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

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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?

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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!

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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?

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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 

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2019 Retrospective

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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…

Exposing Credit Myths & Tips on how to increase your Credit Score | Vol. 1

Ashanta Charm1 Comment

V.1 The Power of an Address

Throughout your teenage years to adulthood you’ve probably heard various credit boosting remedies. Some have said never to have a credit card, others have said to have as many credit cards possible. 

Your parents have probably discouraged you from taking out any new credit and your phone bill is probably still in their name. 

I do not claim to be a credit expert nor do I claim to not have any gaps in my knowledge on the subject, however what I do have is a 999 out of 999 credit score with no negative markers, CCJ’s, missed payments or adverse credit on my file. 

I too grew up like the theoretical person who was told to never get any credit in my name and then was advised later in life to get as much as I could. I chose not to listen to either 

As soon as I turned 18 I knew that I needed to start building up my existence as an adult and this meant showing lenders that I could be trusted.

My first step to boosting my credit score was registering to vote – signing up to the electoral roll. When you make any sort of credit application, the first thing they do is take your details and run an address search. Let’s say you signed up for a loan and declared that 42 Laker Lane was your address, however you’re registered to vote elsewhere and also have a credit card at that alternate address, it is likely that the system won’t like that, won’t be able to find you and subsequently will reject your loan application. 

Tip1: Ensure that you are registered to vote at your current address. Ensure that all of your Bank Accounts are registered at your current address. These 2 things will get you an easy +150 points on your credit score.

Tip2: If someone in your house has the same name as you E.g you’re the junior to your father, ensure that his credit isn’t causing any implications on your record. Ensure that the credit agencies know that you are not the same person and are scored separately. 

Tip3: Understand that bad credit for you at your current address can have a knock on affect for the whole household. There have been instances where a house has been black listed due to bad credit behaviour by various members of the family. 

Task

What is your credit score? 

Make sure you are aware of your credit score and make active steps to improve it. Lets start with what you’ve learnt today 1. go in to the bank and ensure your address is up to date 2. go online and register to vote.

The Top Three Credit sourcing agencies are:

  • Experian
  • Call Credit
  • Equifax

Do HMO and Buy-To-Let properties require different Mortgages? | Q&A Series

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Reading Time: 2 mins

Yes. 

Whether you go directly to a Bank or use a Mortgage Brokers, something many Buy-to-Let property owners will find challenging is having a HMO.

What is a HMO?

A Household in multiple occupation. 

This means that a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’. … You must have a licence if you’re renting out a large HMO in England or Wales.

REMORTGAGE

Before your Mortgage Broker approaches or advises that you submit an application with a particular lender, it is important that you understand that lenders policy. This is because you could go through the credit search, application process and find out that your application is rejected once the valuation is carried out. This would be down to the fact that the surveyor has observed that your property isn’t a conventional BTL property, but a HMO.

PURCHASE

Ideally you would of applied to your local council for a HMO licence during the negotiation/Purchase Offer stage as the licence can take a while to come through. 

Featured Image source: Google

Why are some Mortgage Brokers free while others charge a fee? How do the free ones make their money and what Brokers do you recommend using? | Q&A Series

Ashanta Charm4 Comments

Reading Time: 5 mins

Mortgage Brokers are also known as intermediaries. They are the middle man – the mediator between you, the customer and the lender.

The Mortgage industry is a business and lenders are in constant competition with one another. They compete with their interest rates, product benefits and last but not least, procuration fees.

The procuration fee is a percentage of your Mortgage that the intermediary (Mortgage Broker) is paid by the lender for using their services and sending business their way.

Both the lender and Mortgage Broker benefit from helping you! One funds your purchase and the other arranges the Mortgage for you.

It’s a, “You scratch my back, I scratch yours” scenario.

How?

When you borrow money from the bank, you pay back what you borrowed plus interest. So although the bank is facilitating and funding your Mortgage, it’s not a good will gesture, it’s business!

  For Example:

How the Bank benefits

You borrow £143,822 with a 1.74% interest rate.

You actually pay back £271,417.44

This means that you pay back £1.88 for every £1 that you borrow.

How the Broker benefits

The average procuration fee is 0.3% – 0.5% of your Mortgage Balance

Using the above Mortgage as an example, the procuration fee earned on £143,822 is £719.11 (0.5%)

However, many Brokers are in *Mortgage Clubs and would loose a cut of the “proc fee” to the club. So after deductions etc, they may walk away with around £550.

Note: The procuration fee is only paid to the Mortgage Broker on completion. This is, once the purchase, remortgage or product transfer has been completed.

Therefore you can understand why the larger Mortgage Brokers can get away with not charging for their services.

This is because they submit many Mortgage Applications with a variety of balances over the course of weeks/months. If they submit say 100 Mortgage Applications consistently a week for 4 Months, buy the end of the 4 Months, that’s 1,600 Mortgage Application. At the end of the 4th month, roughly 800 of those people would have completed on their remortgages, 400 completing on their Purchases and 400 non completions with a variety of unforeseeable issues: sellers pulling out of the purchase, the intended property being down valued and deemed unsuitable, the applicants circumstances changing etc.

1,200 completions with an average procuration payment of £700 is £840,000.

Now do you see why they don’t charge?

Mortgage Brokers I’ve either used, worked for or been affiliated with that I’d recommend are:

Habito

Capricorn

Mojo

Alexander Hall

*A Mortgage Club is a network many Mortgage Brokers belong to. By belonging to these, they have access to a panel number which they use in order to submit Mortgage Applications to lenders.

The Mortgage Club/Network facilitates the Brokers ability to advise, place Mortgage Application and therefore take a cut of their procuration income. The two main Mortgage Clubs/Networks out there are Legal & General and Openwork.

Despite having to abide by the standards of the clubs/networks, Brokers also have to adhere to the FCA standard and therefore have their own FCA registration number.

What is the difference between using a Mortgage Broker vs. Going direct to the Bank? | Q&A Series

Ashanta Charm4 Comments

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Reading Time: 7mins

In 2015 my mother gave me some great advice. She knew that I had the desire to get my foot on the property ladder and as I had no idea where to start, she advised me to go to the Bank with my then fiancé and see what we were “worth”.

As my fiancé worked for HSBC at the time, we booked an appointment with a Mortgage Advisor, disclosed our salaries, savings, commitments etc and based on our situation she gave us a flat maximum amount that we’d be able to borrow.

This meant that regardless of what property we found, that’s the maximum Mortgage amount that we qualified for.

I can’t remember what that max lend was, but let’s just say for arguments sake that it was £300,000. This means that even if there were mortgage deals at HSBC where you could get a 90% Mortgage with a 10% deposit and the property we sought after was £450,00, we would have to cough up £150,000 and not the simple 10% deposit of £45,000 that the product suggests. This is due to what we were “worth” and the maximum HSBC was happy to lend to us based on our salaries, credit score etc.

I hope this makes sense.

Here’s where Mortgage Brokers come in to play…

There are numerous High Street Lenders, and I suppose my finance and I could of gone up and down the streets from various bank to the next getting a rough idea of what they’d lend us, but this is extremely tedious and time consuming.

Our next point of contact was a Mortgage Broker which my finance found on Google – Alexander Hall.

We got in touch with a Mortgage Broker who was amazing! He offered an amazing service and until this day, I still remember his name.

The Mortgage Broker took more or less the same information we provided to HSBC and sourced which lender would give us what we were looking for.

“Source” the phrase used to describe the action taken on a system similar to Google for lenders. Most lenders are on this system and the great thing is that some Mortgage Brokers get exclusive rates and deals from lenders. For example the lowest rate at TSB if you were to walk in to a High Street Bank could be say 2.04% however with a broker, they have access to exclusive interest rates like 1.69% for TSB opposed to the 2.04% High Street rate. That’s a huge difference!

To cut a long story short, the Broker found us a lender that was willing to lend us way more than HSBC and we were able to then look for an affordable property, make an Offer and secure a Mortgage.

Round up.

The 3 Major difference between a High Street lender and a Mortgage Broker are:

1. Time

High Street Lender

They tend to have a 2 week wait for you to be able to secure an appointment with a Mortgage Advisor.

Application to Mortgage Offer can take anything from 1 Month – 6 Months.

Broker

For many no appointment is needed. You can get in touch with your Mortgage Broker over the phone/on email with the option to book in a face to face meeting if that’s your preference. However some brokers require face to face interaction like Capricorn Financial and Alexander Hall due to verification etc.

You also have the option to do everything online and through a chat window. Convenient and no need for any face to face interaction or time consuming meetings. Brokerages like Habito and Mojo operate in this kind of manner.

Application to Offer can take anything from 3 working days to 21 days. (I’ve seen case where a full Mortgage Application was submitted and an Offer followed immediately after due to the lender being able to verify the applicants electronically and carrying out a desktop valuation) – rare but possible.

2. Interest Rates

High Street Lender
What you see is what you get.

Dependent on the Bank of England base rate.

Not many options

Broker
Options galore.

You can play with the term length and Mortgage features (E.g cash back, free legal representation, split terms, payment holidays)

The Broker will be aware of when new rates are going to be introduced/when old rates are going to be pulled off of the market.

3. Convenience

High Street Lender
They will require hard copies of documentation

Proof of ID

Proof of Address

Bank Statements etc.

Broker
Hard copies of documentation not required

PDF copies acceptable

The convenience of being able to email across any additional information required from you.

Some people don’t like the idea of using unpopular lenders like “The Mortgage Works” or “Atom”, but if getting value for your money is important to you, I highly suggest using a Mortgage Broker.