The Importance of Protection (not that type of protection)

Everybody knows that life has a funny way of turning out differently to how we expect it to. When faced with the unpredictable twists and turns of fate, it is comforting to have the support of the right protection policy for your needs.

Rising bills reinforce need for protection

With rising household bills, as well as soaring mortgage and rent costs, protection is more important than ever right now. It is vital that you consider whether you would you be able to afford your monthly outgoings if your family were to lose the income of the primary earner.

Consideration of the protection that will give you the right level of support is an essential part of long-term financial planning. That’s because protection provides an indispensable safety net for you and your family against any unexpected downturns in your financial situation.

Longer-term mindset

At a time when many households are already struggling to cover rising costs, it is worrying that an increasing number of people are abandoning their personal insurance (Source Feuell4Life)

It may seem tempting to save a few pounds a month by cancelling or holding off a new protection policy. But there is a risk that, should the worst-case scenario unfortunately strike, you will be left in a difficult financial position.

It is worth remembering too that, as well as leaving you and your loved ones without essential cover, if you cancel your protection now then take out a new policy in the future, it will more likely than not end up costing you more, since premiums are calculated based on your age and health condition.

So, what protection do I need?

The exact balance of protection will vary from person to person, and family to family. Two of the most important types to consider are:

Income protection is a financial safety net that provides you with a tax-free income if you are unable to work due to injury or illness. At the end of your chosen deferred period, income protection steps in to make sure you and your loved ones don’t suffer undue financial hardship, allowing you to maintain normality and the same standard of living at a turbulent time.

Life insurance is a crucial safety net designed to protect your loved ones in case the worst happens. Sadly, many families would find themselves running short of money very quickly if the main breadwinner were to die unexpectedly. Life insurance removes this stress at an upsetting time.

Protection is for life

Having the right protection in place provides certainty in the most challenging times. If you are thinking about changing or cancelling your policy, don’t act in haste. Contact us today to see how we can help.

As with all insurance policies, conditions and exclusions will apply - Your home may be repossessed if you do not keep up repayments on your mortgage1. 1.

If you would like more information please book in a free consultation on our website. http://www.kotofs.co.uk/

Are you paying your lender’s variable rate?

According to research done by an online mortgage broker in January this year, more than 27% of the UK’s homeowners with mortgages are paying their lenders standard variable rate. This is the lender’s 'default' interest rate which buyers drop on to when the initial term of their arranged mortgage deal ends. This means that more than 1 in 4 of you are paying too much for your mortgage and in many cases, this will mean paying anything up to 6.5% on your mortgage balance outstanding.

Approximately 1 in 5 people did not even know if they were paying their lenders variable rate. This is obviously concerning, and more so when some of these people thought they were paying off their mortgage quicker as their payments were now higher. In fact, the additional payment is paying the additional interest due to the higher interest rate being charged.

So, we must ask, “Why are people paying these higher rates, not doing anything about it?”

Many are under the misconception that remortgaging is something that you only do out of financial necessity or believes it means taking on more debt. Others are worried about their finances being scrutinized especially if their income has been affected or worse still, they are now unemployed through redundancy.

What should you do?

Whether you are on a reduced income since taking your mortgage, have a current deal which is due to finish in the next 6 months or think you are not going to be eligible to get a better rate on your mortgage, speak to your mortgage adviser. There are lots of options available that we will go through with you, and we will tailor our recommendation to your specific circumstances. There is no need for anyone to be paying the lenders standard variable rate. With rising inflation and energy costs we are all looking to save money wherever we can, so please don’t leave what is likely to be your biggest debt on a rate of interest that is much higher than need be. The only person gaining in these circumstances is the mortgage lender when you could have this money in your own pockets.

If you are currently paying your lenders standard variable rate or have a deal that is due to finish in the next 6 months, then get in touch with us here or on 01702 746811 where one of our advisers will be able to go through options with you and ultimately save you money.

Photo courtesy of Canva May 2022

Silly mistakes that are easy to make that damage your credit score

Life can be busy and it’s easy to make relatively insignificant decisions about your finances that can come back to haunt you and potentially be a problem when looking to take out a mortgage or any other type of credit.

So, let’s have a look at some of the things that can cause problems on your credit report and have a detrimental effect on your score.

Your mobile phone contract

We all like a nice up to date shiny new phone, however did you know that by signing a mobile phone contract you are entering into a credit agreement? The actual handset cost is included in the contract within the credit agreement. If you default or don’t make your payments on time, this will damage your credit score and show as either late of missed payments (arrears). Tip: Always make sure you have enough money in your bank account to pay the monthly direct debit.

Credit Card payments

If you are using a credit card and forget to make the minimum payment, this will damage your credit score. The credit card company will assume you are not able to make the minimum payment and you are therefore a high risk to lend money to. Tip: Always set up a direct debit to pay at least the minimum payment each month. This way the payment will never be late and if you want to pay off additional funds, you are still able to do so.

Personal Loans

If you have a personal loan, and you’re short of funds, it’s not uncommon for some people to think the payment can wait until you’ve sorted your finances out. Whilst there may appear to be no consequences at the time even though you’ve caught up with your payments, the missed payments will be recorded on your credit report as arrears. If you try to get a loan at a later date the new lender will consider that you were late paying your previous loan and may therefore be reluctant to lend you the money. Tip: Always phone the loan company if you are in financial difficulty and see if they will come to an arrangement for future payments until you are back on track.

Credit cards

Nowadays it’s not uncommon for us to have 2 or 3 credit cards. But, having too many may not be such a good thing especially if you tend to leave a balance outstanding on them each month. Even if you are making the monthly minimum payments, having too many credit cards and loans will flag warning signs to lenders. They will start to suspect that you may not be able to manage your finances, even if they are fine. Tip: Always make sure you cancel any credit cards and close accounts of cards you no longer use

Electoral Roll

Lenders like to know who you are and where you live. They way that they do this is by checking that you are on the electoral roll which they can see on your credit report. Tip: Always make sure that you are on the electoral roll especially if you have just moved and if not, get yourself on there as soon as possible by contacting the local authority.

Not having any credit

Whilst it can seem a good idea not to have any credit, in the world of credit referencing this may be a potential issue. A lender wants to be able to see that you are able to manage your own credit and the only way to do this is to take out some. Tip: Next time you are buying a sofa, tv or other larger purchase, consider taking this on credit (even better if it’s interest free) to help your credit file especially if you don’t have any existing credit.

If you would like any advice on improving your credit file of getting a mortgage then please give me a call on 07798 687434 or email me at sue@southernmortgages.co.uk

Photo courtesy of Canva