Posts Tagged With: mortgages

Money: The Roof over your Head

This is important, but sometimes people either forget, or have never been told, just how to respect the value of their home.

Your home is usually the biggest purchase in your life. A lot of people in Europe get along happily by renting all their lives, but I think that isn’t the norm elsewhere. If you’re into owning your own property, then here are a few thoughts:

  • If you have a mortgaged property, you’re not completely the owner until it’s fully repaid. And, as the small print in UK adverts says, if you don’t keep up repayments, you may lose your property.

  • Therefore, it’s important to make sure you keep up those repayments; it wouldn’t hurt to save up and build a reserve specifically to cover six months repayments, so that in any eventuality, whether losing a job, illness or whatever, you’ll have six months in which to get back on your feet. Let me put that more gently, tactfully: Do it!

  • Saving isn’t always easy, but think about it – if you put away just 10 percent of your (net) income, that doesn’t hurt that much. Maybe not every month, but whenever you can.

    Save your small coins. Get the family to do the same. Make piggy banks out of empty soft drink cans, and all the small coins that you don’t normally use (I’m told some people chuck out their pennies! As an ex-banker, I cringe…). In a years’ time you’ll find that you have a pretty interesting amount of money saved up. I paid for air tickets for wife & me on a holiday, through saving pound coins as well as smaller ones.

  • This next one is really important: don’t take out a second mortgage for anything except to improve or maintain your property. Not for a speedboat, not for a holiday, nor anything. Your mortgage is meant to end while you’re not too old to still enjoy life. Once you’ve retired, you will regret the drain on your income if you still have years to repay a mortgage, and you won’t remember the holiday you used the money on.

  • Another, even bigger, never-never: don’t  ever speculate with your property. Not with the roof over your head. If you have a second, holiday property, fully paid up, repeat fully paid up, that’s different. I’ve seen people using their house as security for a loan to start a business, or to finance stock market investments; sometimes you win, sometimes you don’t. If you don’t, you could lose the wife and family as well as the house…

    A simple gambling rule – don’t play with more than you can afford to lose. Period.

  • Repay that mortgage as soon as possible. If you pay a bit extra each month, you can knock years off your mortgage. A small amount, £10 or £20 helps just fine, especially if the interest rate is high.  If rates are in double figures (it does happen. I’ve seen over 20 percent rates), the effect is much greater. A typical mortgage often allows you to repay about 10 percent extra.

    As a side bonus, this could help if you find yourself strapped for cash at some point, as the bank is likely to let you miss a few months payments as long as you’re within the laid down reduction programme.

  • Here’s an interesting one I never came across until recently; some banks, somewhere in the obligatory small print, allow themselves to attach assets like your mortgaged property to help repay a loan or overdraft if you default. Solution simple – don’t take up a mortgage with the same bank that you use for the rest of your personal and business accounts.

That’s all that comes to mind at the moment. If you have other thoughts that might help other people along, I’d love you to write in. If you have an article in you and you want a home for it, let me know.

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Money 3

Oops; I’ve just published Money 4, for reasons mentioned in it, so I guess I’d better publish this one, which I still wanted to polish up a bit:
~~~~~

Ever since I left the bank, long, long ago, I’ve obviously not had access to all the data streams, in-house gen, and other sources of information that exist. It does help to have a sound financial advisor, but that depends on how flush you are.

So, what to do? Well, first of all, be sensible and save. Especially in hard times. Don’t keep all your reserves in one basket, have some in the stock markets, some in other, balancing investments like gilts, some in good, solid assets like gold, silver, some in liquid form – needs to be accessible at a moments notice. There are so many books & magazines and Internet resources that can keep you up-to-date with what’s available, I couldn’t be more help even if I wanted to, I’m now a publisher, not an investment advisor. I can give out ideas in general, and everyone is different, so you have to take thing further yourself.

What I say has to be adapted to your own circumstances. Also, style is a factor; if you’re young, you can afford to take a few risks (always within reason). Come to middle age, less so, and if you’re approaching retirement, then you need to be risk-averse. Then, also plan out your strategy to spread through short-term, medium term and long-term investments. The latter is usually your home sweet home. Hopefully, by retirement age, you want to be rid of the mortgage as well, leaving you in relative peace…

What I can do, is to mention things to watch out for. And help you to sharpen your mind to developments that you can learn from. Like a Native American Indian, or an African Bushman hunting for food, you need to learn to pick up the scent, have a keen eye for clues and tracks, footprints, except that yours will be of the financial kind, and not physical.

For example, I mentioned earlier that back  around 2003, personal borrowing passed the trillion pound mark, for the first time in history. That’s time to start watching out for property bubbles, stop buying property at ridiculous prices, etc. Soon after New Labour got into power, Gordon Brown didn’t waste time. He sold off most of our gold reserves at the pitiful prices available at the time; he added a really painful levy on the pension funds, that really hurt. With the result that your investments, pension and otherwise suffered, because eventually, it’s always the customer who pays, be it pension funds, supermarkets or fuel. Yes? Did he make saving more attractive? Of course not. He reckoned we/he had the bubble trap well under control, so spend, spend, spend. No more boom & gloom…

Enough. Those were more clues/tracks to note down. You also have to know a few rules, before you recognise they’re being broken. For example:

  • Always, repeat always, help people into a save mentality.

  • Don’t mess with the pension funds. Regulate them so they don’t do stupid things, but don’t bleed them.

  • Residential property prices have to fit into affordable levels. If the average property is not priced within about 3.5 to 4 times average annual earnings, things are out of kilter. If cheaper, you know you’re getting a good deal. If higher, you’re paying too much and running the risk of negative equity sooner or later. Nowadays, people tend to move every 8 years or so. If you can’t get your price when moving, you probably can’t move. People didn’t want to hear that ten years ago, now everybody understands it.

Let me know what you think, tell us about your experiences. Am I making sense? I’m interested. I do want to pass on tips that help people, It costs me nothing but a bit of time. Leave a comment, or if you want to contact me directly, here’s a contact form below; it isn’t for harvesting your email address, it’s to prevent spammers from harvesting mine.

Categories: Money, Uncategorized | Tags: , , , , , , , , , , , , , | Leave a comment

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