Need a Mortgage? Top Tips to Securing a Home Loan

Need a Mortgage? Top Tips to Securing a Home Loan

by | Sep 8, 2022 | Uncategorized

NEED A MORTGAGE?

TOP TIPS TO SECURING A HOME LOAN…

21

September, 2022

Mortgages

The prospect of buying a house for many buyers is looking increasingly daunting as house prices continue to soar and interest rates rise, making mortgages more expensive.

Here are 10 ways to make sure you secure the loan you need for the property you want.

SAVE THE BIGGEST DEPOSIT YOU CAN

Soaring property prices mean that bigger deposits must be saved. It’s possible to get a mortgage with just a 5% deposit but you’ll be looking at paying the highest bracket of interest rates and a smaller pool of lenders to choose from. Saving a 10% deposit will mean you’re eligible for lower rates. A deposit of 25% will help access even lower rates.

USE GOVERNMENT SAVINGS INCENTIVES

A Lifetime ISA was introduced to help savers build a deposit for a first home (or a nest egg for retirement). You can pay in up to £4,000 a year (which forms part of the £20,000 yearly allowance) and bank up to £1,000 in government top-ups. The money can be used to buy a first property worth up to £450,00.

Alternatively you can withdraw it from the age of 60 to boost your income in retirement. If you take the money for any other reason there’s a 25% exit penalty. You must be between 18 and 39 to open a Lifetime ISA which can be opened as a cash or stocks and shares account.

CONSULT THE BANK OF MUM AND DAD

Parents and grandparents have been an important lifeline for first-time buyers as well as those upgrading to a second home, perhaps to accommodate a growing family. Estate agency Savills put the Bank of Mum and Dad’s total lending at £9.8bn in 2021, and say it supported around half of all first-time buyer home purchases.

If family are not able to part with savings, however, they can still help. It’s possible to use the income to help offspring get a bigger mortgage or even be part of a family offset mortgage where savings deposited can be linked to the mortgage and reduce the amount of interest charged – and so reducing monthly repayments. A mortgage professional can help with the options.

STREAMLINE YOUR SPENDING

Lenders will go through around six month’s worth of statements and payslips to assess affordability. It would be smart to plan ahead and rein in your spending, though you might be doing this anyway while you save for a deposit if you’re a first-time buyer. Set aside time to go through your spending on direct debits and standing orders to spot anything lurking that you had forgotten about. Hanging onto gym memberships is a common trend among those who only manage to go a couple of times a year. You might spot a magazine subscription you have been meaning to cancel. Equally, avoid regular, large purchases and gambling transactions.

REDUCE DEBT

The actual amount you can borrow will also depend on debts and credit agreements you have. A student loan or car finance for example, would reduce the amount you can borrow, as will a credit card balance. If you do have credit card debt, make sure you are paying as little interest as possible – preferably none. School fees and child maintenance payments can also be included as “debt” so you may find you can borrow less than you think.

AVOID APPLYING FOR DEBT

Steer clear of applying for credit in the run up to applying for a mortgage – it could hurt your credit score and lead to a rejection to an application. If you need a new credit card, wait until you have your mortgage sorted.

CREDIT SCORE

It’s important to make sure your credit file will be squeaky clean in advance of making a mortgage application. Those who have borrowed money in the past and showed they can make repayments on time have more chance of making a successful application. But if you have a history of missed or skipped repayments, you need to demonstrate that you can be trusted to repay a mortgage. Even if you’re sure you’ve never skipped a payment – check your file. Many contain mistakes or a forgotten few pounds owed on an old credit card.

You could also have a blemish from owing just a few pence on an old mobile phone contract, which could cost you the mortgage you want. You can check your credit report – for free- from one of three main credit reference agencies – Equifax, Experian and TransUnion. It’s good practice to check all three as you can then have peace of mind that whichever one a lender uses, you’ve made sure it’s ship-shape. Alternatively use CheckMyFile’s free trial to check all three.

GET YOUR PAPERWORK IN ORDER

It makes sense to get your paperwork prepared in advance so you can be efficient when the time comes to place your application. Make sure you have statements downloaded that can be emailed – or printed. Get your payslips ready and your P60 tax form showing income and tax paid from each tax year. You will also need photo ID so get a copy of your passport, and for proof of address dig out recent utility bills.

LINE UP A MORTGAGE ADVISER

Using a broker means they take on much of the all-important legwork for you. They can help you work out how much you can borrow so that you know what price bracket you can search for properties in. They will also help you decipher the right type of mortgage for you. If you are self-employed or have any special circumstances, they can help find more flexible lenders for your situation.

GOT THE OFFER?

Once you’ve secured a mortgage offer, there’s no rush. They usually last for around six months which gives you time should there be any delays with moving. However, offers can be extended in special circumstances. For example, where you’re buying a new build property and construction is running late.

 

 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

National Insurance – The Lowdown

National Insurance – The Lowdown

by | Feb 25, 2022 | Economy, Market Updates, Planning, Uncategorized

NATIONAL INSURANCE –

THE LOWDOWN

15

MARCH, 2022

National Insurance
Tax

There’s plenty of column inches in the news dedicated to the cost of living crisis at the moment. As well as having to deal with soaring inflation and sky-high energy bills, it’s important to prepare for the fact that we’re all going to pay more National Insurance from April.

How it will affect your own finances depends on earnings. Essentially, the more you earn, the bigger the impact on take home pay.

National Insurance is a tax on earnings paid by both employees and employers; the self-employed pay it on their profits. It’s used to pay for the NHS, benefits and the state pension. Here we’ve got the low down on the changes.

HOW MUCH IS NATIONAL INSURANCE RISING?

Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022.

Lower National Insurance thresholds1 included in the Autumn Budget in October would normally mean workers pay less tax. (Thresholds tend to increase each April to account for inflation.)

Yet the increase in National Insurance by 1.25% means that most taxpayers will be subject to higher bills.

WHERE IS THE EXTRA CASH GOING?

The government says the changes are expected to raise over £12 billion a year2. Initially, this will go towards easing pressure on the NHS.

A proportion will then be moved into the social care system. The aim is to make sure people in England pay no more than £86,000 in care costs from October 2023.

Proposals3 state that pensioners will still have to pay up to £86,000 – but then the Government will step in cover the rest of the bill.

Government estimates state that private payers would reach the £86,000 cap after three years in residential care and six years receiving care at home.

There will be other crucial changes. At the moment you have to pay for residential old-age care if you have more than £23,250 in assets if you live in England. The threshold is £50,000 in Wales4 and £28,750 in Scotland5.

The £23,250 limit will rise to £100,000 under the Government’s new plans taking effect in October 2023.

People with assets of between £20,000 and £100,000 would contribute towards the costs of their care on a sliding scale.

Anyone with savings under £20,000 will not pay anything.

“From April there will also be an increase on tax charged on income from dividend payments.”

THE FUTURE OF NATIONAL INSURANCE

Technically, from April 2023, National Insurance will return to its current rate. Yet the extra tax will still be collected, badged as a new Health and Social Care Levy. This levy – unlike National Insurance – will also be paid by state pensioners who are still working.

MORE PAIN FOR TAXPAYERS

The National Insurance increase is not the only thing in the pipeline that will impact our income.

Back in the March budget, income tax thresholds were frozen until 20266, meaning that people on more modest salaries will also be pulled into higher tax brackets and pay higher tax bills.

Frozen thresholds include the personal allowance, which is sticking at £12,570.

From April there will also be an increase7 on tax charged on income from dividend payments. On an amount that exceeds the £2,000 limit per person, basic, higher and additional-rate taxpayers currently pay 7.5%, 32.5% and 38.1% respectively. In the new tax year – from 6 April 2022 – the rates are rising. For basic rate taxpayers it will climb to 8.75% and for higher-rate and additional-rate taxpayers it will rise to 33.75% and 39.35% respectively.

If there’s ever been a time to ensure your money is working as tax efficiently as possible, it’s now.

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

PENSIONS AND RETIREMENT – STILL TABOO?

PENSIONS AND RETIREMENT – STILL TABOO?

by | Jan 19, 2022 | General Investing, Planning, Retirement, Uncategorized

PENSIONS AND RETIREMENT – STILL TABOO?

15

FEBRUARY, 2022

How to fund retirement is not an ideal topic for a quiet evening in. But it’s an important one which is being overlooked by millions of married couples.

According to a recent study1, almost half (47%) of working married people have not spoken to their spouse about their retirement plans.

Wealthy households aren’t doing much better. The study revealed that those with assets of between £100,000 and £500,000 excluding property – are more likely than average to be aware of the value of their spouse’s pension, but the majority (60%) aren’t going to plan their retirement finances with their spouse.

Those couples who don’t tend to talk about finances might be more likely to do so if they realised that those who jointly plan their retirement can be much better off when they stop working.

Indeed, 85% of non-retired married people are not aware of the tax-efficiencies of planning retirement together.

There are many ways in which couples can maximise the tax breaks jointly available to them and find the most tax-efficient way of generating income in retirement, together.

For example, on retirement, taking the full tax-free cash entitlement from a pension is not always the smart choice- unless a large lump sum is needed.

It can make sense for couples to instead retain most of the tax-free cash entitlement until a later date, looking to utilise the personal allowance (and potentially the basic rate tax band) to draw down tax-efficient income instead.

“Talking about money and financial security is a must in any relationship since it’s such a big part of planning a future. “

An adviser can unveil the many other ways in which a couple can use the rules to their advantage and minimise tax bills. This is particularly useful where retirement happens before the State pension kicks in.

Making use of each other’s allowances is also worth investigating. A higher earning partner approaching the Lifetime Allowance or Annual Allowance could pay additional contributions into their partner’s pension. The contributions will attract tax relief and the couple will be able to draw a tax-free combined income of more than £30,0002.

That’s got to be worth talking about.

However, it’s not only married couples that are guilty of failing to communicate on retirement money matters later in life.

Previous research3 suggests the failure to talk finances starts much earlier on in the relationship cycle. People admitted they would say ‘I love you’ five months into a relationship, but wouldn’t talk about money until nine months – and a quarter are simply uncomfortable talking about money with their other half.

The research also found 18% are more likely to move in together before they talk about money.

Talking about money and financial security is a must in any relationship since it’s such a big part of planning a future. Sharing decisions about spending and saving – and discussing money openly – will help avoid arguments and tension.

Having an adviser on hand to help put in place ways to reach retirement goals – and others – can prove invaluable.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Source:

[1] LV= surveyed 4,000+ nationally representative UK adults via an online omnibus conducted by Opinium in June 2021

[2] LV= surveyed 4,000+ nationally representative UK adults via an online omnibus conducted by Opinium in June 2021

[3] https://bank.marksandspencer.com/explore/media-centre/overview/press-release/2020/02/financial-language-of-love/PR100410/

 

 

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

PENSIONS AND RETIREMENT – STILL TABOO?

Five New Year resolutions for 2022

by | Jan 10, 2022 | Uncategorized

FIVE NEW YEAR RESOLUTIONS FOR 2022

12

JANUARY, 2022

Pensions
Will
Tax

The beginning of a New Year presents the perfect opportunity to explore a shaping up your finances.

In the same way you might make a plan to be healthier this year, there are also measures you can take in an attempt to build your wealth and put measures in place to protect it.

Here are five ways you can improve your finances in 2022:

1. Sort out old pensions

Round up all your pensions to make sure you’ve got the full picture for your retirement savings. You might even unearth money you had forgotten about. Losing track of a pension is more common than you might think with around 1.6 million lost pension pots worth £19.4 billion, according to the latest estimates[1].

If you think you have some money lurking in an old workplace pension scheme, you can get in touch with your former employer and ask for the details. Be ready with the dates you worked there and your National Insurance number. The Government’s Pension Tracing Service can help reunite you with your savings if your old employer is no longer trading.

For personal pensions, you can try the Pension Tracing Service. You will need the name of the provider to find the contact details. Where old life companies have been taken over and no longer trade under that name, the database will recognise it anyway and direct you to the new provider that now looks after those schemes.

If you don’t have any luck there, try Experian’s Unclaimed Assets Register (UAR). This is more comprehensive because you can search for old shares and insurance policies, as well as pensions.

2. Don’t leave too much in cash

Money that’s earmarked for the future – rather than what’s in your rainy-day account – will see its value eroded if it’s left in cash for the long-term. This is even more apparent now with rising inflation and ultra-low interest rates. This combination means your money is guaranteed to make a loss when it comes to real returns over the long term. Save for a rainy day, invest for your future.

“A financial adviser can help you understand your financial priorities and put a plan in place to help achieve goals.”

3. Use tax allowances

There are plenty of allowances to make use of. Remember the tax year runs from 6 April to 5 April, so make sure you use allowances before it’s too late.

One of the most popular is the ISA allowance, which is £20,000. You won’t pay income tax, dividend tax or Capital Gains Tax (CGT) on any investments you hold in an ISA. You don’t even need to mention it on your tax return. Parents can also open a Junior ISA and save up to £9,000 a year into it. Crucially, an ISA allowance cannot be rolled over into next year. If you don’t use it, you lose it.

You should also consider the valuable tax breaks from pensions. If you’re a basic rate taxpayer, for every £80 you pay in, the taxman will top it up to £100. And if you’re a higher or additional rate taxpayer you can claim back up to an additional 20% or 25% through your self-assessment tax return.

Don’t forget that some investments also offer upfront tax benefits, so if you want to invest in start-ups and younger companies, investments such as Enterprise Investment Schemes, better known as EISs, could be attractive to you. There’s also a Venture Capital Trust (VCT) – another investment offering upfront tax benefits, that is designed to raise money for start-ups.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen

4. Write a Will

Making a Will ensures your assets and possessions are passed on to the people you choose. Without one your wealth will be passed according to the “laws of intestate” – and not your wishes. Writing a Will can save on inheritance tax as well as spell out how you wish your wealth to be distributed.

5. Talk to a professional

A financial adviser can help you understand your financial priorities and put a plan in place to help achieve goals. Professional advice can go a long way to provide peace of mind that you are addressing the needs of you and those of your family.

Advice can be viewed as an investment in itself. Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in pensions and financial assets) of £47,706 in 2014/16[2].

Source:

[1] https://www.abi.org.uk/news/news-articles/2020/05/19.4-billion-of-pension-pots-unclaimed-just-because-of-house-moves/

[2] https://ilcuk.org.uk/financial-advice-provides-47k-wealth-uplift-in-decade/

 

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

Inflation – what’s the story?

Inflation – what’s the story?

by | Jan 4, 2022 | Uncategorized

INFLATION – WHAT’S THE STORY?

05

January, 2022

Inflation
Cost of Living

Inflation is the talk of the town, and it’s no wonder since the latest official figures[1] revealed it has soared to 5.1% – its highest in a decade.

The Consumer Prices Index (CPI) is a measure of how much the price of goods, such as food or fuel, and services, such as haircuts or train tickets, has changed over time.

The latest CPI figure of 5.1% is up from 4.2% in October, 3.1% in September and 3.2% in August.

As the cost of living climbs higher, pressure on household finances rises too.

Rising prices have already pushed up bills and created a cost of living crisis for millions of households.

Overall inflation is the highest it’s been since September 2011, according to the latest data from the Office for National Statistics (ONS)[2]. And it is more than double the Bank of England (BoE) target of 2%.

The price of fuel and second-hand cars helped push the inflation rate up, along with energy and clothing costs, the ONS said.

Fuel prices alone have soared in recent months. Petrol prices jumped 7.2p per litre between October and November – the largest monthly rise on record[3].

“In December the Bank increased interest rates to 0.25%, up from a record low of 0.1%.”

Is inflation here to stay?

This is the $64 million question. The Bank of England had expected inflation to hit this level in the spring but now expects it to peak at 6% at this time[4].

In a written note from the Bank itself[5], it explained that there is more than one reason why the rate of inflation started to rise in 2021, with a lot of it being to do with the economy recovering from the Covid crisis.

It said: “We expect inflation to stay high over the coming year, then start to fall back towards 2%.”

In December the Bank increased interest rates to 0.25%, up from a record low of 0.1%. Upping interest rates is one way of attempting to curb inflation. Yet the impact could be minimal in this instance, since costs are largely being pushed higher by global factors not necessarily within the Bank’s control.

 

Protecting finances

Whether it’s here to stay or not, a higher rate of inflation means your money doesn’t go as far and you have to spend more. But it’s not just about losing your spending power. Individuals will be hoping that such high price rises are not sustained over the long-term to avoid the damaging effects of inflation on savings and investments being compounded.

Protecting wealth from inflation means making sure your investments are working hard with a diversified spread of assets, including those that can keep pace with inflation.

The stock market can give your money the best chance of keeping up with inflation. That comes with an element of risk of course, but now more than ever the hidden danger that inflation holds for seemingly safe assets like cash are highlighted. Returns won’t get anywhere near inflation at its current rate.

Even if it proves to be transitory, a bout of inflation is also bad news for the fixed income streams provided by bonds. If inflation persists, it’s even worse.

Make sure to factor in the need for inflation-beating returns when constructing your investment portfolio so you have peace of mind your money is working as hard as possible.

Sources:

[1] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/november2021 

[2] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/november2021 

[3] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/november2021 

[4] https://www.bankofengland.co.uk/knowledgebank/will-inflation-in-the-uk-keep-rising 

[5] https://www.bankofengland.co.uk/knowledgebank/will-inflation-in-the-uk-keep-rising 

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

PENSIONS AND RETIREMENT – STILL TABOO?

Pension Trap – Don’t Get Caught

by | Dec 1, 2021 | Uncategorized

PENSION TRAP – DON’T GET CAUGHT

01

DECEMBER, 2021

PENSIONS
SAVING POT

 

Saving pots for emergencies provide an important buffer for when times get tough. But many without adequate nest eggs have been forced to raid their pension savings either to bolster their own income or to help family over the last 18 months.

A total of 1.4 million people cashed in £9.4billion throughout 2020 under the financial strain caused by lockdowns, according to official figures[1].

While the pension freedoms, introduced in 2015, allow savers to access every penny of their retirement savings, there are important consequences of drawing on that money. Once you have dipped into your pot, the amount of money you can pay into it -and claim tax relief on- reduces.

That’s because withdrawing income (over and above the 25% tax-free lump sum) usually triggers the Money Purchase Annual Allowance (MPAA), which reduces the amount you can pay in with tax relief by 90% from £40,000 to just £4,000.

Once you’ve triggered the allowance you can’t go back to putting a higher amount in. It’s irreversible.

When the MPAA is applied you also lose the ability to carry forward up to three years of unused allowances in the current tax year.

This sting in the tail could severely limit the amount you’re able to save for the future.

New research[2] from Canada Life has shown that nearly one in ten of over 55s have accessed their pensions while on furlough to help make ends meet. Many over 55s have flexibly accessed their pensions, with 7% using both their tax-free cash and drawing down additional sums.

“Consulting a financial adviser before accessing pension savings early is the smart move as you could struggle to get retirement plans back on track with the lower limit in play.”

However, two fifths of people were unaware of the restrictions on the amount they can continue to contribute to their pension pot.

Worryingly, 40% are aware of the restriction but are uncertain about the detail. Many overestimated the allowance as almost £7,000 a year – almost double the real MPAA limitation of £4,000.

Consulting a financial adviser before accessing pension savings early is the smart move as you could struggle to get retirement plans back on track with the lower limit in play.

Yet many of those who dip into their pension fail to take advice.

Anyone who has started taking money from a private pension –whether it be a one-off lump sum withdrawal or a regular monthly amount – must first convert their pension into an income drawdown account. Drawdown allows you to take out what you need, and leave the rest invested in the stock market.

Worryingly, an estimated 100,000 drawdown plans are taken out each year without the guidance of a financial adviser[3].

This is significant because an adviser would be able to flag up the pitfalls and important tax consequences.

It’s not just the MPAA you need to be aware of. You can also be hit with a large tax bill when withdrawing money from your pension. After the 25% that you are allowed to take tax-free, any amount withdrawn is taxed at your normal income tax rate.

Raiding a pension could also impact future benefit claims, for example support with council tax or affect universal credit claims.

An adviser can also, crucially, assist with ways in which you can take money out of your pension without triggering the MPAA.

There have been a number of campaigns among pension providers urging the Government to scrap the MPAA. However, this is not to be relied upon.

Source:

[1] https://www.gov.uk/government/statistics/flexible-payments-from-pensions#history 

[2] https://www.canadalife.co.uk/news/nearly-half-of-furloughed-workers-make-changes-to-their-retirement-plans/ 

[3] https://www.fca.org.uk/news/press-releases/fca-proposes-rules-investment-pathways-and-other-measures-improve-retirement-outcome%20s-consumers 

 

 

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

Abacus Blogsite
MENU
PLEASE CLICK LINKS BELOW