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Monthly Archives: February 2015

Morning Star

Morningstar.co.uk provides information and guidance for making better investment decisions. Includes in-depth fund research, portfolio investment alerts, and newsletter subscriptions.

Trustnet

Trustnet is devoted exclusively to research. Trustnet contains information covering many different investment funds and trusts.

Business Protection

Business protection is all about insuring for the unexpected. It’s a way of protecting your business if something goes wrong. It can provide an essential safety net for all types of business.

Personal Protection

Protection is the bedrock of financial planning. Dan is able to assess you’re current circumstances and also look at your future goals and help ensure that you are protected for all eventualities.

For more information please contact Daniel Cottam on 07746125102 or submit an enquiry and we will be happy to assist you.

What You Need to Know about Help to Buy

Help to buy may no longer be headline news but it is still alive and well and providing valuable support to people buying a new home, and its availability has now been extended to 2020. In particular it can help first time buyers struggling with the challenge of finding enough savings to put down a respectable deposit. The scheme comes in two forms: equity loan and mortgage guarantee.

Equity Loan

The equity loan scheme aims to bridge the gap between a small deposit and a mortgage for a smaller percentage of the purchase price. This scheme is available to those looking to move as well as first time buyers, but can only be used when purchasing new-build property from a home-builder registered with the scheme. Under current rules buyers are forbidden from using this scheme in combination with part-exchange on any existing property. Of course, there is absolutely nothing to stop buyers from selling their property separately and using the proceeds to (help to) fund the necessary deposit.

Buyers must be able to put down a minimum of 5% of the sales price (maximum £600,000) and the equity loan scheme will provide a maximum 20% of the purchase price. This means that buyers only have to find a mortgage up to 75% of the price paid. No loan fees are charged for the first five years of the loan. Following this interest is charged on a scale which rises annually in line with any increase in the Retail Price Index (RPI) plus 1%. The loan must be repaid within 25 years or when the home is sold. At that point the borrower has to pay the same percentage of the proceeds of the sale as the initial loan was of the original purchase price. In other words, if the borrower takes out the maximum 20% equity loan, the borrower pays 20% of the total market value on any future sale.

Mortgage Guarantee

The mortgage-guarantee scheme is essentially a form of insurance available to lenders who provide mortgages for higher percentages of the value of the property. Unlike the equity loan scheme, the mortgage-guarantee scheme can be used to buy existing property (as opposed to just new-build property). Shared-ownership properties are, however, excluded from the scheme.

As with the equity loan scheme, the buyer needs a minimum deposit of 5%, but in the mortgage guarantee scheme the lender provides a mortgage for the remainder of the purchase price in the normal way. The lender can, however, purchase what is effectively an insurance policy from the government for up to 15% of the value of the property. This helps to reduce the risk of lending to buyers with smaller deposits.

The mortgage guarantee scheme is open to people who have owned property in the past. Borrowers must, however, have sold the property by the time they enter into the scheme, and must use a repayment mortgage, rather than an interest-only, offset or guarantor mortgage.

It All Means in Practice

For many people, a house is the single biggest purchase they will ever make in their lives. It is therefore crucial to look carefully at all the available options to ensure that you get the most suitable deal. It can also be hugely valuable to get some advice from a financial adviser, who can not only answer any questions you have about the house-buying process but also help to make sure that your finances in general are in as good a shape as they can be before you start applying for a mortgage.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

For arranging a mortgage a fee of £250 or 1% of the loan amount, is payable on completion. Typically this will be £349

How to Save with an Offset Mortgage

Buying a home is generally one of life’s most significant events, even for those who have been through the process before. This being so, getting the right mortgage can have a major impact on the family finance.

What Kinds of Mortgage Are Available?

With a repayment mortgage, the monthly payment covers both the capital sum borrowed and the interest due on it. At the end of the term, the mortgage is guaranteed to be paid off in full, providing all the payments have been made on time.

With an interest-only mortgage, the monthly payment is simply to cover the interest owed. At the end of the term the borrower needs to pay off the capital sum borrowed in full.

With an offset mortgage, the borrower essentially has access to a giant overdraft, which is available for a fixed term. The balance must be paid off by the end of the agreed term..

What Are the Main Benefits of an Offset Mortgage?

The benefit of offset mortgages is that the savings made by reducing the interest due on the capital sum borrowed will be greater than the interest earned on money held in a standard current account or instant-access savings account.

Interest income is liable to tax, and the amount of tax due (if any) will, of course, depend on an individual’s circumstances. For working-age adults however, there could be significant savings to be made by foregoing taxable interest income in favour of reduced interest charges.

Offset mortgages offer a higher degree of flexibility than either repayment or interest-only mortgages. Borrowers on regular incomes can calculate how much they need to set aside each month to have their mortgage paid off by the end of the agreed term and stick to that. Borrowers with more variable incomes can increase and decrease their payments in line with their earnings. Likewise borrowers can dip into their savings, if they find they need or want to. Hence overpayments can be made with confidence, since the money can be withdrawn if necessary rather than being locked away.

How Is Interest Calculated with Offset Mortgages?

In terms of interest, offset mortgages typically work in the same way as repayment and interest-only mortgages. They may be fixed-rate, which means that the interest rate is set for a specified period. They may also be tracker mortgages, in which the rate charged to borrowers goes up and down in tandem with changes in the interest rates set by the Bank of England.

Are There Any Disadvantages to Offset Mortgages?

Offset mortgages can be harder to find than either repayment or interest-only mortgages. Borrowers may therefore have to look a bit longer before finding one. Borrowers may also find it more challenging to move from one provider to the other in search of better deals (e.g. new fixed-rate deals). While it is quite possible that the availability of offset mortgages will increase as people become more aware of them, this cannot be guaranteed.

The disadvantages of an offset mortgage include that they often have higher interest rates compared to base rate trackers, fixed rate and other mortgages, that most Offset Mortgages are variable rates which put you at risk of interest rate rises, that you need a certain level of savings in your account to make it worthwhile, and they require discipline.

Likewise, some people may prefer the security and imposed discipline of repayment mortgages, even if they may not be the best deal from a strictly financial perspective. The flexibility of offset mortgages may lead to temptation or alternatively to individuals being overly worried about spending money which has been put into their mortgage fund. Getting some advice from a financial adviser can help to resolve these issues and give you the best chance of finding the right mortgage for you.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

For arranging a mortgage a fee of £250 or 1% of the loan amount, is payable on completion. Typically this will be £349

Life Insurance

Life Insurance (sometimes known as Life Assurance) helps provide financial security for people who depend on you, should you die.

Although money can’t replace a loved one, it can help those left behind to weather the financial storm. For example, it could pay off the mortgage or provide an income to help cover regular household expenditure.

Types of Life Insurance

There are different types of Life Insurance – the most appropriate type for you will depend on your circumstances. Life Insurance will pay out either a single lump sum (sum insured) or a regular income when you die.

  • Term Insurance – This is the simplest type of Life Insurance. You choose how long you’re covered for, eg. 20 years (the term), and the policy pays out if you die within the agreed term. You can also take out term cover as a couple, with the policy paying out on the first death only during the term. There are several different types of Term policy available, depending on your needs.
  • Family Income Benefit Insurance – This is essentially the same as Term Insurance, but instead of paying a lump sum when you die, it will pay out a regular income instead. This type of payment may be more suitable where the main purpose of the policy is to provide ongoing financial support to dependants.
  • Whole of Life Insurance – This pays out a lump sum when you die, whenever that is, as long as you are still paying the premiums.

Related Articles

This article (Life Insurance) is intended to provide a general appreciation of the topic and it is not advice.

For more information please contact Future Perfect Financial Solutions Ltd on 02476 447100 or email info@futureperfectfs.co.uk and we will be happy to assist you.

Article expiry: 01 Apr 2015

Payment Protection

Payment Protection Insurance / Short Term Income Protection Insurance

Payment Protection Insurance and Short Term Income Protection Insurance can provide a monthly income to help cover your regular outgoings if you can’t work due to an accident, illness/injury or, often as an optional extra, unemployment.

There are important differences between these products, and Income Protection Insurance. They include a limit on how long the replacement income will be paid for – usually between 12 and 24 months. By contrast, Income Protection Insurance will pay out for as long as you are unable to work (up to the policy expiry).

Unemployment cover is often an optional extra on these policies, or can be purchased as standalone cover.

Related Articles

This article (Payment Protection Insurance / Short Term Income Protection Insurance) is intended to provide a general appreciation of the topic and it is not advice.

For more information please contact Future Perfect Financial Solutions Ltd on 02476 447100 or email info@futureperfectfs.co.uk and we will be happy to assist you.

Article expiry: 05 Apr 2015

The value of Protection

Far from being a luxury, Protection Insurance should be considered essential, especially if you have a family or people that rely on your income.

If you suffered a serious illness or injury, you may lose your income . This could lead to you losing your home.

Similarly, if you died, your loved ones may be unable to maintain their current lifestyle without your income.

But with the right level of Life and Protection Insurance, you may be able to:

  • Pay off your mortgage
  • Maintain your or your family’s lifestyle
  • Pay for replacement childcare
  • Cover school or university fees
  • Pay for specialist nursing support

You may already have Life and Protection Insurance in place, but it’s still worthwhile reviewing your current cover levels. Personal circumstances can change regularly so it’s important to ensure your level of cover is appropriate.

Related Articles

This article (The value of Protection) is intended to provide a general appreciation of the topic and it is not advice.

For more information please contact Daniel Cottam on 07746125102 or submit an enquiry and we will be happy to assist you.

Article expiry: 05 Apr 2015

Critical Illness Insurance

Critical Illness Insurance pays out a tax-free lump sum on the diagnosis of certain life-threatening or debilitating (but not fatal) conditions including heart attack, stroke, cancer and major organ transplants.

This list will vary depending on the insurer, as will the exclusions for making a claim.

Critical Illness Insurance often comes as an optional addition to a Life Insurance policy, but can also be purchased on its own.

Policies usually only pay out once, so they don’t necessarily replace your regular income, but you can use the money towards medical treatment, your mortgage or anything else you choose.

Many people buy Critical Illness Insurance when they take on a major commitment, like a mortgage, or start a family. However, since we’d all like to have our financial commitments lightened if we were to suffer a serious illness or injury, the cover is relevant for most of us at any time.

If you already have Critical Illness Insurance you should think carefully before you cancel your existing policy and take out a new one.

For example, if you’ve developed any illnesses since you first took out the policy, you may lose some of the benefits when you replace it. That’s because pre-existing medical conditions may not be covered by the new policy.

Related Articles

This article (Critical Illness Insurance) is intended to provide a general appreciation of the topic and it is not advice.

For more information please contact Daniel Cottam on 07746125102 or submit an enquiry and we will be happy to assist you.

Article expiry: 05 Apr 2015

Income Protection Insurance

Income Protection Insurance pays out a regular tax-free replacement income if you become unable to work because of illness, injury or, with certain policies, unemployment.

It could help you keep up with your mortgage repayments and other living costs until you’re able to return to work.

Policies have a waiting period before they pay out, which begins when you become unable to work. The longer the period chosen, the lower your premium. It’s a good idea to find out what your employer would pay you, and what state benefits might be available so you can choose an appropriate waiting period.

The premium you’ll pay will vary depending on your age, health and job, as well as the level of income you wish to protect.

If you become ill or suffer an injury during your working life, an Income Protection policy can help protect against any possible loss of income, and speed your return to work.

Related Articles

This article (Income Protection Insurance) is intended to provide a general appreciation of the topic and it is not advice.

For more information please contact Future Perfect Financial Solutions Ltd on 02476 447100 or email info@futureperfectfs.co.uk and we will be happy to assist you.

Article expiry: 05 Apr 2015

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE