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Top Five Tips to secure a Mortgage

Getting a mortgage is not easy these days. There are many things though that you can do which will increase your chances of getting one. There are five things that you can do or check to start with to make sure that you have the best possible chance of securing one.

Check your credit record

It is really wise to start off by checking your credit record. You can do this for free and it will allow you to see whether there are any mistakes or any outstanding debts that could be having an impact on your credit rating. Even if your credit rating is good, anything like this could make you seen as more of a risk. You may secure a mortgage but may not be offered such a good mortgage rate as a result of it. Therefore it is really important to take a look at it and have a think about what you can do to change things on it so that it improves. It may take time to do this, but it is worth doing as it could make a huge difference to your chances of securing a mortgage and the interest rate that you are offered.

Save a good deposit

Most people realise that you will need a deposit in order to buy a home. The lender will want to see that you are capable of saving a sum of money to help them trust that you will make the repayments on the loan. Usually you will need to save around five percent of the value of the house you want to buy in order to secure it. However, if you can get together more than that, it will enable to lender to trust you even more and they will be more likely to let you have a loan. They will also be happier if they are lending you a smaller percentage of the value of the property as this will give them more security.

Clear your debt

It is important to make sure that you do not have lots of outstanding debt when applying or a mortgage. You may not think that it is a problem if you earn enough money and have a deposit, but it will be a factor in the decision made by the lender as to whether to lend to you or not. They will want to calculate whether you have the means of making the repayments each month. For this they will look at your income after tax and your expenses to see if they feel you will have enough spare money to be able to make the payments. They will also want there to be extra left over in case the interest rates increase and so by being debt free, you will have less repayments to make and will have more means to pay back the mortgage. They will also see an unpaid debt as a sign that you may not make the repayments necessary on the mortgage either.

Pay bills/rent on time

By paying your bills and your rent on time it shows that you can be relied upon to make all payments on time. The lender will need to trust you and will want to see evidence that you will make your mortgage payments when required. If you have any outstanding bills or long term unpaid ones then make sure that you pay these off. If you are not sure whether you have outstanding bills to pay then they will be on your credit record, so if you have looked at this, then you will know.

Have a secure job

Having a secure job is really important to a lender. They will want to see that you have a good income coming in that will cover the mortgage repayments as well as your other expenses. You will need to have been working there for at least three months and not in a probation period in order to make sure that it counts as secure. You will need a permanent contract not a zero hours one. If you are self-employed it will be more difficult to borrow money but there are lenders that will provide a mortgage but it could be a lot dearer and more difficult.

Should you pay your Childs University Fees to Save them Getting into Debt?

It can be very difficult watching your child leave university with a huge amount of debt piling up. It can then get even scarier when you see their statement and it looks like they owe huge amounts of money and the interest means that the amount they owe will pile up. However, unless they have a career development loan (which works very differently), having a student loan should not be seen as scary and there should normally be no advantage in paying in back early.

It is worth looking at a student loan in terms of the repayments rather than the amount owed to start with. They will only have to start repaying when their income is above £21,000 and then it will only be a small percentage which will increase as their salary increases. If they take time off work, perhaps through illness, to have children or work part-time or work at a low income job, their repayments will stop. This money will not need to be repaid at a later date in most cases and they will not be penalised for not paying, in the way that you would with any other type of loan.

This means that most people will not repay their entire loan as after 30 years the debt is written off. So many will never pay back any of the interest owed anyway and probably not the even the money that they borrowed. Of course, you may feel that it should be paid back because you feel morally obliged to which is a different situation. They have no obligation to do so unless they are earning a high enough salary.

If they are a middle income earner (so having to make some loan repayments but not the full amount) but you have a spare lump sum to pay towards the loan, then this could be a waste of money. It is important to do the maths on this one. Consider how much is being repaid each month and how much will be repaid in total. Consider what will be left. If the lump sum is paid and after the thirty years they still owe money this will be written off. If you have paid in the lump sum, less money will just be written off and therefore they will still make the same monthly payments but will end up paying in more than they needed to over the term. As a parent you will have just been contributing to the government’s income and not making any difference to your child’s financial future at all. So unless you can pay in enough to clear the debt or allow it to be paid off sooner, your child will not gain anything financially. Even if it is enough to clear the debt or allow it to be paid back sooner, it still may not be the best financial decision to do this.

For those who are earning really high salaries from when they leave university and expect to continue to do so, they will pay their loan off before the end of the term and so they will benefit from paying it off early to avoid that interest. But you need to be able to see into the future to know whether this will apply to your child and whether they will continue to have the same high earnings for thirty years. Even if you are confident that this will be the case, it is worth considering whether this is the best use of your money. Chances are that theywill want to buy a home. You may be better off using the money to pay towards a deposit on a mortgage or to pay off a mortgage or other debts. It is well worth comparing interest rates here to see which would be better. If they have credit card debt then this will be very expensive and much more worth paying off. If they have a mortgage then it could be more expensive, it will depend on the current rates and you will need to compare them.
You will also need to consider which you think will be more worthwhile, paying off their mortgage or paying off a student loan. As well as the cost consider what would happen if they had a sudden drop in income and how they would manage. They would not have to make their student loan repayments, but they would still need to pay for that mortgage.

How to help Family Members Get out of Debt

It can be very difficult seeing family members struggling financially and you might be really tempted to help them to get rid of their debt. However, it may not be as straight forward as you expect.

To start with you will need to make sure that they want you to help. In any situation it is impossible trying to help someone unless they really want you to help them. This is because they will just be determined not to change anything. They may be happy as they are or they may just not want help from you. They may see your request to help as a criticism of their behaviour and this could have a big impact on your relationship with them. You may end up falling out with them and that would not be good at all.

If they do want help then it is important to give them the right sort of help. Do not get cross with them about the situation they are in, they will know that it is not a good situation to be in or else they would not be asking for help. Try to remain calm and if they are in a lot more debt than you were expecting try not to appear too shocked! It can be easy to ask them how they managed to get in so much debt, what they have to show for the money, if they regret it and things like that. However, this will not help them or you and so it is best if you do not get involved if you think that you might be tempted to say things like that.

It can be tempting, if you can afford to do it, to offer them the money to pay off their debts. Although this would be a very kind gesture and would be likely to be very much appreciated, it may not be the best way to go about things. If you just give them money, they will not learn how to get out of debt and they may just start getting in debt again thinking that they could be bailed out by you again in the future. You will not be able to afford to do it all the time and you may find that there is jealousy from siblings if you help out one and ignore another who may be working hard to stay out of debt.

Therefore it is much better to teach them how to budget their money so that they can start to pay off those debts. They will need to know exactly how much they owe and to whom and then they will be able to choose which they would like to pay back first. You may need to show them how to reduce what they are spending and increase what they are earning so that they will be able to do this. They will also need to choose which debt to start paying off first. This could be the most expensive, which would make sense financially as it will be most economical. However, they may prefer to get rid of some smaller debts to start with so that they can just clear some. This method works better for some people as they feel like that are having a bigger impact on getting rid of the debt and it can be more motivating as well.

If you still feel like you want to give them some money, then wait until they have been budgeting for a while and started to repay some debt. They will have already learned some valuable lessons about spending and earning and repaying by then and so they will be less likely to get into debt again, as they will know how difficult it can potentially be to get out again. They will also know how to continue to repay the debt, if your contribution is not enough to repay all of it.

You may find, that despite your best interests, it is too difficult for you to help a family member. You may not be able to get on well when discussing things, it may be hard to be patient or you may just find that you do not have the knowledge to help. There are free debt services available where help can be given to advise someone on how to get on track with repaying debt. It may be wise to give them the details of one of these and let them be guided through it by an expert. You could still encourage them and help them but not being so directly involved could be much better for your relationship with them.