Tag: Credit

A buyers Market, not a sellers…

Ashanta CharmLeave a comment

It’s no secret that Covid-19 has had a devastating impact on the entire world.

Millions have lost their jobs. Off of the back of this, many will have to take payment holidays on their mortgages, some may eventually fall behind on mortgage payments and some may even lose their homes due to repossession. 

What does this mean for the market?

I’m going to focus on 2 things today.

  1. It will be a buyers market, not a sellers 
  2. Lenders will have to recover a lot of unpaid debt and be a lot more frugal with who they lend to

What does this mean for you? 

The person with a home to sell…

  • Now is the time! Sell as soon as possible and sit on the funds. Move in with family, think about short term renting and sit on the proceeds of the sale as in a few months, you will be able to buy a bigger house for a lot less.
  • Fast forward a few months… If you take too long to take the leap to put your property up for sale, you may need to take an Offer much less than what you wished for.

Are you in a chain? There’ll be more about what can do next week… 

 The person with a home to buy…

  • Hold your horses. There are going to be many houses to choose from and many people desperate to sell them so this may work in your favour when it comes to negotiating on price. 
  • You may need to front more deposit than you may have initially planned due to Mortgage products being quite unstable. 90% Mortgages which require a 10% deposit have been pulled and reintroduced week by week. Lenders may also be a lot more picky with who they lend to, request much more information and be much quicker to decline applicants who don’t fit within their risk appetite 

Key take aways

Home Sellers

  • The time is now!

Home Buyers

  • Be patient. Fix your credit & save save save!

All information on my blog is opinion driven based on market trends, statistics and forecasts regarding the current situation. 

*Photo Source https://www.standard.co.uk/news/estate-agents-face-ban-on-for-sale-signs-6781275.html

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

Ashanta CharmLeave a comment

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?

Ashanta CharmLeave a comment

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.

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

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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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.

Credit Do’s & Don’ts

Ashanta Charm1 Comment

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Once you turn 18, the world of credit is accessible to you.

You can have a phone bill in your name, credit cards, utility bills, take out various finance options, open an ISA and are now eligible to pay *council tax. The world of finance is your oyster and your options are not limited to what I’ve listed above.

This sounds exciting, everything you’ve ever wanted is at the end of an application, but this is where the problems begin. If you are not aware, the financial backlash can be crippling.

Any negative mark on your credit file takes 6 years to clear. You may be happy to wait 6 years as by this point from 18, you’ll be 24. However, again as the theme of this blog is property acquisition, some lenders are not happy to lend to anyone that has ever had a default, CCJ etc regardless if this is shown on your updated credit report or not.

Do’s

  • Pay your bills on time
  • Avoid non-official credit websites
  • Disassociate yourself from anyone with bad credit
  • Get on the electoral roll
  • Build healthy savings
  • Be aware of when Direct Debits are scheduled
  • Keep your childhood bank account right through to adulthood

Don’t

  • Live in your Bank overdraft (If you don’t have one, the better)
  • Avoid checking your account balances**
  • Make multiple credit applications just because you can
  • Buy everything on credit when you can afford to pay by cash
  • Frequently open and close Bank Accounts
  • Have a credit card balance higher than 30% of your credit limit***
  • Be linked to multiple addresses
  • If you know that you’re going to apply for a Mortgage, DO NOT take out any form of credit for a minimum of 3 months, preferably 6 months if doable.

 

**Some people don’t like checking the balances of their current accounts. They’re scared to see how little money they have left and subsequently go in to an un-arranged overdraft

***Credit limit £2,000, do not use more than £600

 

Tip: If you started following my blog, you will know that for the last 12 weeks there has been a theme titled, “Mortgage Monday’s”. If your ultimate desire is to acquire a mortgage hence your following of this blog, I’d highly advise that you are registered on the voters roll, this boosts your credit score and legitimises you in the realm of credit.

*Council Tax – if you come from a single parent home, whilst you and your siblings are all under 18, your mum/dad is entitled to a 25% single persons discount. That means that if your annual council tax is £2,000, your parent will only have to pay £1,500. As soon as your eldest sibling turns 18, your parent is no longer eligible for this discount and has to pay the full £2,000. It’s only right that you chip in!

Council tax is calculated per household, not per person.

FAQ’s

  • My parent took out finance in my name and now I have a bad marker on my credit file. What should I do?

You have 2 options.
Option 1 contact the financial provider, explain the situation and see if this can be resolved via Experian. You will need to provide your parents details so that they can take ownership of this problem – sooner rather than later.

Option 2 Take the financial hit. Try and make an agreement with the financial provider. Pay the outstanding balance sooner rather than later. This will be labelled on your credit file as paid. The marker will remain, but at least you’ve taken accountability and show potential financial providers that you will pay, eventually.

  • I have a CCJ on my credit report will I be able to buy a house?

Yes you will. There are some specialised lenders that target people with bad credit. The unfavourable nature of these lenders is that they have really high interest rates. Yes they will lend to you, however if you didn’t have any negative markers on your credit file, you would of been able to get a Mortgage from a lender offering you a 1.89% interest rate instead of the 5.08% interest rate from the specialised lender.

  • What’s the best company or website to keep an eye on my credit?

Experian.

They’re the only credit scoring site that I would suggest. If you’ve never used them before you get their full package for free for a whole month, thereafter it is ***£15 a month.

Experian break down your credit in to different sections and explain why your credit score is X out of 999. They also give you advice on what to do in order to increase your credit score.

Lastly, most if not all lenders use Experian in order to attain information on your credit, so it’s brainless! Have an account with the body that is solely influential on your future. They are also the body you’d call regarding point 1 and someone else defecting your credit. They have the capacity to remove/resolve markers on your account.

***If you don’t pay for the monthly membership, you get the basic overview of your account. They show you your credit score out of 999