential borrower can put down, the less exposed the lender is to changes.

Bigger deposits make for smaller monthly repayments

As of April 2014, lenders are legally obliged to assess mortgage applications in terms of “affordability”. In other words, they need to make sure that potential borrowers can afford to meet the repayments over the lifetime of the mortgage. People who need to borrow less also need to repay less. This means their monthly repayments will be smaller and therefore more likely to be seen as affordable.

Set some money aside for moving costs

It’s important to budget for all the costs involved in moving home. Buyers may be liable for stamp duty and are will need to pay solicitor’s and surveyor’s fees. The actual cost of moving from A to B and of furnishing and equipping a new home will depend on a variety of factors. It can, however, be useful to have a budget for unforeseen expenses. In other words, funds available to deal with anything about your new home that you only notice once you’ve moved in. Although not strictly a home-purchasing cost, new home owners household items as the need arises.

Check if there is government help available to you

The Help to Buy scheme is available to help people buying new-built homes. Provided that buyers can put down a deposit of at least 5%, the government will lend up to 20% of the purchase price of the property. This means that the buyer only needs to get a mortgage for the remaining 75% of the purchase price. The Mortgage Guarantee Scheme can be used to buy either new-build or pre-owned property. In this scheme, lenders essentially insure a part of a mortgage with the government. This means that they are guaranteed to get that part of their money back even if the borrower becomes unable to make the repayments. Of course, there are rules and limits for both schemes which means that they may not be applicable to, or suitable for, everyone.

Consider speaking to your family

Older people who have had more time to accumulate personal wealth, may be willing to act as mortgage guarantors for younger people that they trust. This can be helpful for people who might struggle to meet affordability criteria as applied objectively by lenders. It could also be helpful for people who’ve had a chequered financial history and whose credit ratings are therefore less than pristine.

Get some professional financial advice

Investing some time talking to a qualified financial adviser can go a long way to helping you make the best choices during the house-buying process and beyond. Whatever your plans and goals for your new life in your new home, getting your finances in the best possible shape is always a good starting point for making them a reality.


How to Save with an Offset Mortgage

Friday, December 19th, 2014

fb - how to save with an offset morgageBuying a home is generally one of life’s most significant events, even for those who have been through the process before. This being so, getting the right mortgage can have a major impact on the family finance.

What Kinds of Mortgage Are Available?

With a repayment mortgage, the monthly payment covers both the capital sum borrowed and the interest due on it. At the end of the term, the mortgage is guaranteed to be paid off in full, providing all the payments have been made on time.

With an interest-only mortgage, the monthly payment is simply to cover the interest owed. At the end of the term the borrower needs to pay off the capital sum borrowed in full.

With an offset mortgage, the borrower essentially has access to a giant overdraft, which is available for a fixed term. The balance must be paid off by the end of the agreed term..

What Are the Main Benefits of an Offset Mortgage?

The benefit of offset mortgages is that the savings made by reducing the interest due on the capital sum borrowed will be greater than the interest earned on money held in a standard current account or instant-access savings account.

Interest income is liable to tax, and the amount of tax due (if any) will, of course, depend on an individual’s circumstances. For working-age adults however, there could be significant savings to be made by foregoing taxable interest income in favour of reduced interest charges.

Offset mortgages offer a higher degree of flexibility than either repayment or interest-only mortgages. Borrowers on regular incomes can calculate how much they need to set aside each month to have their mortgage paid off by the end of the agreed term and stick to that. Borrowers with more variable incomes can increase and decrease their payments in line with their earnings. Likewise borrowers can dip into their savings, if they find they need or want to. Hence overpayments can be made with confidence, since the money can be withdrawn if necessary rather than being locked away.

How Is Interest Calculated with Offset Mortgages?

In terms of interest, offset mortgages typically work in the same way as repayment and interest-only mortgages. They may be fixed-rate, which means that the interest rate is set for a specified period. They may also be tracker mortgages, in which the rate charged to borrowers goes up and down in tandem with changes in the interest rates set by the Bank of England.

Are There Any Disadvantages to Offset Mortgages?

Not so much a disadvantage, more as an observation, is that offset mortgages can be harder to find than either repayment or interest-only mortgages. Borrowers may therefore have to look a bit longer before finding one. Borrowers may also find it more challenging to move from one provider to the other in search of better deals (e.g. new fixed-rate deals). While it is quite possible that the availability of offset mortgages will increase as people become more aware of them, this cannot be guaranteed.

Likewise, some people may prefer the security and imposed discipline of repayment mortgages, even if they may not be the best deal from a strictly financial perspective. The flexibility of offset mortgages may lead to temptation or alternatively to individuals being overly worried about spending money which has been put into their mortgage fund. Getting some advice from a financial adviser can help to resolve these issues and give you the best chance of finding the right mortgage for you.


How to match your life cover to your mortgage

Wednesday, November 26th, 2014

fb How to match your life cover to your mortgageAnyone who’s watched Strictly Come Dancing will have had the opportunity to appreciate the importance of keeping all aspects of the performance in synch with each other. If it matters in a 90-second dance routine then it matters even more when looking at protecting your financial future. Whether you’re looking at savings, investing, insurance or any other financial product, your overall aim should be to improve your personal wealth and every decision you take should lead towards that goal. Of course, the Strictly celebrities don’t work on their own, they get help from experienced pros, so when looking at managing the family finance, it can help to get some financial advice from a financial adviser.

Make sure all financial products work effectively together

An example of two financial products which very much need to be kept in step with each other is that of mortgages and life insurance. The fundamental purpose of life insurance is to provide a financial cash cushion for those who are left behind after a death. In short it allows beneficiaries to focus on dealing with the emotional aspects of bereavement without facing the additional distress of financial difficulties. The prospect of a grieving partner having to sell the family home due to an inability to meet mortgage repayments is one that can feasibly be averted with forward planning.

Every time your circumstances change, make sure that your finances stay in synch with them

The key point is to ensure that your life insurance reflects the reality of your outstanding mortgage. Assuming you take out (or update) your life cover when you buy your first home then the level of cover will reflect the amount needed to take care of the mortgage in the event of a death at that point. If, however, you increase the size of your mortgage for any reason, then you need to ensure that your life insurance cover will still do its intended job. The most obvious reason for taking on a larger mortgage is, of course, moving house, but you could choose to increase the size of your mortgage for other reasons. For example you may want to extend your current property as an alternative to having to move.

Be prepared for life’s slings and arrows

As well as looking at the potential consequences of you or your partner dying, it’s also important to think about what would happen in the event of one or both of you being out of work for any length of time. This could be due to the employment market or alternatively due to serious illness or accident. Should any of them happen to either of you, then having the right insurance cover in place could make all the difference to your financial and emotional comfort. In short it could mean the difference between worrying about paying the bills and being able to concentrate on making a full recovery.

In short, insurance is about making sure that you and your loved ones are protected if the worst happens. It’s probably one of the few products people buy actively hoping that they’ll never need to use it. For many people, however, it is an essential part of their overall financial planning and needs to be kept up-to-date in line with their changing needs.


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