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What you need to know about getting a mortgage

How it works

A mortgage is the process of borrowing money from a bank or loan provider such as The Loans Department in order to buy a property or land. You will need to provide a deposit that can be from 5% upwards of the property value and you will pay your lender interest on the remainder of the money you will need to borrow in order to make the purchase.

You will make monthly repayments over a fixed period of time, usually 25 years, but can be longer or shorter. If you fail to make your repayments your lender can repossess the property and sell it in order to recoup losses on the money loaned.

Types of mortgage

Each mortgage repayment scheme will be dependant on a rate of interest charged across the amount of money borrowed.

Your interest rate will change over the period of the loan and is linked to the lenders standard variable rate (SVR); a rate they decide and is often, but not always, linked to the Bank of England’s base rate.

A fixed rate mortgage will tie in a specific interest rate for a given period of time. This makes budgeting a simpler process, as you will know exactly what you will be paying. At the end of the fixed rate period you can choose to move to the lenders SVR or choose another fixed rate for a similar suitable term.

A tracker mortgage is linked to the Bank of England’s base rate and will increase or decrease in line with any changes in the base rate. A tracker mortgage will generally offer a lower interest rate than fixed rate mortgages but you need to be aware that they are likely to change and your repayment amounts with them.

An offset mortgage is an option linked to your savings.

 

Repayment options

With a repayment mortgage you pay off the interest and part of the capital amount each month. Your interest amounts should slowly reduce as you pay off part of the capital every month.

With an interest-only mortgage you only pay off the interest on the loan and nothing towards the capital amount.

So when you reach the full term of your mortgage you will own your home outright with a repayment mortgage but with an interest-only mortgage the lender will still own your home. You will need to prove to your lender that you have a saving plan to be able to pay for the property at the end of the term in order to be offered an interest-only option.

Rates and fees

The interest rates you will be offered are dependant on the value of the property, the term of the loan and your deposit amount.

The loan-to-value (LTV) amount is the amount of the property you own relative to that of how much capital you need to borrow from the lender. This translates into the larger the deposit you can pay the lower your interest rate could be as you will be considered a lower risk to the lender.

Lenders can also charge a set up fee that should be added to the total amount when making comparisons to other offers. You should factor in all costs associated with each loan. Not only with the loan itself and the cost of the property but also the costs associated with the process; you will incur additional fees for property checks and valuations and there will also be legal fees to pay too.

You should also consider any early repayment or exit fees with the mortgage you choose. If you decide to change mortgages or find yourself in a position to be able to repay the full amount before completion of your term your lender may include a charge for doing so.

How much can you borrow?

Your loan amount is dependant on your age, your financial position and your credit score.

A lender will consider your loan term against your age to make sure you will still be under retirement age and have access to a suitable income. They will also consider a host of personal financial details in both your income and monthly outgoings to make an in-depth estimation of what you can comfortably afford to repay each month.

Any loan you apply for will be based on your current credit score so make sure you check your credit report to be assured of the best health possible and the best option of receiving favourable offers from lenders.

How your lender will vet you

Modern mortgages have to be assessed by a mortgage advisor regulated by the Financial Conduct Authority. This could be a bank or building society’s own advisor or an independent broker or financial advisor. Either way they will assess you in order to be sure you are in a position to be able to afford your repayments.

Your advisor will put together a detailed forecast from your personal cash-flow situation. They will look at income streams for you and your partner (if you’re applying for a joint mortgage) and of all your outgoings too. You will have to provide information into how much you spend on utilities, loans, groceries, child-care, phone contracts, gym memberships, travel expenses and more. Everything that can be considered a regular monthly outgoing will be taken into consideration to arise at a suitable figure you can safely afford to pay each month without causing financial difficulties.

You can create your own plan by checking your bank statements and your monthly lifestyle. There are affordability and mortgage calculators online that can help you determine your outgoing costs and obtain an estimate of what you are likely to be offered from lenders on your figures. The more research you do the better prepared for your application you will be.

Finding your best mortgage

To give yourself the best mortgage options you should do your homework across all lenders and products.

A bank or independent mortgage advisor is often tied into their own products. The same applies to comparison sites; you should check them as many as possible as they will each likely be linked to varying suppliers and lenders throughout their product ranges.

Some banks will not be associated with comparison or money websites so you should always make additional independent searches to be sure you’ve covered all of your options.

A mortgage broker can prove to be a valuable option, as industry specialists they will often have a wealth of knowledge that can save you time and money.

A broker may also have exclusive access to deals unavailable anywhere else. They could provide options for those with a poor credit history or a difficulty in attaining a mortgage due to an irregular income or self-employment.

A broker should outline their fees at your initial interview. They may charge separately for individual services or as a complete commission on a mortgage that they supply or arrange. You should make sure you add this onto your total list of costs.

Dealing with the debt recovery bailiff on your doorstep

Ok, so you’ve managed to get yourself into debt and you’ve tipped yourself just far enough over the edge to be struggling to pay it back. This is nothing new for many people but the problem is still undesirable until you find a healthy way to resolve the situation.

If things get out of hand there’s a chance that the people you owe money to, your creditors, will utilise one of a selection of options in retrieving the debt. One such option is to send a bailiff to collect it or to confiscate items that belong to you in order to sell them and use the money gained from the sale as payment or part-payment of the debt in question.

Debt collectors

Don’t get a debt collector and a bailiff mixed up. They do a very similar job but they hold very different powers and responsibilities. If there’s a debt collector at the door then that’s not great news but it’s not the worst news. A debt collector has very little power and most of their success is based around the debtor’s naivety in what they can and can’t do.

A debt collector can’t force entry, he can’t confiscate your belongings, in fact all you have to do is ask them to leave and once you’ve made that request they have to respect your wishes and go.

How do you tell a bailiff from a debt collector?

Ask them. A bailiff must always carry their badge, certificate or identity card to prove they are exactly who they say they are. You should also ask them which company or court they are working for. If you’re still not convinced that they’re who they say they are then request their employer’s telephone number and call them to confirm it.

A bailiff will likely be carrying a legal document issued by the County Court, Magistrates Court or High Court outlining your debt and its details.

Lock the door

A bailiff’s best tool is being able to access your property so keep the door locked at all times. If the door is unlocked a bailiff has the right to come in without invitation and once inside they will be very difficult to remove. They have a job to do and are very efficient. They know the rules inside out and will use every one of them to their advantage if you allow them to.

If you’re going to request ID then do it through the letterbox, or keep your door on a security chain, even speak to them through a window if there’s no other option. It’s a good idea to meet them outside via a different door but make sure you lock it behind you.

Alternatively, speak to them on the phone. It’s a perfectly acceptable method in order to keep them outside.

A bailiff can’t access your home through the window on their first visit, they must be allowed into your home through peaceable means, but once you’ve allowed them access they are then allowed to use reasonable force to gain the same level of access on future visits so it’s imperative that you start as you mean to go on.

Check the time

A bailiff can only enter your home between the hours of 6am and 9pm. If they call at any other time then they must leave and return at a time within the allotted hours.

What can they do if they do get in?

If the bailiff does access your property they can’t take any of your belongings on their first visit. They will have full access to the property and they will use this right to take a complete and detailed inventory of all the items with a resalable value that they intend to take from you. These items when seized will be sold in order to assist in paying off your debt.

They can only take the amount of goods whose value adds up to the total sum of the debt and any fees incurred by doing so.

What can they take?

  • They can take any item that you own or item you part own with other residents of the property.
  • They can take your vehicle as long as it’s parked on your property or a public road.
    • If the vehicle is parked on somebody else’s driveway or other private property they don’t have the right to take it unless they hold a specific order giving them permission to do so.
    • If you’re expecting a visit from a bailiff then find somewhere else to park your car. If they can’t find it, they can’t take it.
    • They can’t take your vehicle if it’s your home; for example, a campervan or motorhome.
    • They can’t take your vehicle if you’re still paying for it on finance.
    • They can’t take your vehicle if you use it as part of your business.

What can’t they take?

  • They can’t take household goods required to meet a basic level of domestic living. This means they must leave clothing, bedding, furniture, food, drink, household appliances such as your cooker, microwave, washing machine or your fridge, your mobile phone or landline telephone, and any fixtures or fittings you need on a day-to-day basis to live.
    This also includes a table and enough chairs for everyone in the household and medicines or any items you need in order to care for a child or an older person.
  • They can’t take any tools, books, computers or vehicles used in your employment or business.
    • However, a bailiff acting on a failure in payment of Poll Tax, Council Tax, VAT or Income Tax may be able to do so.
  • They cannot take pets or guide dogs.
  • They cannot take items under a hire purchase agreement or under a rental agreement. Goods bought on credit can be taken because the item is classed as your property.
  • They can’t take a Motability vehicle or a vehicle displaying a blue badge.

What can I do if I know they’re coming

Move your possessions

You will be made aware of a bailiff’s visit in advance by letter so if you don’t want them to be able to take any goods then remove them from your property on the first visit.

If the bailiff gains access to your property, despite not being able to seize the goods at that time, anything they add to their inventory will become part of a ‘controlled goods agreement’ and you must relinquish any of the items in due course that are part of this agreement.

Leave the property

If you’re not at home when the bailiff calls they can’t access your property using any kind of force on the first visit unless they hold a specific order giving them the right to do so.

If you do choose to leave the property then make sure nobody else is there to let them in. If a family member or other tenant of the property allows entry to the bailiff then they hold the same rights as if you let them in.

Don’t tell them who you are

If the bailiff doesn’t have proof that you are who they are looking for then they are less likely to continue to add unmerited pressure on you to let them in. This tactic isn’t against the law and is a useful method of trying to get them to leave with the minimal amount of confrontation. For more information and help with bailiffs visit bailiffs help and advice.

 

How data and artificial intelligence are being used in the finance industry

Big data and how we read it

The term “big data” is currently being used to describe how the use of predictive and user behaviour analytics, along with other advanced methods, extract value from a seemingly endless supply of information made available by the growth in technology and the availability of that information. The software and the minds behind creating these applications are the key players to bring about major changes in some of our biggest industries.

In the finance industry it has been the growth of fintech startups such as Cambr’s new Digital Banking Platform that has raised a disruption in traditional methods, moving it into newer and more efficient areas and methods of performance.

To look at how that transfers into our daily lives the huge amount of data available about each and every one of us is now being accessed by artificial intelligence software programs to explore everything we do; from our social media activity, what we buy online and where from, our search history, our messaging conversations and more, and from all that information the results are giving banks a deeper learning into what and how we spend; this gives them a far greater opportunity to sell us exactly what we need, whether we know what that is or not, and these selling opportunities are now also becoming automated, just as the gathering of the information was in the first place.

The use of artificial intelligence is already widely used in the exchange market. AI is learning and predicting patterns that make investing a lower risk with higher profit outcomes, and just like this a similar function in the banking industry has arisen. It has become not just apparent but necessary for traditional banks to maintain awareness of the sector and of the more efficient and affordable alternatives fintech businesses are now offering.

Bloomberg announced that trading from the results of big data analysis has grown over the past ten years and is now responsible for 40% of trading in Europe and 55% in the US. The companies using these new algorithms to search out profits are the ones who are leading the way and dominating the market.

So how are the banks going use this information in order to be more efficient and more competitive?

1. Machine learning and automation

Using artificial intelligence to understand and predict changes in data analysis that can update and improve its own algorithms is becoming a forward movement in developing the technology. These automated decisions are improved with the addition of more and more data. Automation in other areas of banking and finance is also improving business efficiency; underwriting, risk model development and reconciliation are also showing an increase in benefits.

2. Engage with public cloud based solutions

Keeping all the information so far in private cloud solutions has been a safe way for banking to keep information secure. Now that technology allows more secure ways of storing our information hybrid cloud use between private and public options will give access to required computations and also for the advance in new application development. The financial sector is going to need to utilise these methods of managing their big data to crack issues in updating, synchronising and governing data assets.

3. Further engagement with blockchain technology

Blockchain is probably the main component in the future of banking and financial services right now. The leading question is how it’s going to be utilised to match the fintech operations already employing its benefits. Will private or public blockchain use draw new issues in the legalities of using such a system? How will it compare to current and traditional transaction activities? And what are the ways forward of using blockchain information to tie in with big data and use the information to the bank’s advantage? This is going to be a big conversation topic in banking in 2018.

4. Detecting and eliminating fraud

Using AI to recognise patterns in detecting fraud cases and money laundering will reduce the need for manual monitoring. This should also help cut down the time spent keeping the regulatory agencies happy with a large percentage of the rules being written directly into the software to eliminate it at the source.

Data analytics and AI are going to be very important in detecting criminal activity, fraud, money laundering and more, so the banks are going to have to address using risk data aggregation and model risk as a primary focus.

5. Data governance

Making sure all the data involved is of high quality and of real use to the banks will be a substantial part of their continuing awareness into converting their findings towards the most appropriate responses and ROI. The solution here will be to manage critical aspects of the information to make positive results a more likely outcome by using cleaner data. This in turn will dictate which products and services are the most likely saleable products for their users.

6. The data team

Data scientists and engineers are going to be highly important members of the prediction process. The improvement in data management and analysis is going to have to be skilfully organised to utilise how the AI reads, analyses and uses the information it receives. The people who organise the computer systems and their software are going to become increasingly important as this part of the industry grows and will be a much more important member of the finance team than currently considered.

7. Integrating historical and current financial data

Banks and financial traders have always stored their own historical data of financial transactions but increasingly now they are using it alongside their real-time data to analyse not just patterns in spending by the business or individual but also any effects of additional influences at the time depicting additional customer behaviours and trading patterns.

8. Utilising the Internet of things

Initially not a highly considered opportunity for banking, the growth of data provided by these items over the more obvious mobile and online pools is becoming more relevant with patterns of spending and payment activities being shown through this further field of information. This streaming data can improve the efficiencies of financial operators, lowering costs and usage.

So what’s next?

We’re going to see more involvement in data analysis in banking, there are going to be big changes in movement using artificial intelligence systems to increase opportunities of higher ROI, and there is definitely going to be a rise in developers looking for all the ways to get ahead in all the financial sectors.

Big data management is fairly new in this industry but banks, insurance companies, investment groups and more are going to be some of the most prominent users of big data the world over, and finding better and more advantageous ways to utilise this increased and insightful information is the way they’re going to succeed.

Is A Decreasing Term Life Insurance Policy Right For Me?

For those of us with large financial commitments, life insurance can give a sense of security. It means that loved ones won’t have inherit the burden of paying off a huge mortgage, children will be supported through their education, or simply that funeral costs and inheritance tax are taken care of while people are trying to mourn.

Depending on what you want your life insurance policy to cover, as well as a range of other factors like your age and health, certain policies will be better suited to meet your needs than others. One form of cover is life assurance, which is taken out and covers you for a set number of years, say two decades. You then pay your premiums during the course of the term, and if you die during those 20 years your beneficiaries will receive a payout. With life assurance, this can be split into two categories: level term life insurance and decreasing term life insurance. It’s the latter of the two that we’ll be talking about.

Decreasing term life insurance: explained

Before you take out a policy, you need to decide how many years you’d like it to cover. This can be worked out based on a number of factors, from the length of your mortgage to the average life expectancy in your family. Basing life insurance terms on mortgage length is common with decreasing term policies, as it gives you the peace of mind that your loved ones won’t be left with a huge debt if you pass away before you’ve finished paying it off. But likewise, the premiums can shrink as the remaining mortgage debts also decreases with your payments, so you’re unlikely to be over-insured. The amount of money covered by your policy shrinks because decreasing term life insurance gives a smaller payout the further through the policy you are. For example, you could take out a 20-year policy for £75,000. If you die in the first year of cover you’ll receive the whole amount, but if you die in the 19th year of cover, you may only receive a couple of thousands of pounds. The good thing about this type of policy is that the premiums will also decrease.

Who is it most suitable for?

For those with a smaller income, a decreasing term life insurance policy is a good choice of cover, as premiums are significantly cheaper than those for a level term policy. Premiums also decrease over the course of the policy term, making this an even more affordable option.

A decreasing term life insurance plan is also a great option for those who expect to live to a ripe old age. While there are plenty of elderly life insurance plans available, having decreasing term cover is a great way of planning for inheritance tax. You can tie your decreasing term policy to your inheritance tax, so that over time less tax is due.

Family income benefit policies are a type of decreasing term life insurance. The difference is in the way the insurance policy pays out. Rather than giving your loved ones a lump sum in the event of your death, this policy gives them a regular income for the duration of your cover term. For example, if you die in the 5th year of a 20-year family income benefit policy, your family will receive a regular payment every month for 15 years. The downside is that if you die in the 19th year of the policy, your family will only receive one year’s worth of payments. This type of policy is well-suited to families with small children as it mirrors an income.

However…

There are many reasons why a decreasing term life insurance policy is right for you. But it may not actually be the perfect choice. That’s because:

  • Decreasing term policies will only pay out if you die during the term of cover. So, should something terrible happen just after your policy has ended, your loved ones will get nothing.
  • Similarly, should you outlive your life insurance policy, you are not entitled to get any of your money back. That’s because there is no investment element to decreasing term life insurance policies. What’s more, if you then decide that you’d like to take out a whole-life policy, or even take out a second decreasing term policy to cover you for the next couple of decades, it will be significantly more expensive. That’s because life insurance premiums become more expensive the older you are when you take out a policy. Therefore, it may be worthwhile simply taking out a whole-of-life life insurance policy from the beginning; especially if you have a large family and lots of dependents.
  • As your life insurance policy decreases over time, it should mirror the amount of debt that you want it to cover. However, there’s no guarantee that your cover can perfectly correspond with your policy. If you’re prone to making large purchases or expect to move to a new house and need a second mortgage in a number of years, then a level term life insurance policy may be a better way to give your loved ones a large cash sum that can cover any debts you have in the future.

Alternative types of life insurance

After looking through the disadvantages of a decreasing term life insurance policy, you may feel that it’s not the best type of cover for your situation. Other types of policy to consider include a level term life insurance policy and a whole-of-life policy. The first involves a set price premium, which gives you the same sized payout no matter how far through the policy you are. If you’re insured for £100,000, this is the amount you’ll get if you die on the first or last day of your cover. The second type is a policy that doesn’t expire. A whole-of-life policy is not chosen to cover a set number of years like a level term or decreasing term policy; it is valid until the day that you die. This type of cover is generally more expensive than other forms of cover, as it’s guaranteed to pay out in the future. 

Choosing the Right Credit Card for You

Different credit cards each offer individual advantages and disadvantages, meaning you should think carefully about which one would suit your spending habits and credit situation. This can be difficult, but these questions should help you towards picking the card that’s right for you.

Can you Pay Back What You Spend Each Month?

If you can pay your credit card company back the money you have spent each month, you can take advantage of the interest free period and worry much less about the rate of interest on whichever card you choose.

This means you can look at cards which might have higher interest rates but also come with rewards or cashback. Cashback means you get back a percentage of what you’ve spent, usually in an annual payment.

Rewards other than cashback can range from air miles to shopping vouchers or specific merchandise.

Do You Already Have Debts?

If you are already in debt, some credit cards could help you get out of that situation. Several credit cards have 0% offers, meaning you pay no interest for several months, which could temporarily reduce pressure and make it easier to pay your debts.

In the case of credit card debt, then a balance transfer can be used to transfer the debt from one card to another. If your new card has a lower interest rate than your old one it can make your debt much easier to clear.

Credit cards can also be used to pay off overdrafts or loans. Money transfer cards allow you to put money from the card directly into your bank account, meaning you have much more flexibility to use the money than with other types of credit card. This can allow you to pay off debts such as loans or overdrafts or to make major purchases that you could otherwise not use a credit card for.

Do You Have a Poor Credit Score?

Whether a card provider will accept your application depends on the information in your credit report, including what you currently owe and if you have made or missed repayments, and your personal information, such as age and income.

If you have a bad credit report some credit card providers may reject you, but there are cards designed for people in your situation. These cards often have a higher rate of interest and a lower credit limit, which is the amount you can owe on any one card at a time. Applying and being rejected for credit cards shows up negatively on your credit report so try to be realistic and apply to providers who are more likely to accept you.

Using these cards can eventually improve your credit score and can make it possible for you to be accepted for cards with lower rates or rewards. You can do this by staying within your credit limit and paying your balance in full and on time. Avoid making cash withdrawals as these often have high interest rates attached and can damage your credit report.

Some cards may even improve their own rates over time if you are a reliable customer.

Do You Travel Overseas Often?

While all credit cards can be used abroad, there are several extra fees which can hit you hard if you don’t pick the right card.

Transaction fees are the fees charge by your provider for spending in a foreign currency, while withdrawal fees are what you are charged when you withdraw cash abroad. You will also be charged interest as soon as you withdraw your cash, so these fees mount up.

There are credit cards designed to be used abroad, with no transaction fees, no withdrawal fees and a lower than usual rate of interest on withdrawals. If you are someone who spends a lot of time abroad, it might be that getting one of these cards would be the right choice for you.

When taking your credit card abroad you should also always remember to let your provider know in advance, otherwise it can look suspicious and your card may be stopped.

Do You Run Your Own Business?

Business credit cards can make the running of a business much smoother and help you to control your cash flow while also keeping your business and personal finances separate.

A business credit card has several benefits, from the fact employees can use business credit cards to pay work expenses to being able to pay for supplies before money comes in, for example while waiting for a customer to pay a bill.

Business cards differ from ordinary cards in that, rather than being assessed on your own details, the card provider will accept or deny your application based on the company’s assets and credit history. If you are a sole trader, they may also consider your finances. Some providers do only provide cards for businesses with a certain level of income.

Are You a Student?

Many credit card providers offer cards specifically catering to students. These cards treat your student loan in the same way as other cards would treat a regular wage. They do, however, have a higher interest rate than most other credit cards.

While these cards are designed specifically for students, it can be financially dangerous to have one of these cards, as debts are liable to build up if you do not manage the card carefully.

On the other hand, it can be useful to have a credit card as a student, as it can help you to build up your credit report. Often you can keep the same card after graduation, with a lower rate of interest and a higher credit limit if you have been a reliable customer.

How You Can Get Out of Debt

To get out of debt, one must create a plan and execute it. It is because of this reason that this article is created. The ways that credit is paid back have gradually changed over the years, and this one is designed for debt that you still haven’t paid these days. As you are working on your plan, you need to make some adjustments to your budget so that you do not overspend and go back into creating more debt. You also need to set aside some money aside into savings beforehand if you do not have any emergency funds.

The best way to be debt-free

Many people with a huge debt want to make this right. You need to make sure that you know where you stand right now before you begin the plan. You need to have in your mind the complete picture so that it will be easy for you to keep track and follow your plan.

 

Create a List

The key factor to success of getting out of debt is by have everything written out. Also, once you have everything written, it will not be as surmountable as it was before.

  • List all the debts and its corresponding information: the name of the creditor, minimum monthly payment, balance, interest rate.
  • You also need to list down how much you need to pay so as to zero-out the debt of your card within the span of 3 years, as what is stated in statements of your credit cards.
  • You also have to include the loans that are not listed on the credit reports such as medical bills, family loans, etc.

 

Lower the Rates

Paying up the high-interest rates on your existing debt can cause the debt to mount up. Thus it makes it difficult to pay back. If it is possible for you, you have to lower the interest rates. Here is what you need to do:

  • Based on the credit you possess, you might qualify for much better interest rates on the credit cards.
  • Open up a free account at Credit.com and take a look at the kind of low rate you get on the balance transfer with credit cards.
  • Check the Income-based Repayment and student loan consolidation at StudentLoans.gov.
  • Call the card issuers and seek whether you can lower the rates on the balances of your credit card.
  • Consider balance transfers or consolidation loan to pay off the high rate credit cards. This will lower the rate.
  • Try to find out if you are able to refinance on a high rate on auto loan.

 

Get the Number

As this point, you will have a clearer picture on how much you are going to pay for the credit every month.

 

Plan the Strategy

There are various ways you can save this problem, and you will highly likely approach this using different methods and tools. Make sure you plan your strategy carefully. If a monthly payment is not possible, try contacting a credit counseling agency or the bankruptcy attorney for any advice.

 

Monitor and Adjust

Once you already have your plan set up, do not get too comfortable. You have to keep track of your behavior as close as you can to ensure that you are making progress and you also want to make some adjustments whenever necessary. When your credit score shows progress, try to consider getting balance transfers or consolidation loans again to save money from time to time being spent on the interest charge for the remaining debts.

Never sway from your plan in paying off your debt.