Interest rates on savings are currently so low that your money is earning very little. It probably makes sense to pay as much as you can afford every month to reduce your mortgage debt where the interest will be higher. With the ‘right’ flexible mortgage you can probably borrow back the money you’ve overpaid if and when you need to.

What is a Flexible Mortgage?

• The term ‘flexible’ has become rather overused by the mortgage industry. Some deals are only fairly flexible but others give you far less flexibility than the name suggests
• Flexible mortgages let you overpay as a one-off payment or by increasing the amount you pay each month.
• You should be able to make reduced mortgage payments when you have overpaid on your loan first. So in good months you pay more than the minimum required by your mortgage agreement but in tough months you can pay less as long as you do not owe more than if you had always maintained normal repayments.
• More formal ‘holiday’ periods are possible in flexible mortgage agreements.

How flexible is the Mortgage Lender?

• Flexible mortgages vary as there is no legal definition or common standard
• Talk to your lender and solicitor so you understand from the outset.
• You must also read the small print to take advantage of the flexibility on offer.
• Smaller building societies may deal with individuals with flexibility but may also be constrained by rules.

Flexible Mortgage Issues

• If you fall into arrears you may loose the rights to flexibility so take care.
• Check that any holiday or reduced payments will not be entered on your credit score record.
• Do not over pay for flexibility you do not need. Check your interest rate is competitive, some flexible deals attract a premium rate of interest.
• Flexibility is a long term issue and you should be thinking about the whole life of your mortgage. Better to get good flexibility on key issues than have quick flexible wins now in year one.
• The flexible mortgage calculator on this link can show the benefits of early repayments
• An offset mortgage is one special type of flexible mortgage.

Cost is not normally the same as price! The price of a house on the market may be £230,000 but who will pay the asking price? £200,000 may be the negotiated and agreed contract value and thus becomes the price. This ‘price’ will be registered with the land registry as the transaction value. However this is not the cost to you.
Your costs will be larger because it will include legal fees and stamp duty plus removal and possibly renovation and repair costs. The list of extras can go on for quite a while so set a budget and stick to it.

You Set Your House Price

• You are the buyer and if you do not like the price or the terms of the deal you do not need to buy.
• There are other properties that will become available and you should try to avoid emotions leading you into agreeing a poor house price.
• Do not ‘shop outside your price range’ in the current climate. When property prices were booming it made sense to push yourself a little bit as the market took you along. Now the opposite is true and you should err on the side of caution.
• Mortgage lenders do not set the house price but they can be influential in getting to a valuation. They only lend a percentage of their valuation not of the price you are paying. Take note of these hidden messages in coming to the price you are comfortable paying.

Other Sources and Comments

• The market paints a broad canvass on house prices but individuals set individual prices for their own reasons.
• Some vendors are inflexible whilst others expect to horse-trade to a certain extent. you need to read the context for the vendor and yourself in assessing the price you are willing to pay.

Read a fuller explanation about the factors of supply side and demand side economics in the housing market on Housing Market.org

If you are able to pay off your mortgage early, you can save yourself significant sums on the total cost of the mortgage.

(see: benefits of paying off mortgage early)

• assuming an average interest rate of 7%  on a £150,000 mortgage.

Paying in 15 years rather than 30 years, saves a total of over £106,000 in the total interest bill

Early Repayment Through Circumstances

• The most common early repayment arises when the borrower moves home. The old mortgage is repaid and a new one may be negotiated in it’s place.
• Windfalls are unfortunately all too rare and even if you win the lottery or are left a large sum of cash it is not always best to repay your mortgage.
• Divorce, death or bankruptcy can lead to the termination of a mortgage. Specific terms for paying off your mortgage in these circumstances will depend on the money available and the facility to negotiate.

Early Repayment By Borrowing Less

• Start with the lowest amount of mortgage you can. Less now means less repayments later. Do not add soft furnishings and extras to your mortgage but try to pay for them out of revenue.
• Similarly do not add mortgage fees and legal costs to the overall mortgage. Remember the lenders job is to make money out of you and that can be done by lending you more for longer.
• Go for the lowest net interest rate you can. A high interest rate can increase your overall mortgage term by several years.
• Opt for the biggest deposit you can afford as this may reduce the rate of interest you are charged.

Early Repayment By Advancing Payments

• Ensure your mortgage has no penalties for early repayment but includes the facility to over-pay when you have the cash.
• In many situations an offset mortgage will reduce your repayment period often by years. You are credited with interest on your current (checking) account and other deposits before the lender calculates the mortgage interest to add to your total borrowing.
• If given the chance to reduce monthly repayments (say interest rates have fallen) do not take up the offer. Keep your payments at the old or better still an increase level for quicker repayment of the capital.
• If you have budget savings e.g lower insurance costs then use the money to repay a bit more on your mortgage.
• Consider any lump sum you have as a possible means of to pay off your mortgage early.

Best Types of Mortgage For Early Repayment

• An offset mortgage / Current account mortgage automatically uses money from your bank account to reduce your mortgage total. This means you can concentrate on saving money and the bank will automatically reduce your mortgage total.
• Look for flexible mortgages which don’t penalise early repayment.

Saving Money To Pay Off Your Mortgage Early

• Consider holding back on other investments such as pension and concentrating on repaying your mortgage. Once your mortgage is paid off early, you can put greater resources into pensions and savings.
• See these tips for saving money in the home
• Reduce unnecessary spending – see: 7 Tips for Reducing overspending

For more tips on Reducing Your Mortgage Quicker read Housing.org

The reasons for many of the current mortgage refusals include the lenders own problems, a perception of your status problems or a property related problem.
Above all you should read the messages and do something about what is hidden in the refusal.

Property related Problem

• The structural survey is for your benefit but the interpretation is often left to the prospective lender. Their interpretation will be risk averse.
• If the property is badly constructed perhaps from dangerous materials or with poor technique such as a wrongly pitched roof the lender may adjust the loan value down aggressively. They are saying BUYER BEWARE so take the hint!
• The lender will know about problems and blights in a tight area such as flooding or subsidence risk and adjust the loan accordingly. Whilst they may be reluctant to tell you why for fear of being sued (what a litigious nation we have become)
• Simple over valuation of a property can derail a mortgage.
• Remember there are other properties and they may be more suitable or less risky for you so don’t shoot the messenger

Lender related Refusals

• You can’t do a lot if the lenders national policy is sent down to a local branch eg we don’t want to lend to people from a particular profession or for a type of property or our loan book is full.
• Lenders who run out of money do not like to admit that fact and try to continue business as usual! Until the crunch and you get knocked back.
• Your face or profile fails their internal IT test.
• Take you business elsewhere. The market is more lively than you may think!

Personal related Refusals

• You may have seen it coming with a poor credit score, low deposit, uncertain income or whatever. Try match your aspirations with the right sort of lender.
• Unexpected refusals should be explained. The explanation will allow you to study and correct the issues for your next attempt to get a loan.
• Outright refusals are unlikely to be reversed on appeal.
• Conditional refusals or approval on terrible terms may be subject to negotiation.

Common Reasons for Refusal

• Overdue or missing your current mortgage repayments.
• Becoming self-employed or changing job during loan negotiations.
• Reducing your credit score.
• Having too many outstanding loans and credit card debts.
• Making errors or omissions on the application forms and documentation.

See also Mortgage refusals in a changing market

Good News In the Month

• The total amount of personal debt in the United Kingdom has continued to fall. The rate of fall did slow due to seasonal borrowing but the trend is in the right direction.
• The total number of people in work has risen but unfortunately so has the number of unemployed.
• National opinion poll (GfKNOP) market researchers report that consumer confidence rose 4 points in January. Optimism for the next 12 months also improved.
• USA have started to report minor improvements in economic sentiment. This week it was an improvement in the amount of savings as more money was tucked away.

Less Good News of the Month

• Politicians are getting more involved in the management of British banks via the ‘Bonus Shambles’. We were then taught a lesson by the markets who decimated the share price of the banks and reduced the value of the countries investment dramatically.
• Europe and the Euro continue to vacillate about the politics of the solutions and our government seems to be uncertain bit players.
• The barometer for unemployment looks set for more turbulent times.
• Too many major issues and initiatives are still in the political melting pot eg Welfare reform, NHS organisational framework, delivery of the economic reform and debt reduction
• The population is still concerned about MP’s moral compass and sleaze, nepotism, hypocrisy, probity etc are set to remain on the agenda.

Wish List for David Cameron

• Stand firm on Europe and keep looking to BIRC and the rest of the world.
• Complete at least one reform with vision, energy and panache. No dithering or turning.
• Make sure the pain of the present ‘delivers the goods.’

Since 1991, there has been no rebanding. The effect is that many houses are incorrectly banded leading to a significant number of people paying too much council tax.

The easiest way to check is ask local neighbours what band they are in. If they are in a lower band you have a very good chance of not just getting a lower council tax bill, but getting a backdated rebate. A friend of mine recently was successful in getting a lower council tax band. He described it in more detail here – A Council Tax Reband could save you thousands

Other tips for Saving Money on Council Tax

• Students Don’t Pay council Tax
• If you live alone, you are entitled to get a 25% discount. Make sure you tell the council though.
• If there is one adult and several students, you are entitled to the 25% discount.
• Renovation. If the house is empty for renovation, you can claim an exemption for upto 12 months.

On a personal note, I really dislike the council tax, it is very regressive and takes a high % of my meagre teaching income. I would like to see a local income tax which would be fairer. The thing with the council tax is that it was rushed through because everyone despised the poll tax. But, the solution given was not the best.

Also see: Council Tax at Guardian

Other Extreme Council Tax Savings

• Live in an area where council tax rates are low.
• Live where council services are run on the basis of good value for tax payers money or where the government subsidy is high.
• ‘If you’re on a low income, whether you’re working or not, and need financial help to pay your Council Tax bill, you may be able to get Council Tax Benefit. Find out more, including who is eligible and information about the Second Adult Rebate’ from Directgov
• Beware of the potential ‘mansion tax’ beloved of the Libdems but also keep an evil eye on Eric Pickles

Read rhetoric or reality on Council Tax

Professionals carry baggage. They have a living to earn, standards committees to satisfy and a ‘been their done that’ attitude bordering on arrogance. Give me a committed amateur not a do as I say not as I do merchant.

Assets can be sound like your savings, property, pensions, antiques, precious metal etc. I said ‘sound’ not ‘safe and sound’. Assets need maintaining and looking after and occasionally changing.

Wasting assets can be part of an accountants mumbo-gook. It is an asset that deteriorates or is consumed with time like a mine or a new car. The car is wasting away as you drive it off the forecourt. Waste not want not or want not a wasting asset.

A liability is something you have to pay like a debt or a contingent liability which is something you will have to pay if something else happens. If your pet gets hungry you must provide the food, if your partner spends on your credit card; I think you should be getting the drift.

OK ‘so what’ you are asking. The mumbo jumboist would say the opportunity cost of spending on the above 3 items is an exchange of leisure time ie working for money not enjoying yourself. It should be a conscious decision

‘Borrowing money to buy things that go down in value is a very bad habit to develop’ John Middleton, Infinite Ideas.

So Do your own thing - you will anyway no matter what I say. Do not get drawn into debt-equity CDC swaps or whatever (a shame the banks ever did.)
I have cleared one or two, of the tons of chips from my shoulder! Keep watching for more chip suppers.

The spirit of this article was spawned by ‘Detox your finances: 52 Brilliant Ideas for Personal Finance Success’ by John Middleton, Infinite Ideas available from Amazon

Core Credit Card Types

• Purchase card is the plain vanilla variety that has been around for decades typified by the original pre Visa Barclaycard. It will have some limited extra features and rights created by credit and sale of goods laws. It is the staple and our card type of choice.
• Cashback cards do what they say on the tin. They offer a lump sum cash reward based on the amount you buy using the card. Rates vary and the largest percentage (2.5%) is currently paid on petrol. Supermarket shopping usually pays well on most cashback cards. There may be maximum reward, annual fees or conditions attached to each card. These cards may be useful if you repay your card in full every month.
• Low standard rate cards have interest rates (APR’s) starting at about 7% compared to normal charges from 17% upwards. They are useful for those looking for credit rather than cheap shopping.
• Rewards cards have a loyalty reward in the form of points. Tesco and Nectar points are available on some cards and other large retailers use this type of card for promotion of their brand. Airline cards are offered by many of the UK based airlines including Virgin, Ryanair, and BA. Their points rewards may go to new flights like the old airmiles (now Avios).

Special Circumstance Credit Cards

• Bad credit are premium interest rate credit cards to accommodate the higher risk by the lender. APR at 35% interest are the norm. Credit builder are similar marketed as a way for first time card holders to build lender confidence (while paying for the privileged).
• Balance transfers are available on a variety of cards. You may want a good deal on your spending and then the ability to transfer the credit balance to a cheaper provider. Zero interest may be available but these offers may be for an introductory period and have conditions attached.
• Overseas spending can incur commission charges. Most credit cards impose extra fees and charges for foreign currency and overseas transactions. There are some including the Post Office and Nationwide who currently have zero charges.
• Cards from your bank may bundle up insurance and other products under a ‘Gold’ or ‘Platinum’ banner but many of these have an annual fee.
• Retailer Loyalty cards can be just part of the big business that is credit cards. ‘Have you got one of our cards? Sign up now for x% off your purchases.’ These cards are managed by other providers like MBNA who share the cost/benefit with the retailer.
• Zero rate cards 0% interest for an introductory period may be tempting but read the rules. New purchases may not be at zero, repayments may pay off the zero rate first leaving higher charges on the card. Ask yourself why would someone give you free money.

Issuer or Processor

• MasterCard, Visa and American Express provide payment processing between card issuers and merchants bank.
• Processors are the conduit for the retailer to get paid. You pay the credit card issuer.
• Visa and MasterCard make their money is by charging the retailer for using their payment method. These charges can amount to over 5% of the transaction value.
• It is this percentage that is diced and sliced to innovatively create the marketing products described in the card offers above.
• In the UK and most of Europe most retailers now accept payment with both Visa and MasterCard.
• American Express cards are less common and less popular with retailers in the UK than they are in the USA. ‘Too often that won’t do nicely.’

First Questions

• How easy or difficult is the buying process in your chosen overseas country
• What are the full costs of buying
• Are there local taxes or regulation certificates to acquire
• What restrictions if any are placed on overseas and absentee owners
• How easy is it to get funding, a mortgage and transfer money in and out.

Assuming Initial Questions are OK

• How easy is it to establish title to your selected property
• Is there a history of foreign property ownership in the area. If so is the experience good or bad.
• How easy is it to sell when the time comes. What are the likely issues.
• Are local and national government sympathetic to overseas property investment
• Will you be taxed on rental income, capital gains and inheritance.

Our Comments on Buying Overseas

• Know as much about the country, it’s language and it’s property related customs as possible.
• Understand the extra risks you incur when dealing away from your home base. Watch the currency fluctuations.
• Read The Downside of Investing in Property
• Watch out if the new country requires you to set up a company before you can buy land. If so you need a lawyer conversant with the likely issues.
• Overseas is a big place and you can only buy in a small part of it! Do your financial and responsibility research with diligence.

Read up on books from amazon – Buying Property Abroad

Why You May Want Health Insurance

• NHS waiting times may be too long and you may personally want the option of receiving treatment quickly.
• You may prefer the choice and perceived standards that are available in a ‘Private Hospital’ with more bespoke comforts.
• You may want a personal choice of hospital and/or specialists
• If you need compensation for a period of ill health or to cover the extra costs of being treated even in an NHS environment then there are policies to compensate.
• The whole family may need to be allowed to bypass lengthy NHS waiting times and receive appointments and treatments quickly.
• Sporting injuries and homeopathic cures may be better provided for by insurance than the NHS.
• Dental accident insurance covers some of the risks to your teeth that an NHS practice will wish to charge for.

Types of Health Insurance

• Cover for private diagnosis, consultations, tests and scans, treatment and for aftercare is a full service health insurance package.
• Many providers offer a menu of choice from the above services. You may opt for consultations only or just treatment or variations depending on the insurer/service provider
• Group health cover is often provided by employers or companies to help motivate their staff and get them back to work quickly if they fall ill.
• Critical illness cover will be restricted to cover for listed illnesses and pay a lump sum of monthly income after confirmed diagnosis.
• Travel insurance generally has health insurance benefits for those who need to pay for treatments whilst abroad.
• Hospital funds are forms of saving that pay out lump sums for hospital stays or treatments such as dentures and glasses.

Saving Money on Health Insurance

• The biggest saving is by not spending anything on health insurance. Throw yourself on the NHS like 92% of the UK population.
• Second alternative is to self insure. This is to buy private treatment from your own funds when the need is urgent. This can work well for using ‘consultants’ and physiotherapists.
• The larger your agreed excess and the more the acceptable exclusions the cheaper your policy should be.
• Shop around there is a range of providers and products on offer. Match your likely needs and cover, try not to go for a high a spec policy.
• Joining your employers scheme can get the benefit of buying in bulk. If the employer is willing to foot the bill yo get away almost free except it is a taxable benefit in kind.

Our Comments on Health Insurance

• Providers include AXAPPP, Aviva, Bupa, Simplyhealth HSA, Healthcare, WPA, Benenden Healthcare and PruHealth.
• Policies can also be bought retail through brokers or companies such as Tesco.
• It is easy to over insure, paying for something you will not use even if needed. 999 emergency calls will most frequently be NHS
• All policies have exclusions, some are many and various and widely scoped.
• Many policies are provided by hospital groups that may restrict your treatment choices.
• See Insurance for the over 50′s