Welcome to Money Matters: GLAMOUR’s weekly dive into the world of finance. We’re chatting all things personal finance, from contracting rights in the workplace to expert mortgage advice and saving for your first home, to ISAs and dealing with debt, to help empower you to make better choices. Now more than ever, it's important to understand our money, but so many of us feel as if we don't have a handle on it – or worse, feel anxious and scared about money.
So each week, a woman in a unique situation will give us an honest breakdown of her finances, and our expert will give her easy tips on how to tackle it.
To submit your own anonymous money diary and get top expert tips tailored to you, simply submit your entry here. And don’t forget to join GLAMOUR’s Facebook group, Money Matters, for more exclusive finance content.
MY ACCOUNTS
Current account: £3,400
Savings account: £0
MY INCOMINGS
Annual salary pre-tax: £40,000
Annual salary post-tax: £31,000
Monthly wage pre-tax: £3,333
Monthly wage post-tax: £2,544
Other incoming payments: £0
MY OUTGOINGS
Rent/mortgage: £1,200
Bills: £200
Splurges: £0
Other: £0
Any student loan/credit cards/overdrafts etc: £1000 per month on my student loan.
MY MONEY THOUGHTS
My worst money habit: Worrying about it.
My biggest money worry: Losing my home due to the mortgage.
My financial hopes for the future: I honestly don't know.
Current money mood: 🏠😠💀
Let's talk money!
WHAT MONEY EXPERT MAKALA GREEN SAYS:
Makala Green is a multi-award-winning Chartered Financial Adviser at Schroders Personal Wealth and has over 18 years of experience in the financial industry. She understands managing money can be complicated and confusing, which is why she is passionate about making financial planning more accessible for all. She is also the Author of The Money Edit; a no shame no blame guide to taking control of your money.
Review your finances.
When facing financial hardship or going through changes in your circumstances, the best thing you can do is review your current finances. Take a deep dive into all your outgoings and explore if there are any areas you can temporarily cut back on. It might only be a small amount, but every bit helps. Once you know what you can afford, it's worth contacting your lender, running through your budget with them, explaining your circumstances, and seeing how they can support you.
There are several new measures to help borrowers struggling; those worried about their mortgage repayments can call their lender for support and information without impacting their credit score, and homeowners will not be forced to have their properties repossessed within 12 months from their first missed payments. For further assistance, services such as Citizens Advice and Money Helper provide free financial and independent advice and can discuss options available.
Switch to a secure deal.
The worst thing you can do is suffer in silence when you are facing or experiencing financial difficulties.
Various rates are available on the market, so it's worth speaking with your lender first to see what other options are available. You can also shop around and explore rates other lenders offer, but always check any early repayment charges (the charge for leaving your deal early that may apply).
Generally, variable-rate mortgages, including trackers, are often cheaper than fixed rates. However, if you factor in the consecutive Bank of England base rate increases, you may be able to fix a rate that is cheaper than your current deal and even if it is not, at least you will have the security of knowing what your monthly payments will be for a specified period. Under new measures, most lenders are willing to offer fixed-rate deals to their existing customers who are not considering further borrowing and if they are up-to-date with payments, so it is always worth asking.
Switch to an interest-only mortgage.
One option to reduce your costs could be temporarily switching from a repayment mortgage (capital and interest) to an interest-only option. While this may incur more interest over the long term, it will reduce your monthly payment and provide some financial comfort over the short term to help relieve some of the financial burdens of increased mortgage costs. It effectively pauses your outstanding mortgage at its current level, meaning you will stop paying off the loan's balance and instead pay only the interest that accrues each month. However, this move should be treated as temporary as you will likely have less time to repay the mortgage balance once you switch back, and increased interest will have to be paid monthly to make up for the missed time. Under new measures, you can switch to an interest-only mortgage for six months – or extend your mortgage term to reduce your repayments and switch back to the original term within the first six months – without an affordability check or affecting your credit score.
Request a mortgage payment holiday/reduction.
Another option is to ask your lender for a mortgage payment holiday to allow you to temporarily stop or reduce your monthly mortgage payments for a set period. Payment holidays are mainly used by borrowers who are struggling financially. Lenders are not required to offer payment holidays to borrowers and will offer them at discretion, so if you feel this option may prevent you from financially struggling, you can speak to them and request one. It may be beneficial and more accepted by your lender if you can maintain a proportion of the monthly payment rather than stop altogether. Consider the maximum you can comfortably afford and review your spending to see if there is scope to keep up with payments without taking on a payment holiday. It will become more expensive once the holiday ends, as the extra interest accrued will be added to the outstanding loan to pay back the mortgage by the end of the term. This may be a last resort option after you have explored all other options.
Extend your mortgage term.
You may explore extending the duration of your mortgage to spread the payments over a longer period. For example, you could extend a 23-year mortgage by an extra seven years to a 30-year term. Lenders usually allow you to take a term up to 40 years, although they often will only extend your mortgage to your retirement age, or whichever is sooner. You also have the opportunity to extend your mortgage term if you are considering switching to a fixed-rate deal. Extending your mortgage term allows you to reduce your monthly payment amount. Although, it will come at a bigger cost in terms of interest payments. However, unlike an interest-only option, the mortgage will be repaid even if the term is never reduced to the original timeframe. Also, you can reduce the term in the future when/if your financial circumstances are more favourable.
Let's talk about money.
