Tag Archives: debt

How to Retire Debt Free

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The great recession of 2008 will undoubtedly become an historic moment across all generations as many hardworking families face cuts in employment and income in coordination with challenging consumer markets and the rising costs of living. Traditionally in this model of family finance, retirement provides that beautiful moment of release alongside a healthy retirement fund and pool of sustainable assets.

However with the level of family debt rising steadily over the past decade, many have been found questioning their previous financial management choices and seeking new ways to balance the books through a healthier lifestyle. Avoiding debt in retirement is entirely possible with good planning; here are five great ways to enhance your financial situation.

1.      Construct a Budget.

Prepare an annualised budget and methodological strategy based around your incomings and outgoings which should provide the estimation of disposable income and monetary investments. This can also shed light on where money could be transferred or reduced and to further identify how your cash flow changes over a significant period of time.

2.      Tax Efficiency.

Tax undoubtedly has an effect on debt levels and should be heavily monitored to make reductions. Business debt and rental property can be removed from taxable income and should be a slimmer priority for those in the higher tax bracket.  As an extra tip to help better prepare yourself for retirement, consider taking courses in a graduate tax program.

3.      Preparation.

A very good measure for savings is to budget 10% of shared gross income as this provides a great fall back for an unexpected scenario such as business failure, divorce or illness. If an unexpected situation occurs, seeking immediate financial cover is both challenging and costly in the longer term. Living within ones means also requires a contingency plan of this nature and if avoidable, provides you with a useful savings trust.

4.      Prioritizing Debt.

All debt is bad debt but there are ways to categorise the importance of each debt based on interest and deductible earnings. Paying off the smallest bill first can allow you to avoid interest on future payments so a debt reduction strategy based on this method can be successful.

5.      Prioritize Importance.

A philosophical approach for the investment of capital should be utilized after covering the necessary areas of education, food, and maintenance. Whilst there is the pressing urge to acquire that new widescreen TV, a weekend away with your partner could become a far more valuable investment for the relationship strength it provides.

 

Author Bio – James Barnett is a writer on behalf of CooperMatthews analysing contemporary wealth management for families across the UK.

5 Reasons a Lender May Reject Your Mortgage Application

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The necessary paperwork that is mandatory to complete for a mortgage application can often be a difficult task to undertake. After finding your dream home, the last thing you want is to then find yourself receiving a call from the lender stating that they have declined the loan. You may even ask yourself what could have caused this to happen. Mortgage applications haven’t changed over the years but the current lending requirements have.

Today’s financial institutions have strict guidelines in place making it difficult for consumers to obtain a loan. The following are five factors that could have an impact on whether a financial institution will lend money for a mortgage.  

1. Changing Employment

Switching jobs may not have an impact on a person’s ability to qualify for a mortgage, but you may be at a disadvantage if you have recently changed companies. If you make a move within the company to a position with the same or greater pay scale, you shouldn’t need to worry.  People who are dependent on commissions or bonuses may suffer a greater risk of getting rejected by the lender. Financial institutions find applicants who have been with the company for two or more years more favourable when lending money. Those with the greatest disadvantage are people who leave a salaried position and start a business venture on their own. Lenders like to see stability and records from a two year period, so they can plan future income appropriately. Furthermore, an applicant that is self-employed could have more expenses to write off, and their income taxes reflect the minimal net income that is reported.

2. Changes in your Credit that have an Impact on Your Credit Score

Equifax, Experian or Transunion are a few of the companies that the lender may use to check the applicants credit history. It can take anywhere from one to three months for a home loan to go through, and the lender may do a final credit check before fully committing to a loan. It’s important to not do anything that could have a negative impact on your credit score during this time. The activities that could prevent your loan from going through include making a late payment, or applying for another type of loan or credit card. It’s in the consumer’s best interest to obtain a copy of their credit report and correct any items that are wrong.  

3. Failing to make your Current Mortgage or other Payments

People who fail to make their monthly mortgage payments or cannot pay their other bills are showing the lender that they are a poor credit risk. If an applicant is having a hard time paying their current mortgage, they should consult with the mortgage holder and see if there are any other options in place, so they can meet the repayment terms on their loan.

4. Too Much Credit Card Debt and Numerous Outstanding Loans

Lenders will take into account an individual’s consumer debt and the mortgage payment, and see how it correlates with their income. The basic rule most lenders follow is approximately 33 percent of an applicant’s gross income with an added five percent for consumer debt. The lender will also look into the available credit a borrower has to utilize, so you may want to think about closing a credit card account or reducing the maximum limit that is allowed.

5. Failure to Complete the Basics

Some financial institutions make it easy and are able to complete the loan application process over the phone. However, many institutions require the individual to physically fill out the form. It’s simple to make mistakes or leave items blank when an applicant rushes through the process and hasn’t filled out the necessary paperwork properly. A lending institution can refuse an application based on these mistakes, so you need to make sure to take the time and go over everything thoroughly. It’s also possible to hire a mortgage broker, attorney or financial adviser to help with the application process and have it all checked before presenting everything to the lender.  These are the primary reasons a lender may refuse an applicant’s mortgage. To make sure this doesn’t happen, an individual should maintain good credit and keep their debt ratio as low as possible. This will have a positive impact on whether their home mortgage is approved.

Bio

Andrew Potter is a finance and property expert and writes for www.myonlineestateagent.com. My Online Estate Agent provides a new alternative to your standard high-street estate agent.