This is a really common question, people are still unsure about how much they have to have in order to get a loan. While it is simple enough in terms of the rules, what is tricky is that keeping track on exceptions becomes difficult in a ‘live mortgage loan’ situation because some may draw down and others don’t.
This week on RTE’s ‘Talking Money’ we looked at the cost of raising a child. Everybody who ever had kids knows it’s expensive, but did they realise it can cost about €105,000 per child? That’s a real eye opener and that so many parents cut back on vital financial needs like life insurance to allow for general consumption is a concern. As always, you’re bound to be entertained as Karl Deeter and Jill Kerby ‘talk money’.
We were asked for a comment on the Central Bank switching report by RTE News at 6. We believe it is telling us what many already intuitively know, that by being assertive and moving away from lenders who charge more that people will ultimately save money.
There is a counterbalancing argument about the savings being estimated over the life of the loan, but equally, the report doesn’t factor in switching contributions which could sway it back in favour of moving from expensive providers to lower cost lenders.
The ‘loan to value’ ratio is a key concept in mortgage lending, it is also extremely simple which makes the concept very easy to understand and calculate. What is a little more complex is ‘why’ it matters and what the view of a lender is when it come to the risk associated with the loan to value. This video is just over a minute long and explains what you need to know.
Back in June (sorry for the delay, we had the recording but didn’t post it!) we did a piece on life insurance and both how and why it matters.
As usual, Jill and Karl didn’t always agree on everything but the need to insure against your greatest risk was universally accepted and how to do it sensibly is really straight forward.
You can catch us again ‘Talking Money’ every Monday on RTE Drivetime at about 18:15.
That so many people can switch their mortgage and don’t was always something that puzzled us as professional advisors.
They found many of the things we intuitively knew but put numbers on it, issues such as inertia, complexity of product, and other issues like naive procrastination.
The numbers are not small either, savings of over €10,000 are being passed by and Irish consumers seem to be willingly paying about €65,000,000 more than they should to the lenders simply by not being more pro-active with their own finances.
This week on ‘Talking Money’ Karl Deeter and Jill Kerby were discussing ‘switching’ with Cormac on RTE’s Drivetime. It was coincidental that many of the points we made were reinforced by the Central Bank findings this week on mortgage switching on points such as assertive customer behaviour being important and not allowing inertia to hold people back.
A tax myth that I have heard more than once has to do with landlords somehow price-gouging because they have a debt free property.
Most recently it was written in the Independent where it was stated by Aideen Hayden of Threshold accused landlords of ‘downright extortion’ because they have increased rents at a time when they have no mortgage on the property.
This is a logical fallacy, and a one worth debunking.
For a start, everybody has the right to charge prices and equally the state has a right to tax profits from various activities. In the case of landlords they have to make a tax return stating their profits and the more they make the more tax they pay.
In fact, the effective rate of tax on a landlords net profits is often about 65% or more. Don’t believe me? Play with this excel calculator and see for yourself. If you want to see how it works for a person who is mortgage …
Credit cards often have an interest rate of 20% or more and the do offer some great convenience and flexibility, but for many people this credit contract can be a problem and the high interest rate doesn’t help. So is there a way to cut that interest rate in half?
The short answer is ‘yes’, within consumer credit there are different types of contract, ‘credit’ can take the form of credit cards, overdrafts or even hire purchase agreements.
So here’s what to do, most people have a debit card with a current account, what a credit card does is give you a time where you pay no interest and can spend money you may or may not have.
If you get an overdraft (say for €5,000 which is a common credit limit on a credit card) instead and just use a debit card with it then you can access that €5,000 in the same way a card might do. If you have money obviously your balance will go to zero before you hit the overdraft so if you always pay …
When one of the best investors the world has ever known says you should stay out of debt it might be worth listening to! We are advocates of keeping debt as low as possible, this involves financial habits and life habits that lead to financial success. Enjoy the video, the words of this video are full of wisdom.