Remortgaging: The Basics

There are many reasons why people look into the option of moving their mortgages to a new provider, or to renegotiate with their current lenders. Chief among these are:

• To reduce monthly repayments
• To release equity from a property
• To finance improvements
• To finance the purchase of another property

Even if you do not fall in any of these categories, it would still be a very good idea to regularly investigate whether you cannot perhaps ‘do better’ than your current mortgage arrangement, especially if you are currently on a simple ‘Standard Variable Rate’ mortgage.

Many people are reluctant to even consider the option of remortgaging since they imagine it to be a very drawn out, complex and expensive process. The fact is however that it need not take more than a few weeks. As far as cost is concerned, lenders will often waive some of the arrangement costs or valuation fees. It could still be worth your while to continue even if they don’t, as the savings that you make could quite possibly outweigh any fees or charges that you will have to pay.

If you decide that you would like to remortgage, you will have to take a few basic steps. They are:

Analyse your current mortgage: How much do you currently pay? Will you have to pay any early repayment charges if you move your mortgage? (In some cases these can be so hefty that it would be better to wait for the penalty period to expire before you attempt to remortgage)

Compile a wish-list: What are you looking for in a mortgage? Write down the specific features that you are looking for (e.g. Ideal rate, the ability to ‘offset’ your savings against the mortgage etc.). This exercise will leave you with a much clearer ‘road map’ when you start looking for deals.

Investigate as many options as possible: Compare different deals by phoning around and doing some research on the internet.

Speak to your current lender first: Once you have a good idea of ‘what’s out there’ it would be a good idea to speak to your current lender and to let them know about the deals that you can get in the market. It could be that they would be willing to match that in order to keep you as a client.

Consider all relevant fees, charges and costs before applying: It might be that some products offer a very attractive interest rate but that they will ‘sting’ you with very high costs and fees. Things to look out for (and put a value to) are:

• Mortgage Indemnity Guarantee Premiums: These are payments that protect the lender, but not you, in case of default.
• Compulsory Insurance
• Loan arrangement fees
• Booking Fees
• Valuation Fees

It is possible in some cases to get a fee-free mortgage at a higher interest rate. This could be worth your while if you are borrowing a smaller amount (e.g. under £100 000). In other cases you should tally up all the relevant costs, take into account the interest rates offered, and choose the best overall deal.

Apply: Once you have decided on your preferred lender the next step would be to apply for a new mortgage from them. Most lenders will be very helpful in guiding you through the process and your new mortgage should be in place in a matter of weeks if approved.

Summary:

• People remortgage for a variety of different reasons
• The first step to remortgaging is to analyse your current position
• This should be followed by the drawing up of a ‘wish list’ of what you are looking for in a mortgage
• The last steps are to analyse what is available in the market and then to apply to your preferred lender.

Top Money Saving Tips

There is one sure way to get ahead financially, one that has not changed over the centuries, it is: Make sure that your outgoings are less than your income. In other words, save money whenever you can! This is perhaps a little easier said than done however since most of us struggle to find places in our budgets from which we can trim a bit of fat. Yet when we stop to think about it savings are actually rather easy to achieve. The following are a few potential ‘savings areas’ that you should perhaps consider:

Clear your credit card every month: It is a golden rule of financial planning that you should get rid of your most expensive debts first. For most people this means the money that they owe on their credit cards. If you do use a credit card it would therefore be worth your while to make sure that you pay it off every month. If this is not possible right away you could consider moving your credit card debt into a loan that attracts a lower rate of interest (e.g. a standard bank loan) and then working hard to pay it off as soon as possible.

Switch your household bills to less expensive suppliers: Many people stay with energy and telecommunications suppliers for years without really considering that cheaper alternatives might be available. This despite the facts that the market for household utilities in the UK is extremely competitive and that switching suppliers could in many cases lead to substantial savings.

Always make a shopping list: Making unnecessary purchases is one of the reasons why many household budgets flounder. Protect yourself from this by always making a shopping list (even for non-grocery shopping) and then sticking to it. This will go some way towards protecting you from ‘impulse buys’.

Make smart shopping decisions: It is often the case that huge savings can be made on the weekly grocery spend by making a few smart shopping decisions. This could include buying some of your fruit and vegetables from a market stall and switching to ‘home brand’ products where available.

Get rid of your clutter: One man’s junk is another’s treasure! You may be sitting on some things that could be quite valuable to someone else. The rise of services like Ebay means that is has never been as easy as now to cash in on this fact.

Do not automatically renew your insurance cover with your current providers: It is very convenient to simply allow insurance policies to ‘run and run’. This does not mean however that it is necessarily the best thing to do from a cost saving point of few. It would be far better to get new quotes from a variety of providers every time that a policy becomes due. This applies to all kinds of insurance including vehicle insurance, home insurance and annual travel insurance.

Think before taking out ‘value added’ products: You will often be offered ‘value added’ products like ‘Payment Protection Insurance’ and extended warranties. It could be that they will indeed ‘add value’ to your purchase/transaction under certain circumstances. It would however be a good idea to ‘crunch the numbers’ to determine whether this is indeed the case before taking it up. In far too many cases the ‘added value’ applies to the vendor and not to you!

Summary:

• The fastest way to financial stability is to make sure that your income always outstrips your outgoings.
• Clearing credit card debts can result in significant savings
• Smart shoppers always make lists and shop around
• Your financial decisions should be determined by thorough research and not merely by ‘business as usual’

Choosing the Best Savings Account

Most people who are fortunate enough to have substantial savings worry about whether their money is working as hard as possible for them. For many this vague worry is as far as they get when it comes to making choices about their savings. They will leave their funds in the same savings account year in and year out without seriously considering if this is indeed the best place for their funds to be. The fact is that there are so many excellent savings products on the market that it would be slightly foolish not to investigate whether your cash is at the right ‘address’. The purpose of this article is to provide a brief overview of the kinds of things that those thinking about moving their savings account should be asking. The most important of these questions are:

Where can I get the best return?

Notice that the heading reads ‘the best return’ and not merely ‘the best interest’. This is because banks will often try to lure customers with promises of excellent rates of interest and then make their buck by levying substantial charges for the ‘privilege’ of an account that earns so much interest! It could also be that a higher interest rate on an account is merely a ‘bonus rate’ that will expire after a few months. It is very important, in light of this, to do a few calculations to determine the ‘bottom line’ before committing to a specific account.

Another thing that you will need to consider is that you will have to pay tax on any interest that you will earn on your savings. The very best rate of return will therefore be achieved by using the one form of savings account that is tax free (at least up to a point). I am referring of course to a ‘Cash ISA’ where you can invest up to £3600 in cash on a tax free basis. It would therefore make sense to first use your ISA allowance before making further decisions on returns on investment.

How much access do I need to my funds?

As a general rule accounts that place restrictions on how easily you can access your money pay better interest than vice versa. Bonds and fixed terms deposits are therefore very good options if you are quite sure that you will not need your savings on very short notice. It would be good to do a bit of homework before you make this decision however since some instant access savings accounts offer rates that compare quite favourably with those of fixed term deposits.

Do I need to earn an income from my savings?

Many savings accounts pay interest irregularly (e.g. once a year on the anniversary of the opening of the account). There are others however that will give you the option to draw down interest income from your account on a monthly basis. This would of course be quite an important feature for those who are interested in earning a regular income from their savings.

Once you have decided on the features that you are looking for in a savings account you will have to do some work in order to find an account from a respected provider that matches your preferences as closely possible. Most financial institutions will be only too happy to do everything possible to help you to set up the account as quickly and painlessly as possible. Once you have decided on your ideal account it is important not to ‘rest on your laurels’ but to continually evaluate whether the account that you are holding is still the best option for you.

Summary:

• There are many excellent savings products around and it is therefore very important to shop around to find the best deal.
• A good rate of return is one of the most important considerations when choosing a savings account.
• Ease of access is another issue with term deposits generally paying higher rates of interest.
• Those who want to withdraw regular interest income from their savings accounts should make sure that the product that they choose will allow this.

UK Home Insurance: A Brief Guide

Home insurance is not compulsory in the UK (as is the case with vehicle insurance) but it is nonetheless a very good idea to make sure that you are protected from the financial implications of damage to your home or the loss of your possessions.

The UK insurance market is very large and diversified with many non-traditional players (e.g. high street banks and supermarkets) entering the insurance field over the past decade or so. This means that competition between providers is fierce and that is therefore often possible to shop around for the best deals.

Before we look at the different types of home insurance, it might be worthwhile to just make a brief remark about home insurance and mortgages. When you take out a mortgage the lender will usually insist that you take out insurance on the property that you bought. They will furthermore strongly suggest that you take out cover through them, or their preferred providers.

Many homebuyers are left with the impression that they are only allowed to take out insurance through their lenders. This is not the case and homeowners have a legal right to choose their own providers. In many cases this would be the best thing to do since the premiums of insurance policies tied to mortgages are often not the best, or most cost effective, options available.

‘Home Insurance’ is actually an umbrella term for a series of ‘coverage areas’ that are usually combined into a single policy. The five most common coverage areas are:

Buildings: This is perhaps the most important part of the average home insurance policy as it covers the building itself (including its structure, exterior, roof, fixtures and outbuildings) against damage and/or loss. Most policies include cover against fire, floods, storms, thefts, subsidence and malicious damage.

Contents: Contents insurance (which is usually optional) covers non-permanent fixtures and fittings like carpets and curtains. Cover can also be arranged for personal property located at the insured property. The risks that are being covered are fire, floods, theft, subsidence, storms and malicious damage.

Personal Possessions: This coverage area differs from contents insurance in the sense that it covers the insured person against the loss of, or damage to, personal possessions that are taken off the property to be used elsewhere. The majority of claims in this area are for items like cameras, sporting equipment, musical instruments and jewellery.

Pedal Cycles: This is an optional part of most home insurance policies. Coverage in this area extends to the accidental loss, damage or theft of a bicycle.

Legal Protection: It is often the case that a home emergency is followed by legal action of some kind. Legal protection cover (another optional extra) can help with any possible legal costs arising from personal injury claims, employment disputes, property disputes and contract disputes.

It should be clear from the above that the market for home insurance is very flexible and that it should therefore be possible to ‘design’ a policy that can fit your exact circumstances and needs.

Summary:

• Home insurance is not compulsory in the UK but it is still highly recommended as a means to survive the potentially crushing financial costs associated with major emergencies.
• Many financial institutions offer insurance products linked to mortgages or other loans. Taking up these products is not compulsory and the consumer is free to shop around for the best price.
• Most UK Home Insurance policies offer buildings insurance as standard and then allow the consumer to choose from a range of optional extras.
• Some of the extras that can be added to home insurance policies include: contents insurance, personal possessions insurance, pedal cycle insurance and legal protection.

Van insurance explained

Buying van insurance can often be more complicated than insuring your home or car, with quotes from different companies varying widely for the same vehicle.

The insurers work out premiums based on ‘rating factors’, which are how the insurer scores you as a risk.

For instance, large vans are more expensive to insure than smaller vans because insurers consider small vans have less accidents as they are easier to control.

Commercial van insurance comes as third party, fire and theft or comprehensive cover, which means that you will be covered for third party injuries or damage, and public liability, as well as theft of your vehicle or fire damage.

To complete a van insurance quote you will need to say how many miles you use your vehicle for business purposes, like that of annual mileage the greater amount you do the more of a risk you are.

What you carry in the van will also have a bearing on your insurance – if you carry hazardous or toxic cargo, the risk increases and so does the premium you pay.

Who drives is another key factor – if your drivers have points on their licences or have had special conditions on their policies, up goes your premium again. One of the last types of policy you want to consider is an ‘any driver policy’ as this always costs more than named drivers.

Like car insurance, where you live, what you carry in the van and where you keep it are all factors that contribute to your premium.

Personal factors like age also affect the premium.

You can try and keep you van insurance down by:

• Not buying a van that is any bigger than you really need
• Fitting insurance company approved anti-theft devices
• Not changing vehicles – older vehicles generally receive lower quotes
• Keeping proof of your car driving no claims bonus – some van insurers will give you a like for like discount
• Taking on a higher voluntary excess – you may pay more in the event of an accident but your premium will be less.
• Keeping a van driving log. If you can show you have driven a van before you are less of a risk and can get a lower premium.
• Shopping online for van insurance – as with many other types of insurance, the provider passes on the broker commission saving to you. Always put your details in to more than one comparison site as well, because not all companies show on all the comparison sites.

Some insurance companies may offer a ‘free extras’ package bundled in with the policy like replacement vehicle cover, free legal advice and free tools cover.

These bundles are cost-effective if you need them, but it’s likely the basic insurance will be more expensive and the freebie bit will make comparison with policies that are not offering incentives more difficult.

Summary:

• Keep the van size and weight down for a cheaper quote
• Shop online for a discount
• Do you need a new van – older vehicles are cheaper to insure
• Screen your drivers carefully – their driving history affects your premium

Protecting your mortgage repayments

Mortgage Payment Protection Insurance (MPPI) is designed to pay your mortgage when you can’t.

MPPI is a standalone policy you can take out any time to protect your mortgage repayments if you can’t work through illness or job loss.

You may be lucky enough to have savings that will tide you over, but if you have to rely on state benefits you may find you have to wait for several months or so before any cash shows up and then it will only cover the interest due.

If you’re concerned about your job prospects or have difficulties in paying your bills, then consider reviewing your MPPI options. You should look for a policy that covers your paying the capital – the money you borrowed – as well as the interest on your mortgage.

Most MPPI policies have a one to three month kick in period, so you have to be off work due to illness or losing your job for that time.

Generally ‘losing your job’ means redundancy – not voluntary redundancy - not being fired or everyone would take out a policy get fired and have their mortgage paid for them!

The policy doesn’t usually pay out if you knew you were going to be made redundant when you took out the policy or if your firm has experienced recent job losses.

Existing medical conditions are not covered; typically neither is not being able to work through stress, back ache, HIV, pregnancy, alcohol or drug abuse.

The policies that do make it through all the hoops usually pay out for 12-24 months as the insurers expect most people to recover from illness or to find work within that time.

The insurer will confirm you are out of work or sick before directly paying your mortgage to your lender.

Some points to watch when taking out MPPI are:

• MPPI costs are linked to each £100 of your monthly mortgage payment, expect to pay between £3 to £7 per £100 of mortgage repayments.
• MPPI is for your home loan, not buy-to-let properties
• Most mortgage lenders offer MPPI, but it’s not compulsory to take the product at all or the one the lender offers, so shop around and see if you can find a better deal. As usual, most insurance comparison sites are useful tools in finding the right cover.
• Some policies cover other monthly payments like credit cards, car loans and unsecured loans. These are called loan payment protection or credit card protection insurance.
• MPPI cover may not be right for you if you are self-employed, a contract worker or over 60-years-old.

Summary

• MPPI is insurance that protects your mortgage repayments for up to a year if you cannot work due to sickness or job loss
• MPPI costs between £3 to £7 per £100 of the mortgage repayment each month – for instance if you pay £400 a month, your MPPI payment is about £12 - £28 a month, depending on your provider.

Is There A Need For Cancer Cover?

Cancer cover is a relatively new protection policy to enter the personal finance market place – some may say that it is about time too that this sort of insurance is offered.

Different to life and critical illness cover, cancer insurance covers you against a specific disease. This policy will pay you a one off cash payment if you are diagnosed with some forms of cancer. The funds are meant to help you get the best treatment and at the same time care for your financial needs, such as pay the mortgage if you are off work on limited sick pay, or carer costs etc.

According to Cancer Research UK statistics, there are over 200 different types of cancers. The chance of you being diagnosed with a malignant tumour is based on your lifestyle, exposure to infectious agents that could cause cancers and your genes.

If you are concerned about these odds and want to protect yourself, you may want to seriously consider cancer cover.

Before you take out your policy, you should make sure you know everything about it. In the past there were cancer victims who could not claim on their policies after they found out about exclusions in the policy.

Once you read your terms and conditions well, you should be more informed about which policy will be right for you.

Another thing to consider is that premiums are usually much lower when you take your policy from an independent provider.

Overall the cancer cover is a policy that will take care of your financial needs including medical treatment if you were diagnosed with cancer. It is a very beneficial policy especially if you don’t have savings or other sources of income to fall back on in your time of need.

A Simple Way to Protect Your Business and Your Investment: Landlord’s Insurance

Being a landlord is perhaps not as easy as is sometimes made out. There are actually quite a few things that can go wrong with your property business (or hobby!). These range from the catastrophic (e.g. a property that you own being destroyed in a fire or flood) to the more mundane (e.g. tenants not paying their rent in time). It is obviously not possible to totally avoid risks like these. It is possible however to cushion yourself against them (and several other kinds of risks not mentioned above) by taking out adequate landlord’s insurance.

Very few new landlords (and sadly even some established ones as well!) realise that there are insurance products available that cater specifically for landlords. This means that they often try to put together a ‘do-it-yourself’ insurance portfolio (covering different aspects of their business) as best as they can. The unfortunate result of this is that many landlords are underinsured or have significant ‘holes’ in their cover. This is totally unnecessary!

The growth of buy-to-let investments over the past few decades was met by the insurance industry with the development of a vast array of packages aimed specifically at the needs of landlords. The details of the different policies that are available obviously vary a great deal. In general however landlord policies will normally cover the following contingencies:

• Loss of, or damage to, buildings and/or contents
• The provision of an alternative place to stay for tenants following damage to an insured property.
• Cover for the loss of income (usually for a period of up to 12 months) in case of damage to a property.
• Liability cover. This offers protection from possible claims by tenants and/or by contractors working on a property on your behalf.
• Cover for unoccupied properties (e.g. when a property is ‘between tenants’)
• Some policies include cover against the loss of income arising from eviction proceedings due to non-payment by tenants. In such cases the policy will normally pay out a specific amount for the time it takes to recover possession of the property.

The above list should make it clear that landlord insurance has the potential to protect you against some of the most common types of adverse event that could potentially threaten the health of your property business. Getting sufficient cover should therefore be quite high on the ‘to-do list’ of landlords. Some of the things that should be kept in mind when selecting a policy are:

• Premiums for exactly the same cover can vary quite significantly between different insurance companies. It is therefore important to ‘shop around’ in order to get the best possible deal.
• Even though price is an important consideration it is certainly not the only thing to keep in mind when choosing a policy. Things like the reputation and strength of the insurance company and possible exclusions can also have a bearing on which policy to choose.
• When choosing insurance it is always important to try your best to strike the perfect balance between being adequately covered and paying for levels of cover (or services) that you do not need.
• Landlord insurance policies can sometimes be quite complex and it could therefore sometimes be necessary to submit a policy document to a legal professional in order to make sure that you will be sufficiently covered if you take out a particular policy.

Most people do not like paying for insurance as it deals with heavily with “what if’s” the fact is however that having proper insurance in place can often mean the difference between succeeding as a landlord or leaving the field early due to an inability to move through unexpected difficult circumstances.

Summary:

• Landlord’s Insurance can provide cover against some of the most common contingencies faced by landlords
• Cover can range from major incidents (e.g. fire or flood) to something as ‘mundane’ as tenants not meeting their payments
• It is very important to shop around in order to get the best possible cover at the best possible price
• Complex landlord policies should ideally be checked by a legal professional

The importance of life insurance

During tough economic times, people tend to try to avoid discretionary spending as much as possible. With uncertain job markets, and tight credit markets, avoiding spending for things that are not vital to a comfortable lifestyle is recommended. However, the challenge at times is trying to decide whether certain expenditures are discretionary, or really important. During these tough stretches, the importance of life insurance can often be overlooked. Some people view life insurance as a product that ideally they would have, but others see it as a non-essential when money is tight.

The importance of life insurance cannot be ignored, though. Yes, in the near term it may seem like an unnecessary outlay of money each month. But, imagine what would happen if tragedy does strike. What if an income earner does die unexpectedly? Then, the tough economic situation definitely gets worse for the family that is left behind. Imagine your survivors being forced to deal with tough market conditions and not having a reliable income. For a small monthly investment, even when on a tight budget, a person can provide a significant security to his or her family.

Okay. So now the importance of life insurance has been established. It is still definitely important to get the best value possible in protection. Finding a great deal on life cover has never been simpler. There are great independent brokers who offer the ability for consumers to quickly and easily obtain quotes online and compare the terms and conditions of various products.

The first step in finding a good life insurance plan is to complete a basic profile and assessment. There are many factors that affect the premium cost of life protection. Essentially, the provider wants to assess the risk or potential for payout of the benefit when developing the appropriate rate. The more risk of a payout, the more expensive the premium. To get a good deal on protection, it is important to maintain healthy lifestyle habits. Not smoking is a good example of a behavior that can save money on protection. Many insurance products come with health assessments to determine blood pressure and other health risk factors. Gender and age also affect premiums.

Once the profile is completed, offers will begin to show from top insurers. Leading independent brokers work with most of the top insurance providers which helps consumers get the most competitive rates and terms possible. Be sure when exploring life cover options to consider other factors besides price. Reputation of the provider, services and support offered by the broker, and other non-price issues are important.

Given the importance of life insurance to your family’s financial security, please keep in mind these practical tips when considering purchasing life cover:

• Life insurance is not a discretionary purchase, it is a necessity for most people
• Protection does not have to cost a lot, compare plans from top brokers
• Maintain good health to get the best premium price available
• Consider the services and support offered by the insurance broker

Finding that mortgage deposit

The excitement of buying a new home can be overwhelming. Unfortunately, the overwhelming amount of details to remember when buying a home and getting a mortgage can be overwhelming for a different reason. Trying to keep track of everything that goes into buying a home can be difficult. One of the most important things to remember is that when you obtain financing for your purchase, there are two type of deposits typically required. This means that you need to have funds available at the point of purchase, or have plan in place to over these payments. Finding that mortgage deposit is vital to a smooth transition into your new home.

The first type of deposit comes at the point of the exchange of contracts with the home seller. Usually, most homeowners require an upfront deposit from a buyer as a commitment to go through with the sale. The standard deposit amount is around 10 per cent. If you are purchasing a property that has a sale price of 100,000 Pounds, your down payment would like be around 10,000 Pounds.

The second typical point of deposit is the mortgage deposit. The mortgage deposit is the amount that covers the difference between the purchase price of your home and the amount of financing you are getting from your mortgage provider. For instance, if you are financing 90 per cent of your home that is purchased for 100,000 Pounds, the balance is 10,000 Pounds. If this is paid as an exchange deposit, you would owe nothing additional. However, if you financed 80 per cent, the balance would be 20,000 Pounds. You would still owe 10,000 Pounds for the mortgage deposit.

Finding that mortgage deposit is often a key step in buying a new home. These deposits are easily the biggest upfront cost to buying a new home. There are several options to coming up with the funds needed to cover these deposits. Deciding which option is best for you and your situation is important.

Here are some of the most common sources for paying the exchange and mortgage deposits:

• Using funds from the sale of your existing home if you have equity built up
• Savings you have built up in preparation for the purchase of your first home
• A 100 per cent financed purchase (Be aware that mortgages that cover over 90 per cent of the purchase price are all but extinct following the global credit crunch and those that are available often include hefty fees or higher interest rates)

Finding that mortgage deposit is critical to the home buying process, as you can see. Building up savings before a first time buy is certainly prudent. Building up equity in your existing home is also a great help when moving. It is always best to avoid borrowing more than 90 per cent of your new home’s purchase price to avoid the higher-lending charge. Because of the increased risk to the bank, lenders use these fees or higher interest rates to offset the potential losses. You will save a great deal over the course of your loan by having adequate resources to make your deposit.

Next Page »