HOW MUCH MONEY CAN YOU RELEASE

Here are some examples of the maximum amounts that could be borrowed using a Lifetime Mortgage. The examples are based on a property worth £300,000 but the scale remains the same for a property worth more and for one worth less. Just give us a ring if you want to know how much you could borrow on your property.

Note: Interest rates have generally been good in the recent past. Any

changes that might come with Brexit could change that so, if a Lifetime Mortgage is something you want to do, it may be best to do it now.

Age     Loan to Value    Maximum Borrowing on Property Worth £300,000

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55        25.6%                £77,000

60        34.0%                £102,000 (Note: These are examples only but do

65        39.0%                £117,000 represent a reasonable estimate of the

70        44.0%                £132,000 maximum borrowing at the ages shown.)

75        47.0%                £141,000

(The illustrated borrowing amounts above assume a property value of £300,000 and, if the property is jointly owned, that the age is based on that of the younger partner/spouse. For maximum borrowing interest rates vary from about 6.0% to 7.0%. Lower percentages of borrowing give rates as low as 3.30%. Also, if there is a serious medical condition, a higher level of borrowing may be possible).

Some More Details of the Lifetime Mortgage

Because of the potentially very long term of the mortgage, the maximum amounts that can be borrowed are generally less than you would be able to borrow with the usual residential mortgage. Here are examples of the maximum amount of borrowing possible based on age. (Note: in the case of a couple the age that the lender’s operate on is that of the younger of the two.)

Age      Loan To Value        Maximum borrowing on property worth £300,000

55          25.5%                           £76,500

60          31.0%                           £93,000

65          36.0%                           £108,000

70          41.1%                           £123,300

75          47.0%                           £141,000

80          51.5%                           £154,500

Note: These are examples only but do represent a reasonable estimate of the maximum borrowing possible at the ages shown. In the event that there are serious medical conditions a higher level of borrowing may be possible.

OPTIONS AND SOLUTIONS!

While there is much uncertainty politically in our and other countries, we can maintain our own personal financial stability by following sensible and proven rules. One of the first is to ensure that you have more money coming in than you spend! This certainly will keep you in the “Happiness” zone described by Charles Dickens, in one of his books.

This principle applies to individuals as well as groups and businesses and even countries.

To achieve this you do need to have a bit of organization in place so you can see all that comes in

and all that goes out. Much more could be done to help educate those growing up so that they do

grasp such basics and also learn the patience of setting money aside for a special purchase rather

than having to buy things immediately on impulse.

ATTACK THE PLASTIC

One of the unhappy after-Christmas and New Year “surprises” is the arrival of the credit card bills for the Christmas spending. Of the various financial tools available, the one we find most misused and most destructive are the credit card and store cards. If you then pay the credit card balance off in full, you will have 4 to 6 weeks free credit and will have avoided the “honey trap”. If you do not pay it off in full, it is all too easy to fall into the habit of just paying minimum payments. Paying minimum payments of 2% or 3% will not pay off the debt and you will end up having paid an enormous amount of interest and the credit card balance still unpaid. If you need credit and are not going to be able to pay it off in full, use a loan. They are structured to ensure that the amount owed does really get paid off.

Attack the Plastic

One of the unhappy after-Christmas and New Year “surprises” is the arrival of the credit card bills for the Christmas spending. Of the various financial tools available, the one we find most misused and most destructive are the credit card and store cards. A credit card used properly can be a very useful way to make purchases on-line, or when you are abroad, or to take advantage of a special offer. If you then pay the credit card balance off in full, you will have had 4 to 6 weeks free credit and will have avoided the “honey trap”. If you do not pay it off in full, it is all too easy to fall into the habit of just paying minimum payments. Paying minimum payments of 2% or 3% of the balance is an invitation into NeverNeverLand, as it will not pay off the debt and you will end up having paid an enormous amount of interest, while the credit card balances remain unpaid. If you need credit and are not going to be able to pay it off in full, use a loan. They are structured to ensure that the amount owed does really get paid off.

Warning - plastic may damage your wealth!

As we move into the Christmas spending season, do remember that credit and store cards should be paid off in full each month. Otherwise the outstanding amount owed can hang around for many Christmases to come.

PAYDAY LOANS AND CREDIT UNIONS

There has been considerable controversy about payday lenders providing small loans at very high interest rates. Even the Archbishop of Canterbury has entered the fray. It has served to highlight one of the lesser known type of financial institutions – the credit union. These are small non-profit financial organisations set up by members with something in common and with the intention to benefit their community. The common factor might be those living in the same area or working in the same industry. If you are interested in finding out about credit unions near to you, search on www.findyourcreditunion.co.uk.

MORTGAGES AND THE PROPERTY MARKET

The property market is reported to be rising at a rate higher than for many years, although this does vary according to where you live. Contributing to this is likely to be the strong increase in the number of First Time Buyers, which is rising more quickly than for many years. There are several reasons for this. First, mortgage rates have fallen to their most competitive level for many years, if not ever. Another reason is the assistance that the Government has been providing through its “Help To Buy” schemes. The focus of the “Help To Buy” schemes most recently have been new properties. The Help To Buy equity loan scheme provides help in the way of any equity loan so buyers with only a 5% deposit can get help with a loan of a further 20% of the purchase price, so that buyers only have to get a mortgage for 75% of the purchase price. The equity loan carries no payments for the first 5 years. When the property comes to be sold, 20% of the sale price will need to be used to discharge the loan – regardless of whether the property value has gone up or gone down. Another option for new properties has been the NewBuy scheme. This is also intended to help those who can contribute only a 5% deposit. In this case the builder and the Government pay for an insurance policy which guarantees part of the mortgage, so if the property is sold at a loss, the insurance policy will cover the difference. With this scheme and the equity loan scheme, the buyers must be using the scheme to purchase the property for their own private residence. They do not have to be First Time Buyers but they cannot have any other properties. And most importantly, of course, with either scheme the purchasers need to be able to afford the mortgage and meet the lenders’ income and affordability requirements.

SAVINGS – SOME BASICS

Saving and investing money is a very important part of personal finances. Here are some tips:

1. For money you hold on cash deposits, keep watch over the interest rate. Banks and Building Societies, unfortunately, will not necessarily remind you when that lovely introductory rate that attracted you in the first place, drops considerably.
2. Take advantage of tax efficient savings. Your cash savings generally should be in Cash ISAs (Individual Savings Accounts) for both a good rate and so you do not lose part of the interest to the Tax Man.
3. Don’t use credit cards for long term borrowing. Take out a personal loan instead.
4. If you are saving for your children (or grandchildren), find out about the Junior ISA, and also look at the selection for children at the National Savings and Investment website.