No one wants to bring debt with them into their old age so if you think you’ll be paying back your credit cards forever, talk to a mortgage adviser about using some of your home’s equity to clear the debt for good.

There are still many people entering into retirement with hefty credit card debt – in fact, one in five over-65’s owe money on their credit cards with average debt of £8,967, says Key Retirement Solutions.

Its analysis shows that pensioners making the monthly minimum repayment on a balance of £8,967 at an average 18.8% rate would pay £141 out of average gross pensioner incomes of £16,000. That equates to 10% of monthly income before tax – but someone only paying the minimum would take 30 years and one month to clear the debt without spending any more on the card.

But using some of your home’s equity could cancel out that debt and save you a fortune in your retirement. And there more than enough equity to do this – KRS says the over-65s have property wealth of around £765.2bn after paying off mortgages and gaining from increases in house prices.

Dean Mirfin, business development director at KRS, says: “Debt is a way of life for a substantial number of people and the over-65s are not immune. Many are perfectly comfortable with owing money on their credit cards and it can be a sensible way of planning for major purchases.

“Many of them do though have substantial wealth tied up in their homes which represents a potential source of income particularly when other sources of retirement income are under pressure from low interest rates and annuity rates.”

SOURCE: KRS, 16/03/10

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Only 25% of people have ever checked to see if their details on their credit file are correct – all secured borrowers must go online and make sure that lenders can see the whole truth and nothing but the truth.

A survey conducted by Confused.com has found that 12% of people had gone online and found that their credit score had improved – but many more might be better off and not have a clue.

Joanne Garcia, head of credit cards at Confused.com says that with providers tightening lending criteria and rejecting many applications people are concerned that they might get a black mark on their credit score – so much so that 40% of people are now scared of credit scores. But if you never check your credit score you will never know.

Garcia says: “It is the 22 to 30 year olds who are the most concerned by the potential of a black mark on their credit score, as the financially savvy young look to the future and see problems about not only getting a credit card or loan, but also to finding a decent mortgage.”

Get savvy yourself and get checking. Your credit score is what lenders see when they consider you for a borrower. If you have a black mark, or even worse if you have a mistake on the score, you could be turned down for credit.

Lenders are still saying no a lot more than they are saying yes, so you need to stand out from the rest. That means sorting out your finances and it means being on top of your credit score. And remember – if you can keep a clean sheet now, even if you cannot get credit you are going to be at the front of the queue for loans when things improve.

SOURCE: Confused.com, 11/11/09

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It’s difficult to get hold of your home’s equity right now, but that doesn’t mean that secured loans shouldn’t be part of your long-term plans.

In the future, when lenders become happier to lend money, there will be a lot of opportunity for people to use the equity in their home to fund home improvements, pay for a new car or help consolidate debts. But right now the key is to overpay on your mortgage and build up that equity for a rainy day.

Both Halifax and Nationwide have reported house price increases this month, and for the last few months, but prices are still subdued and people still have less equity in their home than they did two years ago. This means that if you want to increase your security and increase your borrowing potential, you need to increase that equity yourself.

Many people have a low mortgage rate right now – thanks to the Bank of England’s base rate being at 0.5%, tracker and standard variable rate loans are as low as they have ever been. So people have extra money to spend – and extra money to overpay on their mortgage.

Each mortgage overpayment is a step closer to returning to decent equity levels in your home. Increased equity leads to potential to mortgage or remortgage and it means more chances to get hold of secured loans in the future.

So talk to your mortgage adviser about your overpayment abilities. You need to find a happy medium between making the most of your reduced mortgage payments and not stretching yourself too far. A mortgage adviser will help you find that happy medium and will help you improve your chances of accessing credit in the future.

SOURCE: Halifax, Nationwide, October 2009

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No one wants to have to face debt in their retirement after a long working life, but unfortunately that’s the case for many pensioners in the UK – something has to be done now to stop the elderly becoming too indebted.

EuroDebt says within its current client base of those over 60, almost one in three still have a mortgage and the average unsecured debt for these homeowners is just under £40,000.

Kevin Still, director of EuroDebt says: “The big question is what happens to these people if they are forced to retire? The analysis of our client base indicates a worrying trend, as more and more over 60s appear to be getting into serious debt, struggling to cope with the pressures of the recession. For some their savings have been hard hit as a result of the interest rate cuts and for others the prospects of living off the equity of their properties has diminished.

“The prospect of retirement should be a happy and relaxing time, after a lifetime of work. But our figures reflect that not only are some older workers going to stay on in their jobs for much longer, but for those forced to retire there are real concerns of managing their financial commitments.”

EuroDebt says the figures for debt in the over 60s has gone up quite considerably since the recession really took hold – this age group is really struggling to keep on top of finances as their income has dropped and cost of living has risen.

If you are worried about your debts as you look to retirement, the sooner you can begin sorting them out, the better chance you have of being debt free by the time you leave work. Talk to a mortgage adviser about your secured loan, remortgage and equity release options. Your home is your most important long-term asset, but it’s also your best chance of getting out of debt.

SOURCE: Eurodebt, 07/10/09

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People up and down the country are celebrating after Nationwide revealed that house prices have returned to 2008 levels – equity is rising and there is more hope for the home owning nation.

According to the building society’s latest House Price Index, house prices were up 0.9% in September, down from the August rise of 1.4%, but still enough to add another thousand pounds to people’s equity – the average price is up to £161,816, up from £160,224 in August.

But the most important statistics for homeowners is that the annual change, which is the difference between last year’s prices and this year’s, is at 0.0% – prices have returned to 2008 levels. This is great news, and unexpected news.

Martin Gahbauer, Nationwide’s chief economist, says: “The further increase in house prices is very much consistent with improvements in a broad range of economic and financial indicators over the last few months, all of which suggest that the most intense phase of the recession and financial crisis has probably passed.

“However, given that the housing market still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to increase at the very strong rate seen in recent months.”

We are not out of the woods yet. Although equity has risen, it is still tough for many to use that equity, be it in the form of a secured loan or a new mortgage or remortgage. That means many people may have to sit tight for the next few months. So talk to your mortgage adviser by all means and see what you can do to make your financial life easier over the medium-term, but don’t expect miracles straight away.

Gahbauer says: “Lead indicators, such as mortgage approvals for house purchase, suggest that turnover should continue edging higher over the next few months, but at the current rate of increase it would take another 18 months for it to reach pre-downturn levels.”

SOURCE: Nationwide, 02/10/09

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With the recent news that equity in UK homes is finally growing again, now is the time to make sure that you are saving all you can, ready for the future.

Nationwide building society has revealed that house prices increased by 1.3% over the last month. Although this is great news, especially after it revealed that house prices increased by 1% last month, prices are still down 6.3% on last year’s figures.

This means that there is still less equity in UK properties, and there is less room for people to get hold of secured credit. Right now the secured loan market is in the doldrums, remortgages are down and equity release is also stalling.

So it is still time to save, rather than spend. By doing all your can to reinvest into your home and reduce your unsecured outgoings, you can be sure that when house prices begin to rise again, yours will be amongst the most profitable. All that you can do now to keep yourself in positive equity means that you will have more spending, borrowing and saving potential in the future.

Talk to a mortgage adviser about how your equity and your mortgage is faring. It’s good to know what your limitations are and what sort of potential your money and your investments have, now and in a few year’s time.

SOURCE: Nationwide, 30/07/09

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Right now, a mere 10% difference in a loan to value can be the difference between an affordable mortgage and one that is simply unworkable.

Moneynet.co.uk has been assessing at the financial impact facing homeowners who may suddenly be looking to lock into a fixed rate mortgage. It found that several fixed rate mortgage deals are being priced higher in the last couple of weeks, with those on a higher LTV having to shell out hundreds of pounds a month more than those with a little more equity.

Some 18 months ago it didn’t matter if you had 40% or 10% equity in your property as you’d get the same rate, but it’s a totally different landscape now. Lenders are demanding security and that means more equity. Whilst the customer with an 85% mortgage will pay extra as they are borrowing more money than a 75% LTV customer, they now also now face having to pay an additional hefty premium for the higher borrowing ratio.

Moneynet.co.uk says the extra you need to pay for needing to borrow an extra £20,000 or 10% LTV is quite staggering – more than £14,000 over five years or £236 per month extra in some examples – it found that some lenders are charging a whole 1% for 10% less equity.

This is proof that equity is crucial for those looking to remortgage or to find a new mortgage. Simply, the more that you have, the less you will have to pay for the next few years.

But what if you are equity poor? Many homeowners used their equity when times were good in the form of secured loans or remortgages. Others have had to see their homes lose thousands in value over the last year. The only way to get round this clever financial planning and good financial advice.

Talk to a financial adviser about how you can increase your equity. It may mean saving, it may mean investing – whatever it takes, get the advice before looking to plan your long-term financial future.

SOURCE: Moneynet, 19/06/09

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The Bank of England recently revealed that as many as 1.1 million people in the UK could be in negative equity – but if you are in negative equity, there is nothing to be concerned about.

Negative equity is where your home is worth less than your mortgage, and it’s becoming a common problem for those who took out high loan to value mortgages or secured loans a few years ago. House prices are as much as 11.3% lower than they were a year ago, so those who only had 90% or less equity now own none of their own home.

This isn’t anything to be worried about. The media may link negative equity with arrears and repossession but it couldn’t be further from the truth. A lender will not repossess you if you are in negative equity nor will they charge you any more for your mortgage or secured loan each month.

Negative equity is something that can be perfectly manageable, even in this tough period. As long as you keep up with your mortgage repayments, and any other debt payments such as secured loan repayments then there is no reason why a lender would be unhappy with you.

Of course negative equity does mean you will find it very difficult to get hold of any more credit – if you are in negative equity then you will have nothing to secure credit against. But, with some careful financial planning and some saving then there is no reason why you cannot begin to combat the negative equity by investing back into your home.

Talk to a mortgage adviser about what you can do while you have negative equity. You may not have many options, but as long as you are fully aware of your situation and willing to do something about it then there is no reason to fear negative equity.

SOURCE: Bank of England, 12/06/09, Nationwide, 29/05/09

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New research has revealed a quarter of British homeowners are planning to plough money back into their property by embarking on substantial home improvements this year.

With house prices lower than they have been in several years, Unbiased.co.uk has found that homeowners are determined to beat the slump by improving the home they’re currently in. Over one in ten homeowners said they are saving up in order to cover the cost of their desired home improvements. A sixth of people are looking to make more space for their family, while 8% want to add value to their property.

But worryingly, 5% of younger people plan to finance their renovations through credit cards or unsecured loans. Nearly a third said they’d like to improve their home but simply wouldn’t be able to pay for it.

Unbiased.co.uk says: “As the housing market continues to show no solid signs of recovery, many consumers may be put off buying or selling a property. It is therefore encouraging to see not all homeowners are allowing themselves to be beaten by the downturn. Many are turning their attention to the house they’re in and planning substantial home improvements this year, which could potentially add both monetary and aesthetic value to a property.

“However, we would urge anyone planning to invest significant sums of money into their home to seek advice on how best to finance these renovations in the current climate. Those who are currently considering their options should seek professional advice from an independent financial adviser.”

SOURCE: Unbiased.co.uk, 29/04/09

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Although the Council of Mortgage Lenders revealed that more than one million people could be in negative equity, the message is clear – don’t fear negative equity.

The news and the media might be predicting the apocalypse as a result of the worrying statistics, but there is nothing to fear if you are in negative equity. It simply means you will probably do well to stay where you are, save hard and keep on top of your debts – because when the housing market picks up you might find that you are out of negative equity very quickly.

It’s a common myth that negative equity leads to repossession, which simply is not true. Many people who are in negative equity may have a very low mortgage rate right now, meaning they are comfortably paying their loan each month. This means the lender is happy, your credit score improves and you are in a good position to be able to access a good mortgage when things improve.

But negative equity doesn’t mean you should be complacent – while you are waiting for the market to improve, you should do all you can to make the most of your money. That means overpaying on your mortgage if you can (which fights negative equity), it means doing all you can to reduce your other debts and it means building up a nest egg for when times get better.

Negative equity is a fact in this downturn, but it is not something that should keep you up at night. House prices will improve and mortgages will become more accessible – it’s just a matter of biding your time, taking good advice and putting together a plan of careful spending.

SOURCE: CML, 16/04/09

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