10/8/14

What You Need to Know About Getting a Mortgage

Getting a mortgage is one of the biggest commitments that you’ll ever make in your life. But it’s harder than ever before to get a mortgage, and in many cases, it’s even more difficult to pay it off. Ever since the banking crisis in 2008, banks have been massively restructuring and restricting the amount of loans that they’re willing to underwrite. Of course, in a way, this is a welcome step in the right direction – it prevents people who are unable to pay for their mortgage or who may become unable to pay their mortgage from borrowing more than they can afford – which was one of the major factors in the crash in the first place.

Now, it seems to have gone a little bit too far the other way – it’s incredibly difficult to get a mortgage, even if you have a deposit in place and are able to meet the monthly repayments, because there needs to be affordability in place, which generally means that you’ll need to be earning at least five or six times your yearly repayments in terms of your salary. For many people, this is a huge stretch, and the only way that you’ll be able to prove your affordability – that you can pay the mortgage back – is with a larger deposit. Again, this is often too much of a stretch, particularly if you’re a first time buyer. Many banks are asking for a least a 35% deposit, which is pricing many first time buyers out of the market, or requiring them to buy a house somewhere that they don’t really want to, simply so that they can get a foot on the ladder.

Because of this, more and more people than ever before are staying at their parent’s homes well into their 30s, simply because they don’t really have another option. In order to actually get a mortgage, unfortunately, you’ll likely need a squeaky clean credit report (i.e. no defaults on any of your credit accounts, no bankruptcies, no large amounts of credit and not too many credit accounts). If you’re currently at more than 30% of your total credit limit on all of your credit cards, that will most definitely count against you. Too many credit searches can also have a negative impact, as can repeated applications for credit cards and credit accounts, for example store cards, can make it seem as though you don’t have enough money – which is why you keep asking for credit.

Where possible, withdraw a spending budget each week – for example, $200 (or whatever is manageable for you), and use that to pay for everything throughout the week, such as your grocery shopping or your gas. It’s much easier to keep track of your spending if you buy things in cash rather than on your card, because if you can physically see the money as you spend it, you’re far less likely to. On your mortgage application, your weekly spending will also be far less messy, so it’ll help you to budget and help your application.

Read the next in our mortgage series in a few weeks.

06/19/14

How to Pay Off Debts

Debts can be devastating – especially if they eat up your monthly income and you end up spending more money on paying back your loans than you have left for the rest of the bills, or for your food or for your clothes. Getting a loan is often the easy part, especially if you have good credit as it seems like lenders are just queuing up to throw money at you.  The more credit available to you, often, the easier it is to get into a horrible amount of debt, particularly if you’ve borrowed from a short-term payday loan firm. But although it can feel like an endless cycle that you can’t get out of, it isn’t – you just need to get your head screwed on and get knuckled down. It won’t go away if you bury your head in the sand and you’ll need to put the work in, but it’s definitely possible. You’ve probably heard about all of the success stories, and although many are used for marketing purposes, there are real people with real successes – and you can be one of them.

Find Out What You’re Dealing With

You can’t start dealing with your debt unless you know exactly how much you’re dealing with. Many people pay their credit card bills automatically each month, which means that the minimum payment comes out of your account each month.  This amount changes depending on how much debt you’ve paid off, and if you don’t keep an eye on your payments each month it can be really easy to lose track of just how much debt you have. Sit down with all of your statements, including “buy now pay later” accounts and work out exactly how much money you owe. Next, take a look at how much money you spend on paying off those bills each month. How much of your monthly budget goes on paying off those debts? How much money do you have left over? And what are you spending that money on?

Living on a Budget

It’s the most frequently suggested way of paying off debts and freeing up more money to put towards your debts, but it does have less of an impact than you might think. However, it’s definitely worth doing, even if you end up putting those extra dollars towards a college fund or an emergency fund rather than towards your debts. Look at how much money you spend on your electricity bills and gas bills, your cable TV, your smartphone, your cell bill, your Wi-Fi bill, your food, drinks, clothes and any extra money that you use for leisure purposes, like going to the cinema or popping out for a meal. Chances are, you’ll spot numerous places for you to cut back on – visit a few comparison websites to slash money off of your bills and switch to cheaper brands of food at the supermarket. So far, so obvious, right?

Bring in More Money

This is an option only for some – if you can afford to spend the extra time out of the house, or the childcare costs associated with having to go back to work – then adding an extra day or two at work and bringing in extra money will be a huge help in paying off those bills. But of course you should only do extra work if you are able to. If you’re in retail, for example, and working five days a week you could always ask for an additional day each week. Or, grab a weekend job. It’s not worth working 18 hours a day if you can get by on what you’re making at the moment, so don’t push yourself too far – just strike a balance between what you can do and what you need.

Study Hard

It’s very possible that you’ll qualify for financial aid if you decide to study. There are literally thousands of night schools that offer degrees in everything from psychology to art history and if you qualify for financial aid, studying can mean that you end up with a better job – and a better salary. With that better salary, you’ll be able to pay off your debts more quickly. If you’re in a position that can attract a higher salary if you’re more qualified, this is definitely an option worth considering. For example, if you’re a classroom assistant, you could study for a degree in education and qualify as a teacher, which will pay a much higher salary.

Pay Off Smaller Debts

If you’ve got lots of debts, it’s really important that you prioritize – figure out which debts need to be paid off first in order to maximize the amount of money that you’re paying out each month. The debts you should be concentrating on are those that have the highest interest rates, but it’s also a good idea to pay off the smallest debts first – get them out of the way and then that’s one less thing to worry about! Clearing that small debt means that you can put the money that you were using to pay off that debt towards the larger debts that you have with higher interest rates. The fewer debts you have, the better, after all.

Balance Transfers

If you qualify, balance transfers are a fantastic way to reduce your debt. Transfer all of your debt to a 0% interest card. Provided you pay off the debt within the 0% time period, you’ll be able to get away with paying off your debt with no interest on top – and chances are, at the moment, you’re spending anywhere between 30-40% of your total debt in interest payments. Without that 30%, you’re freeing up a lot more money in your pocket.

01/22/14

How to Control Loan Debt

Loan debt can be scary, especially if you have other forms of debt too. Knowing how to prioritize your debts and how to pay them off to improve your credit score and to help you chip away at the debt is really important, so take a look at this guide to controlling loan debt to learn exactly what you need to do to get your debt back under your control.

Know Your Enemy

Instead of burying your head in the sand, take a look through your bank statements and any statements from your lender to learn exactly how much debt you’re in. If you don’t know how much you have to pay, you won’t be able to start making the necessary changes in order to control that debt. Know your enemy and at least you know what you’re up against.

Making the Minimum Repayment

At the very least, each and every month you need to make the minimum repayment. It won’t shift your debt and it won’t shift it quickly, but at least you’re making a contribution to paying the debt back. This really only makes a dent in the interest, but making the minimum repayments ensures that you won’t get into further debt and it will also help to improve your credit score, too.

Paying What You Can

If you can afford to pay $50 a month for example, at the very beginning, set up a direct debit so that you continue to pay $50 each and every month. Minimum repayments change massively depending on how much debt you have left and the less you have to pay back, the less you have to pay each month – but this also means that it’ll take much longer to pay the debt back. Paying back $50 each month will clear the debt far more quickly, so it’s worth keeping this in mind. You can pay back as much as you like each month, you don’t just have to make the minimum repayment – so don’t let the lender bully you into only making your minimum repayments.

If You Can’t Make Your Repayments

If you can’t make your repayments, make sure that you give your lender a call and explain the situation to them. Failure to do this and failure to make the repayment will simply cause you to miss a payment which will have a huge impact on your credit score. Call them up and explain that you can’t afford to pay the bill this week, or tell them how much you’ll be able to pay. Most companies will be happy to let you do a payment plan as it means that they’re still getting paid – plus, they get to retain you as a customer and they’ll also make interest from you too. People are always kinder than you think they’ll be, so don’t be afraid to ask them if you can set up a payment plan.

Be Sensible

If you’re in debt, you really need to reign in your spending. Spend only what you can afford and think clearly about what you really need. You might love those shoes, but do you really need them? No, not if you’re in debt. Spend your money on your bills, making your loan repayments and paying for food for your family. Save up any money that’s left over and make contributions to your debt as and when you can – that way, you’ll chip away it, reducing the debt without putting any additional strain on your household budget.