Wealth Check: 'I want property and a cheaper phone package'

Currently living at home with her parents, recent graduate Nicole Lester, 23, commutes from Essex to London where she works as a sales and marketing manager for a photographic syndication company.

Nicole is aiming to save for a deposit on a house and perhaps build up a property portfolio. She has debts totalling £3,000, consisting of a student loan and three credit cards with Egg, NatWest and Virgin.

Concerned that her mobile phone bill is costing £60 a month, Nicole would like advice on how to reduce this cost and upgrade her phone to a better model.

We asked Lisanne Mealing of MDM Associates, Rob Clifford of Mortgageforce and Anthony Ball of OneCompare.com for a professional opinion.

Case notes

Nicole Lester, 23, Witham, Essex

Personal: Nicole works as a marketing manager for a photographic syndication company earning £26,000pa. Monthly outgoings total £500

Property: Looking to buy her first home, reduce debt and save for the future

Debt: £3,000 owed on student loan and three credit cards with Egg, NatWest and Virgin

Mobile phone: Costing £60 a month with T-Mobile, but benefiting from 400 free texts (exceeded) and 400 free minutes.

MORTGAGE

Getting a foot on the property ladder is entirely sensible and every year counts, says Clifford. Doing so at Nicole's age and soon after graduating is not unusual but many first timers face a serious affordability gap, given that earnings have grown so much more slowly than house prices.

Nicole is right to aim to save a deposit as almost all lenders expect to see a personal stake of at least 5 per cent of the purchase price.

Clifford estimates that if Nicole decides to buy a property as her main residence then her earned income would make it possible to borrow at least £100,000, subject to the extent of any existing outgoings on credit cards.

Some lenders largely disregard the credit card debt, while others deduct these outgoings from income prior to calculating what level of mortgage is feasible. For Nicole, a mortgage in the range £95,000 to £115,000 could therefore be on offer.

Building a portfolio of residential property is increasingly common as buy- to-let mortgages have become so competitively priced and so widely available. Some lenders will disregard Nicole's earned income and instead base the lending decision on the rental income from the property in question.

Beware that buy-to-let loans almost always demand a minimum 15 per cent deposit, which might push this particular financial plan a few years away for Nicole.

One option Nicole could consider, continues Clifford, would be involving her parents with the mortgage transaction as a joint applicant or guarantor. This might enable Nicole to get on to the housing ladder much more quickly, at a time when house prices are relatively stable and when there are some great mortgage offers around, such as 4.75 per cent fixed for two years from West Bromwich Building Society.

DEBTS

Nicole should perhaps consider a consolidation of her three credit cards with a lower rate of interest, especially if she is going to keep outstanding balances on it. Northern Rock is currently offering 0 per cent on balance transfers for six months with a standard continuing rate of approximately 8 per cent.

If she intends to keep nil balance on her credit cards, she could go for another scheme where she is offered rewards or cashback. An example would be American Express Blue, with double money back for the first three months and 1 per cent on most purchases after that point. The current APR is 6.9 per cent, although a higher rate may be offered depending on status.

MOBILE PHONE

Ball says Nicole's mobile phone bills represent an excellent opportunity to save money. Nicole currently pays £60 a month with T-Mobile. For this she gets 400 free texts and 400 free minutes at anytime. However, on average she uses 300 minutes and 600 texts a month. By going over her limit she can end up paying as much as £120.

Nicole has a Nokia 6170 flip phone and would be looking to upgrade to something similar. She needs to choose a new tariff carefully - some 37 per cent of mobile phone users exceed their monthly allowance every month.

Nicole could choose from several handsets, all of which are free on the top tariff (online 200 texter option from O2) and would save her £30 a month. As Nicole is keen to stick with a flip phone, he recommends the new Motorola v3i and Motorola PEBL U6. The Nokia 6101 and Samsung e530 are also possibilities but Anthony thinks these are less cutting edge.

For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk

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