Q&A about financial planning with Co-operative Bank - ANSWERS BACK

[RachelMumsnet]

We're running a Q&A this week with Co-operative Bank's Head of Home & Family, James Hillon who will be answering your questions about planning for the future and how to best ensure you put the plans into action.

This year the Co-operative Bank wants to help as many customers as possible with their plans for the future. Whatever your plans involve, whether it's finally getting around to that dream extension, buying an upgraded car or maybe even a new addition to the family? James would like to hear about mumsnetters plans and ambitions for the future and any questions they may have regarding the best way to puts these plans into action.

James is keen to answer your questions on topics from finding the right financial solutions, saving money, reducing your mortgage payments, the best way to protect your family financially and much more.

Disclaimer: For more specific and detailed advice about your personal
financial situation, visit The Co-operative Bank in branch - //www.co-operativebank.co.uk/branch or speak to your Independent Financial Adviser.

[Tee2072]

Hi James, welcome to Mumsnet!

We are hoping to be able to buy our first house in about a year. My mom, bless her, is planning on giving us part of the deposit but we need to find the rest ourselves.

We already live pretty much pay cheque to pay cheque with no room for savings. Any advice on how to stop doing that (and we are hardly frivolous) so we can save for our 'forever home'?

[Pascha]

Hello

DH is mid-thirties, self employed with no pension provision so far. (I have a small pension already) What would you suggest are the best type of products to look into bearing in mind the amount we have to save is fairly minimal?

[MissRee]

Is it a little easier to get a mortgage now? We bought our flat in 2010 and had massive problems getting a mortgage and eventually had to get it in my name only due to some adverse credit my partner has. Bearing in mind I've had a mortgage in my name for over 2 years now (with no problems or defaults) and DP has paid off a lot of debt, will we struggle as much now or are the lenders easing off a bit?

[foodfiend]

Hello James.

I have three different occupational pensions from jobs I did in my 20s/30s, but have been self-employed/parenting for the last 6 years. I'm finally admitting that this is now 'what I do' rather than a stopgap until I get a 'proper job'. Income is very variable, but I'm certainly earning enough to save into a pension, but have NO idea where to begin. So many scandals and bad stories I just feel a bit paralysed. Where should I start?

[gruffalocake]

We will hopefully be first time buyers next year but with a small deposit. What are the best ways to make ourselves a good prospect to mortgage lenders? We don't have debts but are considering taking a credit card and paying it off in full every month to help give us an even better credit score. Is this a good idea?

[InMySpareTime]

I have a (very) small business, so am not registered for VAT. Do I still need to charge VAT to my customers? I have enough kept by for tax, but would rather know either way so I can plug it back into the business.
Also, are educational activities VAT exempt? I do workshops and have not charged VAT on them, now wondering if I'll get stung for it!

[PrincessOfChina]

We own our home and have some c/card debt (on 0% rates). I have a good private pension ( not Final Salary but not contribution based). DP has no pension and we can't find a way to make getting him a pension an option with the amount we could put in).

We currently overpay our mortgage by 20% a yer (the max allowed). Should we stop doing this and start looking seriously at a pension for DP? We're both 33 and earn above average.

[StrugglingBadly]

Hi,

I'm a long standing co-op customer (bank account) and have recently had a loan applicationwith you declined. I was thinking of applying to remortgage with the Co-op but am now thinking that would be a pointless exercise given that I've been rejected for a loan. Would that be the case?

[nancerama]

Hello James, can you explain why Co-op bank processed debits before credits, thus sending your customers overdrawn for a millisecond and incurring overdraft fees? This is particularly frustrating when the incoming funds are coming FROM a co-op account.

It would make it much easier for your customers to plan financially if they weren't racking up unexpected charges.

[MrsSpa]

Hi,
I am expecting my 2nd child this year and starting to think that having a car would be a benefit (I have licence though DH doesn't and we have never owned a car before). What is the best way of financing this? Our wages go on bills, mortgage, food etc so we have little left over and have no savings to use. However it's not urgent to get a car right now, but something I think would be a good idea in the next couple of years.

[RachelMumsnet]

The Q&A is now closed and we're sending the questions over to James. We'll post up his answers early next week.

[JamesHillon]

@Tee2072

Hi James, welcome to Mumsnet!

We are hoping to be able to buy our first house in about a year. My mom, bless her, is planning on giving us part of the deposit but we need to find the rest ourselves.

We already live pretty much pay cheque to pay cheque with no room for savings. Any advice on how to stop doing that (and we are hardly frivolous) so we can save for our 'forever home'?

Hi Tee2072,

Thank you for your question and its great that your mother is making a contribution to your deposit. Of course, for most of us its not easy to find any spare cash once the day to day costs of living have been taken care of but I have a few pointers that may help you.

The first thing I would suggest is taking a close look at your income and expenditure. Below is a link to our online budget calculator tool which I hope you will find useful. Fill it in as carefully and accurately as you can and this will give you a clear picture on where your money is going and what you have left over at the end of the month. It may also highlight areas where you are spending more than you think and perhaps this is where you can save money. Review your suppliers such as energy, internet, phone provider and obtain quotes from alternative suppliers and see what they can save you. Another tip is looking at your food bill for the week, there has been much written in the press recently on the amount of food we waste and a simple clear weekly meal plan should target your spending and ensure as little as possible is wasted.

Savings

You clearly have a sensible approach to your finances, and as you say, you are not frivolous. It could be after all the budgeting you may not have enough savings to put down as big a deposit as you would like and it could be worth looking at a different approach. If you can only afford a smaller deposit, check if your local authority is a participant in the Local Authority Mortgage Scheme. The scheme is aimed at first time buyers who can afford mortgage repayments but not the high deposits now required, you will need a 5% deposit to participate but its worth enquiring.
Alternatively, a guarantor mortgage helps buyers to borrow more than they would normally be allowed but entails a family member or someone close to stand as a guarantor for the mortgage, see the link below for an explanation of how a guarantor mortgage works on the Mortgage Lady website.

I hope this advice has been useful and good luck. Below are two more links to money advice websites you might find helpful.

Money advice service
Love money

[JamesHillon]

@Pascha

Hello

DH is mid-thirties, self employed with no pension provision so far. (I have a small pension already) What would you suggest are the best type of products to look into bearing in mind the amount we have to save is fairly minimal?

Hi Pascha,

This is a good question and you have made the first important step by thinking about making provision for your retirement. It is generally accepted the sooner you start saving for retirement the better and it is certainly a worry when we consider what state pensions could be available in 30 years time.

Everyones circumstances are different and pensions can appear quite complex so I would suggest a meeting with a qualified Independent Financial Advisor (IFA) to talk through your options.

I have added the link below to help you find an independent IFA, it also gives you important information on the role of an IFA.

Independent Financial Advisor

I hope this helps and best of luck.

[JamesHillon]

@MissRee

Is it a little easier to get a mortgage now? We bought our flat in 2010 and had massive problems getting a mortgage and eventually had to get it in my name only due to some adverse credit my partner has. Bearing in mind I've had a mortgage in my name for over 2 years now (with no problems or defaults) and DP has paid off a lot of debt, will we struggle as much now or are the lenders easing off a bit?

Hi MissRee,

Thanks for your question and first lets deal with your partners credit rating. The link below will provide you with an explanation of how credit ratings work with some great advice on the steps you can take to improve your partners rating. I dont know your partners circumstances but you say a lot of debt has been paid off and as the article states, a year of good credit habits can return a rating to health. The article also shows how you can view your credit rating.

As far as the mortgage lending market is concerned there has been some improvement and a key reason for this is the Funding for Lending Scheme which was launched in August 2012 by The Bank of England to enable Banks and Building Societies to lend to individuals . The Bank of Englands trends in lending figures also reported increases in mortgage approvals at the tail end of 2012. Whilst I dont believe there has been a huge change there appears to be a definite steady improvement in the mortgage market. I hope you and your partner are able to take advantage of this, best of luck to you both.

[JamesHillon]

@foodfiend

Hello James.

I have three different occupational pensions from jobs I did in my 20s/30s, but have been self-employed/parenting for the last 6 years. I'm finally admitting that this is now 'what I do' rather than a stopgap until I get a 'proper job'. Income is very variable, but I'm certainly earning enough to save into a pension, but have NO idea where to begin. So many scandals and bad stories I just feel a bit paralysed. Where should I start?

Hi Foodfiend,

I will start by saying the same thing to you as your fellow mumsnetter Pascha, you are taking an important step in considering your pension options, it is a concern for the government too many of us are not making provision for our retirement and they are taking steps such as making small businesses provide a pension scheme for their employees.

You say you have no idea where to begin but I would suggest booking an appointment with an Independent Financial Adviser. The good news is you are earning enough to pay into a pension and the sooner you start, generally, the better. An IFA will be fully trained to provide the best advice, they are highly regulated too so whilst there are many negative stories in the press associated with financial services you should be confident that an IFA will act independently and in your best interests.
Again, as with Pascha, I will point you in the direction of a website dedicated to financial adviser, this will help you find an IFA in your area and hopeful allay any fears you may have in using an IFA to advise you about your pension options. I hope this is useful for you.

[JamesHillon]

@gruffalocake

We will hopefully be first time buyers next year but with a small deposit. What are the best ways to make ourselves a good prospect to mortgage lenders? We don't have debts but are considering taking a credit card and paying it off in full every month to help give us an even better credit score. Is this a good idea?

Hi gruffalocake,

Thanks for your question. I think it’s good to understand how credit scoring works, fellow mumsnetter MissRee had questions concerning credit ratings and I pointed her in the direction the thisismoney website which has a very informative article on how credit scoring works, the link is below. This features advice on how you can view your credit rating and it would take away some of the guess work involved in how you stand.

In essence, a credit rating is the way a lending company can assess how you handle debt so if you have no debt to manage there will be no evidence of your ability to deal with debt, in this instance taking out a credit card and paying it off each month would help your rating but be careful, it’s easy to miss a payment so maybe set up a direct debit so you won’t have to rely on memory to make payments, if you miss a payment it could have an adverse affect on your rating. There is one other thing I should say and that is to make sure you are on the electoral roll, I am sure you will be but if you are not you will either appear not to exist or it will look like you are starting out with no credit history.

Finally here is another informative site, this gives some good tips on how to build a good credit history.

As you are looking at buying your first home in 2014 this should give you sufficient time to build up a good credit score, I hope this all goes well for you and best of luck.

[JamesHillon]

@InMySpareTime

I have a (very) small business, so am not registered for VAT. Do I still need to charge VAT to my customers? I have enough kept by for tax, but would rather know either way so I can plug it back into the business.
Also, are educational activities VAT exempt? I do workshops and have not charged VAT on them, now wondering if I'll get stung for it!

Hi InMySpareTime,

Thanks for your question in short, if in the last 12 months the turnover of your business exceeded £77,000 then you must register for VAT. You say it’s a very small business so I would guess this would not apply to you but, if it does, all the up to date information you need is on the HMRC website,

Your second question may have been answered by the above but educational services are indeed, exempt from VAT. If there is anything you are unsure of though it should be covered on the website, alternatively you could call the HMRC vat helpline on 0845 010 8500.

[JamesHillon]

@PrincessOfChina

We own our home and have some c/card debt (on 0% rates). I have a good private pension ( not Final Salary but not contribution based). DP has no pension and we can't find a way to make getting him a pension an option with the amount we could put in).

We currently overpay our mortgage by 20% a yer (the max allowed). Should we stop doing this and start looking seriously at a pension for DP? We're both 33 and earn above average.

Hi Princess of China,

Thanks for your question. This really is a specific question to your circumstances and again, I would suggest making an appointment with an Independent Financial Adviser (IFA) and the link below will help you find one. Your IFA would be qualified to make an assessment of your situation and he would be able to weigh up the advantage of paying 20% a year off your mortgage against investing it in a pension. I would say the sooner a pension scheme is started the better, and without knowing your circumstances, your partner is certainly young enough to make considering investing in a pension worthwhile.
Independent Financial Adviser

[JamesHillon]

@StrugglingBadly

Hi,

I'm a long standing co-op customer (bank account) and have recently had a loan applicationwith you declined. I was thinking of applying to remortgage with the Co-op but am now thinking that would be a pointless exercise given that I've been rejected for a loan. Would that be the case?

Hi StrugglingBadly,

I am sorry you were rejected for a loan but we do use different assessments for mortgage and loan applications and we treat each customers circumstances individually so it could still be worth applying.
That said it’s worth finding out why you were rejected for the loan and taking steps to rectify that. If it’s your credit rating I will point you in the same direction as other Mumsnetters to help you understand credit ratings and how to improve them.

This is Money

Circumstances and lending conditions do change over time, so I hope this will be helpful and at least give you some pointers to improve your chances of being accepted for a mortgage or loan at some time in the future.
I hope you find this helpful.

[JamesHillon]

@nancerama

Hello James, can you explain why Co-op bank processed debits before credits, thus sending your customers overdrawn for a millisecond and incurring overdraft fees? This is particularly frustrating when the incoming funds are coming FROM a co-op account.

It would make it much easier for your customers to plan financially if they weren't racking up unexpected charges.

Hi Nancerama,

I am sorry you find this frustrating, it is the way we (and all other banks) do things which I appreciate is not the answer you were probably looking for but I must assure you that charges are only determined at the end of the day (if an account is overdrawn after all debits and credits are processed) and any decisions on whether to pay a debit are only made after credits have been applied.

We have recently set up a mobile banking app that is free to download which can help you stay on track of your finances and alert you if you go overdrawn. As I alluded to earlier, as long as you are in credit at the end of the day then you won’t be charged.

If you haven’t got the right type of mobile for our app we also have a text service which has a limits alert. If you are interested in either our mobile banking app or text message banking then all the details including how to download the app are on our website, the link is below.

Mobile Banking

Thanks for your question and I hope you find our mobile app useful.

[JamesHillon]

@MrsSpa

Hi,
I am expecting my 2nd child this year and starting to think that having a car would be a benefit (I have licence though DH doesn't and we have never owned a car before). What is the best way of financing this? Our wages go on bills, mortgage, food etc so we have little left over and have no savings to use. However it's not urgent to get a car right now, but something I think would be a good idea in the next couple of years.

Hi MrsSpa,

Congratulations on expecting your second child. This is a good question, you won’t want to overstretch but having a car would certainly make life easier, especially when you have two children to consider.
The good news is you are not in a hurry so you can take your time in weighing up whether this is something you can afford. You will have to take into consideration road tax, cost of MOTs, insurance, repairs and fuel, but against that you would need to assess the cost of getting around with bus fares, taxis and so on. We have a useful budget budget tracker/calculator on our website which should help you set out what you have coming in a going out.

If you are happy that you have enough spare cash you can either save to buy a car outright or at least to pay for some of the car, please feel free to come into one of our branches to have a chat about your savings options. Of course a loan could pay for some or all of the car, check what is on offer in the market to get the best rates, it’s worth remembering that a longer term will lower your monthly payments but ultimately you will probably end up paying more due to interest charged so make sure you get an illustration of what you will actually pay and make a choice that works for you.

I hope this helps you to make an informed decision and good luck with the impending addition to your family.