Cambridge. Its full price is £415,000 but you can buy a 30 per cent share in it for £124,500, which requires a mortgage deposit of just £6,225. Your monthly cost would be £1,407, made up of a £624 a month mortgage, rent of £666 and a service charge of £117. Sounds like just the solution, but there are a lot of catches with shared ownership, so do your research to see if it actually suits you.
First, that massive service charge. Though you own only, say, 30 per cent, you have to pay 100 per cent of the service charge, which is a monthly charge you pay the housing association for maintenance. Service charges are infamously expensive, and notorious for rising steeply. Likewise, rents on the proportion you do not own may also rise and become less affordable, though rents are less than would be charged on the open market – usually 2.75 per cent of the property value per year. You can start to buy more shares in the property, up to 100 per cent of the whole thing, in a process known as staircasing, but again, if property values rise you may not be able to afford to do this. Also you may be limited to how many times you can ‘staircase’, so you couldn’t for example buy just 1 per cent each year.
Shared-ownership mortgages come with higher interest rates than conventional mortgages. There are also certain restrictions on what you can do with your home because, really, you are still considered a tenant. You cannot sublet it, for example, which makes life a bit difficult if you have to move elsewhere for work. If you fall behind on rent there is the risk you will lose the property.
You can always sell and realize any gain you have made on the portion you own, supposing that house prices have risen, but the housing association has a right to find a buyer before you sell through the open market.
Debt is a dirty word, so much so that a long time back the financial services industry rebranded it as the much more enticing ‘credit’. But although many of us often called ‘generation debt’ are up to our eyeballs in it, not all debt is created equal, or owed equally urgently. You should not unnecessarily freak yourself out about borrowing money to the detriment of its many positive benefits (your own flat, university degree, iPhone, car, good credit score) or of getting a decent night’s sleep.
Wrapping your head round how to borrow well is also one of the most efficient ways to avoid wasting money, which is why I think it is a topic worth addressing ahead of how best to budget, or start a savings account or pension. There is no point in having money set aside if you are paying out hundreds of pounds in interest on overdraft or credit-card debts because you have not managed to clear them quickly enough.
If you were to borrow £3,000 on a credit card, with an interest rate of 19 per cent (some credit cards now charge interest rates of over 50 per cent), and only make the minimum repayments, starting at £74 a month and reducing over time, it would take you twenty-seven years and seven months to pay it off, and you would have paid an additional £4,192 in interest in the meantime, highlighted the Financial Conduct Authority, the financial services industry regulator. That £3,000 would have cost you £7,192. If you could stretch to repaying £108 a month, by not saving until the debt was cleared, for example, you would get rid of it in three years, and pay £879 in interest. The debt would have cost you £3,879.
I will come on to how best to have and use credit cards, but, having dealt with mortgages, I’ll start with the second-biggest debt you are most likely to be juggling – a student loan. Ironically, that is the debt that should cause the least insomnia. I will then outline the debts that are far more pernicious, and how best to handle them in a way that helps you save money.
If you are mired in really messy debt with a bank or similar lender there are things you can do and people available to help you out of it, so please don’t let it harm your mental health. I have covered this in chapter 11 on money and wellbeing.
Student loans
Putting aside all the controversial politics of whether or not students should have to pay tuition fees, and the rising cost of living at university, you have to admit that student loans have suffered from a shocking PR job. We have all read the news reports about bright young people being forced into £50,000 of ‘debt’ that they will be lumbered with for the whole of their twenties, thirties and forties, at least. While this is technically true, the implications are often misunderstood. The connotations of the dirty D word can be dangerously offputting, especially if you have grown up in a household stalked by debt, or cannot rely on BOMAD to bail you out.
Конец ознакомительного фрагмента.
Текст предоставлен ООО «ЛитРес».
Прочитайте эту книгу целиком, купив полную легальную версию на ЛитРес.
Безопасно оплатить книгу можно банковской картой Visa, MasterCard, Maestro, со счета мобильного телефона, с платежного терминала, в салоне МТС или Связной, через PayPal, WebMoney, Яндекс.Деньги, QIWI Кошелек, бонусными картами или другим удобным Вам способом.
