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  • FIRST POST
    • Outsider_83
    • By Outsider_83 3rd Jan 18, 2:36 PM
    • 114Posts
    • 9Thanks
    Outsider_83
    Sister's Finances
    • #1
    • 3rd Jan 18, 2:36 PM
    Sister's Finances 3rd Jan 18 at 2:36 PM
    My sister asked for a little financial help and I wasn't really sure what to advise so I mentioned I would post something on here to get a more expert opinion.

    She is 32, single and works full time with her own house.

    Pension Pot - £29,000.

    £6000 - Two Regular Savers paying 5% (First Direct and Nationwide) - Drip feeds £800 per month into these.

    £100 - Peer to peer lending


    £2000 - in current account with Nationwide earning 5% which is coming to an end soon.


    Outgoings


    £440 – Mortgage at 5%, allows 10% overpayments. Early exit fee is 5% of balance but renewal is in February 2019. Outstanding balance is £41000 – property valued at £120k and bought for a similar price.


    £1200 student loan – pays £75 per month from salary.


    £3000 Parent Loan – Pays £300 per month back.


    £600 pm general outgoings including food, insurance (car/house), house tax and socializing etc.

    My sister wants to become more secure and use he money better (Salary is currently at £1800 per month net).

    Any recommendations?
Page 1
    • Linton
    • By Linton 3rd Jan 18, 3:31 PM
    • 8,853 Posts
    • 8,884 Thanks
    Linton
    • #2
    • 3rd Jan 18, 3:31 PM
    • #2
    • 3rd Jan 18, 3:31 PM
    The amount she is saving looks pretty good compared with her expenditure. So I dont think she has anything too much to worry about.

    How much is she putting into her pension? Perhaps it would be worthwhile increasing it.
    Mortgage at 5% seems very high. Hopefully she can get a better deal in 2019.
    Once she has a bit higher savings she could look at long term investments. Perhaps in a year or so when she has paid the parental loan off.
    • AnotherJoe
    • By AnotherJoe 3rd Jan 18, 4:39 PM
    • 7,901 Posts
    • 8,494 Thanks
    AnotherJoe
    • #3
    • 3rd Jan 18, 4:39 PM
    • #3
    • 3rd Jan 18, 4:39 PM
    You don’t say what she is contributing to her pension but in general I’d look at putting some of the money that’s going into regular savers, into pension instead, and obviously when she remortgages some of the saved money into pension.

    5% is obviously a very high mortage rate, what's the reason for that ? Is she perhaps one of those people that like to take out very long fixed mortgages on the grounds she likes the “certainty” of being on a particular rate (when usually it means you have the certainty of paying more) or did she have a very poor LTV in which case putting some of the money she’s saved into her next mortage in able to get a lower rate.

    She could even now look at what it would cost to get out of the mortgage rate it’s possible she could do better even with the early repayment fee
    • Outsider_83
    • By Outsider_83 3rd Jan 18, 6:37 PM
    • 114 Posts
    • 9 Thanks
    Outsider_83
    • #4
    • 3rd Jan 18, 6:37 PM
    • #4
    • 3rd Jan 18, 6:37 PM
    Just speaking to her, on a £31k salary her employer contributes 11% and her contributions are around 8%.
    • TheShape
    • By TheShape 3rd Jan 18, 11:56 PM
    • 1,185 Posts
    • 970 Thanks
    TheShape
    • #5
    • 3rd Jan 18, 11:56 PM
    • #5
    • 3rd Jan 18, 11:56 PM
    Looks pretty good to me apart from the mortgage rate.

    Keep feeding the regular savers.

    When the 5% finishes on the FlexDirect account account, consider overpaying the mortgage with some of that money as that will provide the same/similar level of return.

    When the regular savers mature re-open them if at 5%. The Nationwide regular saver won't take more than £250 pm at that point so perhaps further overpay the mortgage until such time as she can improve the mortgage rate.

    Re-assess everything in 10 months time when she's paid off the parental loan. At that point she should already be more secure as she'll have a lower mortgage balance and an extra £300 to save/invest each month.
    • IanSt
    • By IanSt 4th Jan 18, 11:29 AM
    • 209 Posts
    • 160 Thanks
    IanSt
    • #6
    • 4th Jan 18, 11:29 AM
    • #6
    • 4th Jan 18, 11:29 AM
    Any recommendations?
    Originally posted by Outsider_83
    One definite recommendation would be to look into what funds her pension is invested in and check that they meet her needs. Too many people are just invested in the default pension fund and that may not meet the needs of a young person who could have 30 to 40 years before they retire. At that age I personally would want to be in a 100% globally diverse equity fund.

    Other potential recommendations (which may or may not be applicable to her own set of circumstances): check what provision she has for long term illness; make sure she keeps increasing her pension contributions by at least the percentage of any annual increases in salary; start investing in S&S ISA's to e.g. cater for earlier than expected retirement; keep building up the cash savings until she has at least 6 months salary saved as an emergency fund; at least annually take a full look at savings/investments and check they are doing what she needs them to do; finally keep an eye out for unnecessary expenditures but spend enough to enjoy life
    • zolablue25
    • By zolablue25 4th Jan 18, 11:51 AM
    • 1,495 Posts
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    zolablue25
    • #7
    • 4th Jan 18, 11:51 AM
    • #7
    • 4th Jan 18, 11:51 AM
    As The Shape has said, I would look to transfer the savings pots (when their time is up to the mortgage (up to the £4100 max).

    That will, effectively, give her a 5% earning on the money. It should also mean that when she is up for renewal, she would be eligible for better mortgage deals due to the lower LTV.
    • Linton
    • By Linton 4th Jan 18, 11:56 AM
    • 8,853 Posts
    • 8,884 Thanks
    Linton
    • #8
    • 4th Jan 18, 11:56 AM
    • #8
    • 4th Jan 18, 11:56 AM
    As The Shape has said, I would look to transfer the savings pots (when their time is up to the mortgage (up to the £4100 max).

    ....
    Originally posted by zolablue25
    Though she needs to leave enough cash as an emergency fund - 6 months living expenses + mortgage, £7K or there abouts.
    • zolablue25
    • By zolablue25 4th Jan 18, 1:37 PM
    • 1,495 Posts
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    zolablue25
    • #9
    • 4th Jan 18, 1:37 PM
    • #9
    • 4th Jan 18, 1:37 PM
    Though she needs to leave enough cash as an emergency fund - 6 months living expenses + mortgage, £7K or there abouts.
    Originally posted by Linton
    Indeed, but she has 6K in savings and 2K in Nationwide current account. Can only use 4.1K for mortgage and, presumably, she would have an extra £250 per month that she can no longer put in Nationwide regular saver (max reduced from 500pm to 250pm), or she could forego the regular savers for a few months entirely (£800 per month). Plus she will be saving 10% on her mortgage payments each month.

    But you are quite right, everyone should have some form of safety net.

    Having just re-read the OP, I'm not clear whether the overpayment needs to be in a single lump sum or can be 10% per month. If its per month then the decision is easier as she can divert some of her savings from her NW account to her mortgage.
    • Flobberchops
    • By Flobberchops 4th Jan 18, 3:31 PM
    • 626 Posts
    • 449 Thanks
    Flobberchops
    Her situation sounds good and the previous posters have all given good advice.

    If it were me, the two smallish outstanding loans would be annoying me, so I would clear those first. That would then free up £375 a month to save.

    The £100 in P2P lending is insignificant, I would say either commit to a larger or ongoing amount (say £100 a month?) or else pull out if she can sell.
    I work for a UK bank, but any comments made on this forum are solely my personal opinion. Caveat Emptor!
    • Cotta
    • By Cotta 4th Jan 18, 3:47 PM
    • 2,546 Posts
    • 995 Thanks
    Cotta
    Not sure of the benefit of having £100 in peer to peer lending, can anyone explain this?


    Also if the regular savers are at an end, this is worrying as there will be surplus money doing nothing even if 10% overpayment is made.
    • atush
    • By atush 4th Jan 18, 5:01 PM
    • 16,456 Posts
    • 10,200 Thanks
    atush
    Decent position.

    I'd pay off the loan, and start a S&S isa.
    • Cotta
    • By Cotta 5th Jan 18, 1:29 PM
    • 2,546 Posts
    • 995 Thanks
    Cotta
    Decent position.

    I'd pay off the loan, and start a S&S isa.
    Originally posted by atush
    I'm not knocking what you have said but what is the point of paying off the student loan early?


    Also how will the op benefit from a S&S ISA as rates are so low?
    • ivormonee
    • By ivormonee 5th Jan 18, 1:40 PM
    • 108 Posts
    • 81 Thanks
    ivormonee

    Also how will the op benefit from a S&S ISA as rates are so low?
    Originally posted by Cotta
    An S&S ISA relates to stocks and shares whereas when you mention rates I assume you are referring to cash ISAs.
    • pjcox2005
    • By pjcox2005 5th Jan 18, 1:56 PM
    • 489 Posts
    • 533 Thanks
    pjcox2005
    Worth noting that whilst mortgage renewal in Feb 19 many will let you re-mortgage early, so I'd be asking the question when she has 6 months to go on it.
    • Cotta
    • By Cotta 5th Jan 18, 3:52 PM
    • 2,546 Posts
    • 995 Thanks
    Cotta
    Worth noting that whilst mortgage renewal in Feb 19 many will let you re-mortgage early, so I'd be asking the question when she has 6 months to go on it.
    Originally posted by pjcox2005
    You really think any bank that has their client locked into such a high rate will discuss this in July?
    • kidmugsy
    • By kidmugsy 5th Jan 18, 7:31 PM
    • 9,982 Posts
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    kidmugsy
    I recommend against extra pension saving unless (i) she could get an even bigger employer contribution, or (ii) she can do it by Salary Sacrifice (often called a "Smart" pension).

    Like several others I think she's doing pretty well save for the high mortgage interest rate.

    As IanSt said, maybe she'd be wise to look at insurance. I'll see if I can find a useful link to post later.
    Free the dunston one next time too.
    • kidmugsy
    • By kidmugsy 6th Jan 18, 12:16 PM
    • 9,982 Posts
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    kidmugsy
    As IanSt said, maybe she'd be wise to look at insurance. I'll see if I can find a useful link to post later.
    Originally posted by kidmugsy
    Herewith
    http://monevator.com/do-you-need-income-protection-insurance/

    Sorry for the delay: an urgent football match intruded.
    Free the dunston one next time too.
    • eskbanker
    • By eskbanker 6th Jan 18, 12:59 PM
    • 6,064 Posts
    • 6,078 Thanks
    eskbanker
    Sorry for the delay: an urgent football match intruded.
    Originally posted by kidmugsy
    ....involving a team that a more famous IanSt used to play for?
    • kidmugsy
    • By kidmugsy 6th Jan 18, 3:47 PM
    • 9,982 Posts
    • 6,736 Thanks
    kidmugsy
    ....involving a team that a more famous IanSt used to play for?
    Originally posted by eskbanker
    The very same. He was good, wasn't he? Was he what's now called a "false nine"? But I digress.
    Free the dunston one next time too.
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