Financial Hack: How long would you be able to pay your bills for if you were to lose your job tomorrow? Build your emergency fund, Thailand can wait.

At the beginning of 2020 my husband and I decided to house hunt. We bought our apartment 4 years ago, renovated and thought it was a good time to upsize.

We had a budget, we knew the area we wanted to settle down in and knew that our next move would be for the long term. 

Ideally we wanted a project. Something that was nice enough to move in to straight away, however somewhere that had room for a back extension and loft conversion.

Deal breaker. He needs his space – games room and I need mine, an office.

We made 3 offers on 3 separate properties. 2 Offers were accepted and then BAM Covid-19 triggers a lockdown.

This was a bitter sweet situation as we were given time to truly analyse and think about what we were spearheading in to.

We are living in uncertain times and it is said that it will be a while before life is truly back to normal and in many ways, we’re going to have to accept a new normal.   

Why I gave up my 4 Bedroom Detached House hunt and decided to stay in my 2 Bedroom Apartment a few more years…

After a self analysis of our finances and various eventualities we decided to remain put.

In our current state we knew that if one of us were to lose our jobs, the other could pay the bills 3x over before it became a strain. 

We knew that if both of us lost our jobs, we had enough savings to carry us over for a few months paying the bills whilst we hunted for new jobs.

If we were to upsize and take on a project this wouldn’t necessary be the case.

We’d essentially be taking on much higher outgoings because I wanted a shiny new house and project to get my paws in to – a want, not a need. 

The take away from this experience is to stay where you are until you outgrow your home and are bursting out of the seams. Or until you can financially make the move without any strain, taking all eventualities in to consideration. No one knows what tomorrow holds.

Keep those outgoings low.

Save. Save. Save.

Save. Save. Save and when it is time to upsize, you can do so effortlessly.

There’s a time to save, time to build and a time to enjoy what you’ve built. 

Tip: You should have enough savings to carry you through 3 months of a rough period. These savings will pay your Mortgage, utility bills and basic essential costs of living (travel, food etc.)

Why?
Theres an average of about a 3 month period from being made redundant to securing a new job and receiving your first “normal” pay cheque.

Build your emergency fund, Thailand can wait.

Financial Hack: Treat your personal finances like a business

At the end of 2019, my husband and I sat together to draw up our plan for 2020. We divided the year in to 4 quarters. January – March being Q1, April – June being Q2 etc. You get the gist. I’m sure your company works in a similar way when setting financial targets for the financial year.

Q1 has drawn to a close and we sat down, reviewed the targets we had set and were overwhelmed with how much we were able to achieve. Some goals we surpassed and some goals we will have to take in to Q2 as they were incomplete.

The country is currently on lockdown and we’re about to go in to an inevitable recession given the financial strain this epidemic has had across the board. Weddings have had to be cancelled, companies have gone in to administration and let’s not forget the thousands in the UK and across the world that have unfortunately lost their lives.

Taking the above in to consideration what have you had to make redundant in your life? What luxury/ habit have you had to put on pause or downgraded a little?

Treat your personal finances like a business. Cut back, make sure you have a crisis fund, but most importantly, hit those targets!

Mortgage Payment Holidays: What happens after the 3 months are up…

Mortgage Payment Holidays – You do not get to miss 3 months worth of Mortgage Payments and then continue with your usual payments there after. 

The Mortgage payments that you miss during the holiday period are added to the overall balance of your Mortgage. 

Once the holiday period is over, your new monthly Mortgage payments are higher as your Mortgage balance would have increased due to the 3 months of missed payments being added. 

Your new monthly payments will increase by £10 – £100 or so. This is dependent on your current monthly payment amounts, current interest rate and overall outstanding mortgage balance. 

Find out the facts. Know how much your monthly payments will increase by before committing to a Mortgage payment Holiday… 

The 3 month break is great, especially if you’ve lost your job, have been placed on furlough or are going through financial difficulty, however once that time has passed, your monthly outgoings will increase and won’t be what they once were. 

Some people have panicked and taken a Mortgage holiday because the option is there, it was all over the news and they thought, “why not?”. However in 3 months time, these people will be less pleased when their monthly payments increase by £80 and disrupt their monthly outgoings. 

During the holiday period, save as much as you can so that you are prepared for any further rainy days.

Alternatively, if you can, plough on, cut back a little and avoid the payment holiday all together. 

Financial Hack: So nice, I had to buy it twice!

The best piece of advice I received growing up was, “If you can’t buy it twice over, you can’t afford it”.

Of course the above doesn’t apply to the acquisition of a property as this is a life changing purchase and something many save years for. However, if you want to be a home owner, you have to be disciplined, you have to save!

I love me a bit of online shopping and I also went through a phase where I loved brands! I moved out of home when I was 18 and lived in one of my dads properties. I covered the electric, gas, shopping, council tax etc. This move was primarily to teach me the cost of life, responsibility and most importantly discipline!

There came a time where I became disheartened because I couldn’t shop as freely as I use to when I lived at home, or would often find myself in a spot of bother towards the end of the month and have to ask my mum to save me. That’s when she delivered this gem, she sat me down and amongst many things, the word that stood out for me is when she said, “If you can’t buy it twice over, you can’t afford it”.

Since then, I have lived by this word and have never found myself in a spot of financial trouble. I live within my means and if I do buy a luxury item, I have enough free cash to buy it two, even three times over. 

I never wanted to be that person that bought a Louis Vuitton bag on pay day, but had to walk to work and eat buttered bread for the remainder of the month because I lived way above my means.  

Lesson:

Don’t be afraid to be fugal – tight! Weigh up your needs vs. your wants.

If you can’t buy it twice and have surplus funds in your account, then you can’t afford it! 

Financial Hack: Turn £100 in to £21,600 – Your 18 Year Old dependent will thank you!

The most daunting thing is the creation of life and the responsibility to lead, teach and grow the little human you’ve brought in to the world. 

They never chose to be here. That was down to us and our significant other. Now that they are here, we have to ensure that we set them up for success and entrench some core values. 

Many people are broken and make warped adult decisions due to a fragile childhood, non existent good examples and lack of nurturing. 

Financial Hack: Turn £100 in to £21,600

As 2 parents, you can both individually set aside £50 a month for your child – Or £100 as a single parent.

Over 12 months this £100 equates to £1,200

Over 18 years this £100 a month totals to £21,600

Once your child hits their 18th birthday they’ve already been given a head start. You can give them these funds, but also teach them financial intelligence. They can continue what you started 18 years ago and build on the funds (£100 per month), purchase a car or invest in their education. 

The options are limitless, but the important thing is that you’ve led the way, given them a booster and your dependent will most definitely thank you for this!

Does having bad credit mean that I can’t get a Mortgage to assist in the purchase of a property?

No.

Great news. Bad credit doesn’t mean that you can’t obtain a mortgage, nor does it mean that you won’t be accepted for a loan or credit card. 

However, what it does mean is that you will be hit by higher interest rates and less favourable products. 

What is a product and an interest rate?

Interest rate – this is the rate a bank or other lender charges to borrow its money. The current Bank of England base rate is 0.75%

The Bank of England base rate is the UK’s most influential interest rate and its official borrowing rate. It is currently 0.75% – a historically low figure. The base rate impacts all other interest rates. When the rate is low, it costs you less to borrow money, however lenders are free to make their rates as high or low (no lower than 0.75% otherwise they will not make profit – just break even) as they see fit.

Product – lenders bundle their interest rates and incentives in to something called a product. For example a product for a first time buyer with Halifax could mean a 1.68% interest rate over a 2 year fixed period with a 2% early repayment charge and £500 cash back to assist with legal fees. Products vary and can be packaged with multiple or no incentives.

Expanding on the above example, this means that over the 2 year fixed period, your monthly payments will reflect the 1.68% interest rate. If you decide to Remortgage or sell your property earlier than when the 2 year fixed period ends, you will have to pay a 1%+ fee (% depends on the terms) of your remaining mortgage to do so. 

Interest Rates & Products – These are things you need to take in to consideration. Some people would rather go with a lender that has a product with a slightly higher interest rate which allows them to exit the deal early without a penalty. 

These kind of products are good for those that are Remortgaging due to their current product expiring, but wanting to keep their options open and not be fixed in to a lengthy deal as they have the intentions of selling/moving in the near future – within the year or so. 

Does having bad credit mean that I can’t get a Mortgage to assist in the purchase of a property?

No.

Having good credit means that your options are limitless. You can get favourable deals from high street lenders with low interest rates and great package deals.

Having bad credit, defaults and missed payments means your options are limited. You are limited to specialist lenders who lend to people with a less favourable credit file. Due to this, the interest rates are high, come with a product fee and little, but mostly, no incentives. An example of this kind of Lender is Pepper Money.

Someone with “bad credit” will be offered a Mortgage with a 5% interest rate at a specialist lender opposed to someone with “good credit” who has more options and can get a Mortgage from a high street lender with an interest rate as low as 1.42%.

Why do specialist lenders have such high interest rates?

This is because they’re offering something that you can’t get anywhere else – they can take advantage. Having “Bad credit”, you are also a liability. How do they know you are going to pay? How do they know that you aren’t going to continue with the same behaviour pattern seen on your credit file? Interest rates that are 3x higher than their high street competitors mean that a specialist lender reclaims like for like funds 3x quicker than said high street lender. Remember the Bank of Englands base rate is 0.75%. Most lenders have accounts with the Bank of England so benefit from a low base rate whilst also benefiting from the profits of a high interest rate when lending to others.

Bad Credit: County Court Judgement, missed payment, default, settlement of unpaid debt within the last 6 years etc.

Good Credit: Active credit card with less than 20% limit in use, none of the above.

Exception: Sometimes a high street lender will want an explanation for a negative marker on your credit file.

For example, “Why did Mr X miss a payment on his mobile phone bill 2 years ago twice?”

Reasonable explanation would be: There was confusion with the Direct Debit dates and account the funds should be retrieved from. This was resolved with the mobile phone company and won’t happen again.

Be responsible with your credit. Your future house buying self will thank you.

My property has been valued at £0 because of Cladding – HELP!

Stay away from flats with ACM material and/or flammable cladding.

Think with me: If you are having difficulty obtaining a Mortgage to buy it, you will have difficulty Remortgaging and selling it!

You can usually spot the flats that may cause you issues with a naked eye. 

A flat with cladding

If the surveyor that goes round to value your property is cautious of the material on the exterior of the building, this hesitance alone causes a delay for you. 

This delay is caused as you will be required to prove that the material on the exterior of the flat is not flammable. This is in the form of a fire report that the Estate Agent, Managing Agent or vendor should have. 

Valuers have become increasingly concerned, because Advice Note 14 means the owner has to say the building’s material is fully safe, which is very difficult to do while the building waits for inspection results and while everyone waits for the government’s cladding test outcomes.

Surveyors and mortgage lenders are requiring building owners to demonstrate that cladding meets Advice Note 14’s criteria. If they can’t, the properties are valued at zero.

Most building owners cannot immediately provide these assurances, so they are having to get trained professional engineers to carry out lengthy and costly checks, holding up sales, purchases and Remortgages.

If you’re currently suffering this issue as a Home Owner Remortgaging your property, then the best person to speak to regarding this kind of report is the leaseholder/the managing agent. If the building hasn’t undergone a fire and risk assessment since the Grenfell tragedy, then this is probably currently in the works and you will not be able to do much until you have the results of this report back.

Grenfell Tower

It is extremely inconvenient and disheartening, however you have to understand that there are hundreds, maybe even thousands of buildings nationwide that have to adhere to this new advice note since the multiple lives lost in the Grenfell fire due to the deadly flammable materials used on the block of flats. 

As you can imagine, a surveyor is not going to deem your property as suitable security for a Mortgage if they cannot prove that it adheres to relevant legal requirements. 

Advice to those wanting to Remortgage a property with cladding issues Stay with your current lender and do a rate switch. This is simple, you choose a new product from their latest Mortgage product range and avoid going on the variable rate. A valuation is not required for this. You can make this kind of switch in branch, over the phone and sometimes online.

Advice for those wanting to Buy a property with cladding issues
Avoid avoid avoid. Don’t do it. Walk away. 

New Year, New Me, New Home?

New Years resolution. 

Maybe this new home goal rings a bell? 

If you waited until January to put your house on the market, or begin house hunting, welcome to the pool of the hundreds of others who are doing exactly the same.

Maybe you’ve come across your dream home, but guess what? You’re going to get outbid! Why? For every property out there you’re willing to pay X amount more for, there’s someone out there who has that little bit more liquid cash. That someone is willing to bump up their Offer to secure this property that turns out to be their dream home too. 

Buying a New Home this year? 

Here’s some advice:

Always have a buffer. Go in low (On the nose or just £5K under the asking price) and leave yourself room to increase your Offer so that you don’t get out bid.

Don’t over stretch yourself. Look at properties just under your budget in order to leave room for unexpected costs: if you have money left over at the end – even better.

Make sure you view the property both in the day and night. 

What vibe do you get? Are there people hanging on the corner? Is parking going to be an issue during peak times?

These are all things to take in to consideration.

Don’t forget to read up on the local area. What kind of crime takes place? Are you moving in to the middle of a gang war zone or a place that is renown for home burglary?

Remember that buying a new home is a long term thing, you can’t simply press undo or get a refund after living there for a month of feeling uncomfortable. Don’t be hasty, shop around and trust your instinct. 

Happy first Monday of the New Year and Happy House Hunting!

Feel free to share your House woes and House Wins with me ⤸

Twitter: @AshantaLC

Instagram: @Ashanta_

LinkedIn: Ashanta Charm 

image source

2019 Retrospective

Thank you for your views and engagement from across the globe

August 24th 2018 – TellMeElleCee was born. An introductory post was published and so the journey began!

From August 26th 2018 – Throughout 2019 a variety of posts, Mortgage industry gold and financial hacks were shared. 

The following 18 topics have been dissected and explored:

Here’s to an informative 2020…