Finance

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whether to invest in a property

Imagine the scene: you have decided to become a property investor and are now excited about what looks like an exciting future of buying, letting out and, ultimately, making money from property. However, you have just hit something of a wall: you can’t make your mind up about which property you should buy first.

Here are a few factors to weigh up as you mull over buying a specific property.

Do you need to make money quickly?

If so, you should probably completely forget about investing in property. It not only requires significant financial outlay right from the start, but also doesn’t tend to bring returns that can be accessed quickly. You can allow people to rent your property – an arrangement which would give you an additional, regular supply of income. However, you would need to first find tenants.

As demand for property – whether to buy or rent – can fluctuate, property investment should be treated as a long-term investment. That way, when the market is depressed, you can simply wait for it to recover before you sell. However, the process of selling a property will itself take a while; therefore, you won’t necessarily make a lot of money quickly even when the market is flourishing.

Will you be able to pay all of the necessary costs?

Various charges to consider on your property investment journey include the fees you might need to pay estate agents, surveyors and solicitors. Any additional costs associated with maintaining and managing your properties should also be factored in.

Those costs could include, should the freehold not be outright yours, extending the lease; the Money Advice Service cautions that negotiating this could be time-consuming. Will you have enough time free for taking care of this?

Would you be able to afford the mortgage?

Mortgage lenders should enable you to calculate the monthly costs of a mortgage, money.co.uk states. If those costs outweigh what you know you would have coming in each month, you might have to turn your back on property investment – or, at least, investing in the particular property or area that you are currently eyeing up.

If you are letting out, will the rent be sufficiently high to help meet your costs?

While letting out properties could, of course, bring in money to help you with upkeep, you should carefully look over the probable outgoings to make sure that the rent would be high enough. This isn’t necessarily to say that the rent should pay for absolutely every aspect of looking after the property. However, it might be unlikely to cover the repayments on your buy to let mortgage.

While raising the rent is an option, this could ultimately bring the rental costs above what the property is genuinely worth – and so leave you without any willing tenants. Therefore, limiting your investment to properties likely to deliver the best return on that investment would be a wise strategy – and consultants at Flambard Williams can help you to identify the best opportunities.

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Unfortunately in the past, zero hour contract workers have found it very difficult to be able to secure themselves with a mortgage as they are unable to meet the lender criteria – as there is no guarantee of regular hours to be worked and therefore no fixed income for a lender to review. 

The Statistics

According to the office of national statistics, in 2016 more than 900,000 people in the UK held a zero hour contract. Almost 34% of them worked regular full time hours and 41% had been in the same employment for more than 2 years. In fact, 9% of them have been in the same employment for more than 10 years!

Nearly a fifth of zero hour contract workers are at the age of purchasing their first property, but they face being judged by the flexibility of their work contract and declined a mortgage.

The Mortgage Misfit No More!

Zero hour contract workers have long been considered one of the ‘Mortgage Misfits’. However Ipswich Building Society have very recently confirmed that as of the 1st March 2017 they have changed their lending criteria to be able to help zero hour contract workers to secure a mortgage!

They will be taking personal circumstances into account through a manual underwriting process rather than automatically hitting ‘computer says no’.  Ipswich Building Society have said:

“Zero hour contract workers have limited choices for mortgage borrowing. We are continuing to improve our products and introduce new programmes to help those who are creditworthy, yet marginalised by mainstream mortgage lenders. We believe that ‘mortgage misfits’, such as those who are on a zero hour contract and can demonstrate a consistent income, should have the same level of options and access to the mortgage market as any other applicant.”

What Do You Need To Be Able To Apply For A Mortgage On A Zero Hours Contract?

  • Evidence of the past 18 months of your employment history & a P60
  • 3 month’s worth of payslips
  • A letter from your employer estimating the minimum and maximum hours available for you to work per month can also be considered
  • The usual lending criteria applies also

This is such great news for those on zero hour contracts and its a highly important shift as more companies are recruiting via zero contracts and more workers are forced down this route.

If you are currently working on a zero hour contract have you previously had a mortgage declined in the past based on your contract and will this tempt you to re-apply?

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avoiding house repossion

There are more than 200,000 people in arrears on their mortgage in the UK. While this number is about half that at the time of the financial crisis around 2008-09, it’s still a significant number of people who are behind when it comes to paying for their home. If you having trouble keeping up with you mortgage payments this 10 step guide should help you find a way out:

Don’t let your debts build up

As the old adage goes – you should fix the roof while the sun is shining. The UK as a whole owes £66 billion in credit card debt and it’s this sort of debt that should be cleared as quickly as possible. While it might not seem an issue at the time, if things take a turn for the worst credit card debts can add to a list of issues.

Pay more while you can

Many mortgages allow you to pay a little more than your set amount each month and this ‘overpaying’ can come in very handy down the line. It will allow you to build up equity and curry favour with a lender if you, for example, lose your job and your ability to pay.

Protect yourself

It is possible to take out a ‘mortgage protection’ policy and this sort of product could come into its own if you come into difficulty and find it hard to keep paying your mortgage.

Know your budget

Repossession could be the end result of your spending spiraling out of control and often this can start off by losing track of what you’re actually spending. Use a budget planner to help you to understand how much money you have available. That way you’ll soon know if your funds are drying up and you’re getting into difficulty.

Act early

All of that means you’ll have the knowledge you need to act early and this is something that is crucial if you want to avoid the worst. Don’t bury your head in the sand and presume things will right themselves.

Claim what you can

If you lose your job then you might well be able to get support by claiming benefits. It’s important to seek this support when it’s open to you rather than being tempted to rely on emptying your savings.

Speak to your lender…

Acting early means speaking to your lender as soon as humanly possible. Ultimately, they want to recover their money so it’s in their interest to try to work out repayment terms that you are able to meet.

…and other experts

It’s also worth speaking to experts who know their way around this sector. You can pay to speak to an advisor or look to a charity of free service.

Consider selling up

If a house becomes a big burden then you might reach the stage in which the only way to stop repossession is to look to sell it quickly and avoid it becoming an even bigger issue.

If it gets to court…

If, however, the matter gets to court then it’s important to fully engage with the procedure. You should attend the court and could still, as The Telegraph notes, stop the proceedings at this point by making an offer to the court.

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ClearScore

Last week Joe posted about 10 Ways To Boost Your Credit Rating, which really made me think how bad it is that I actually have no idea what my credit score is! I assumed it couldn’t be too negative, as I don’t have the obvious signs such as an overdrawn bank account or maxed out credit cards but I thought it was important to find out!

So I decided to check my credit score online and it turns out I’m actually not doing too bad! I used the ClearScore credit checker which was really simple (and free!) to use. I thought I would need a lot of information and paperwork to complete it, but it was completely haste free. Once I’d filled out some basic questions about my address history and income it gave me my credit score rating and clearly told me what was good and what was bad about it. It also told me where I stand in comparison to the average score of people in my local area and the average UK score – I was pleasantly surprised to find I’m above average!

ClearScore Coaching

One of the best things about ClearScore was the coaching platform it offers after you’ve completed your credit check. They have an automated instant message system that acts as a personal credit score trainer, that gives you advice on how to Build, Repair or Shape Up your credit score and the advice it gives is specific to you and your thoughts about you finances. As you go along it adds the tips to your own personal to-do list which you can tick off as you complete later on. The IM chat was really entertaining and combined valuable advice with a conversational tone and threw in some cat videos too!

As my credit score was looking good I went for the Shape Up plan. My IM chat had already added and bunch of things to my to-do list and it handily split them up by quick wins and tasks that would require a little bit more effort. Best of all, they offer some refuel advice to motivate you to carry on, mine included pug puppy videos – always a winner!!

ClearScore smashed it

ClearScore identified that not having a credit card was negatively affecting my credit score and my ClearScore coach directed me to some comparison offers of credit cards that were appropriate to me, with links to check my eligibility really quickly! This is particularly helpful as there’s nothing more frustrating than filling out all the fields on a huge credit application only to be declined after clicking submit.

I hadn’t realised how simple it was to check my credit score before and just how many things can affect it. Having the personal credit score trainer has really helped me to understand my next steps to not just improving my credit score, but my finances also! Have you tried out ClearScore, if so what are your thoughts?

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Repairing your credit rating

Do you know what your credit rating is? If you do – is it good, bad or just average? Perhaps it’s something you have never taken into consideration, but a weak credit score could come back to haunt you when you need to borrow money – to buy your first home, perhaps.

You can check your credit report for free if you don’t know what your rating is – this is important not only so you are aware and can do something about it if it is poor, but also in case there are any mistakes.

Your credit rating is used to help lenders decide whether to lend you money or not, how much to let you borrow and sometimes even how much interest to charge you – so it is vital you know what it is and are always looking for ways to improve it.

So, with that in mind, here are 10 ways you can improve your credit score:

1. Stop Applying for Credit

If your credit score is poor, then an immediate step you can take to improve it is to stop applying for credit – credit applications are filed on your record, hold fire just until you have sorted out any problems on your credit file and improved your score.

2. Get On The Electoral Register

If you have never voted before then your name will not be on the electoral register. Not only are you unable to have your say when it comes to voting, if your name isn’t on there you will also find it much harder to get credit. You can register to vote online right now, enabling you to get your name on there instantly. This is a quick and easy win to boosting your score.

3. Pay Off Existing Debt

Of course, it goes without saying, that to increase your credit rating, you must pay off any existing debt. Banks and credit card companies will be unlikely to lend you more if it appears that you are already overstretched. If you do have existing debt then it is vital you show lenders you can borrow responsibly – because in time, this will improve your credit score. Make your repayments on time and even pay off accounts early if you can.

4. Pay on Time

Missing or making late payments on your mortgage, credit card, personal loan, gas or electricity bill will stay on your credit file for six years! So, make sure you budget so you can afford to pay these off and keep a close eye on when they are due so you don’t miss one. Where possible, try to align these to come out via direct debit straight after your pay day.

5. Use A Credit-Builder Pre-Paid Card

Some prepaid cards have a credit building option that can improve your credit score. So, you are loaned an amount – you agree monthly repayments and at the end of the year (as long as you haven’t missed any) this will be recorded on your report as one year of successful repayments.

6. Credit Builder Credit Card

You have probably heard that getting a credit card is a good way to improve your credit score – providing you use it to show you can borrow and pay off money.

If you have a poor credit history then there are credit-builder credit cards available – although it is important to be aware that the interest rates charged are much higher than standard credit cards.

7. Cancel Unused Credit Cards

If you are planning on improving your credit rating so that you can apply for a mortgage or other large credit application you should know that lenders will look at how much credit is available to you, not just how much you are actually using. Holding, using and paying off credit cards can benefit your rating, however, if your cards are sitting there unused then pull the plug! 

8. Avoid Expensive Credit Repair Companies

Credit repair companies often sound too good to be true and unfortunately that is usually because they are. Credit ratings are pretty black and white, regardless of their help you will need to improve your credit rating yourself so avoid where possible paying someone else to do it.

9. Avoid Joint Credit With People With Poor Credit History

Being tied into joint forms of credit such as bank accounts, loans or mortgages with someone who has poor credit history will affect your ability to gain credit due to a ‘financial association’. Disassociating your credit from theirs is most often the best thing you can do for both parties in the long run until you both have good credit history.

10. Remove Any Mistakes On Your Credit Report

One of the reasons it is so important to check your credit report is in case there are any mistakes. It is not at all uncommon to check a report and find that someone has fraudulently applied for credit in your name. If this is the case you can contact the related company in question to have the instance investigated and removed – boosting your credit rating very quickly.

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