Wealth Check: 'I'm living with my Mum, and I want to move out'
Saturday 18 November 2006
Mary Barber has worked as a sales manager for a soft drinks company for a year. She currently shares a two-bedroom flat with her mum, but would like to move out, ideally by February next year. She isn't sure, however, whether her finances are in good enough shape to justify taking on a mortgage.
Mary's current salary is £28,000 and she gets a bonus worth up to a further 20 per cent of pay each year. She does have a small amount of savings and she has also joined her company's pension scheme. However, Mary does have some debts, including a student loan of £1,248 and a loan from Barclays with more than £3,600 still to repay.
We asked three financial advisers for their advice: Drew Wotherspoon, of John Charcol; Ben Yearsley, of Hargreaves Lansdown; and Darren Littler, of Savills Private Finance.
Mary Barber, 25, sales manager, London
Salary: £28,000, plus a yearly bonus.
Savings: A Barclays savings account that currently holds £4,000 and an ISA with Abbey, worth about £2,200.
Debts: Student loan with £1,248 to pay and £3,632 on a Barclays bank loan.
Pension: Mary is a member of her work money purchase pension scheme.
Monthly spending: £830 on living expenses and bills.
Mary believes she would be able to get a mortgage of around £150,000 and this is about right looking at her salary and bonus, the advisers say. However, before purchasing a property Mary needs to think about both the initial costs and the ongoing payments.
Littler says that Mary needs to remember that the upfront costs of purchasing a property include stamp duty - on a property of £150,000, this would be 1 per cent or £1,500. Then there will be the lender's valuation fee, the survey and legal costs - these could easily add up to a further £1,500.
These costs will obviously affect the size of the deposit Mary can put down, though some lenders will assist with these costs. Northern Rock contributes £500 towards legal bills on completion, for example.
Mary has made a decent start with her savings but she should increase them to at least £7,500 in the next few months. That would be a deposit of 5 per cent on a property with a purchase price of £150,000, giving her access to cheaper mortgage deals. The difference in price between a 95 per cent and 100 per cent mortgage is about 0.35 percentage points, which equates to a saving of about £25 a month, says Wotherspoon.
Wotherspoon also thinks that Mary should consider spending slightly less on a property and instead use some of her savings to pay off her bank loan. However, this depends on what's available in her local housing market - at the very least, she must make sure the interest rate on the loan is competitive.
Everyone should have at least three to six months' salary saved for a rainy day and the ideal place is a mini cash ISA - a tax-free and easily accessible account. Mary's Abbey ISA is therefore a good account.
Mary's debts are relatively small, according to Yearsley, and should be paid off in a couple of years. He doesn't think she should be too concerned about them, though he also thinks that she may be able to find a cheaper interest rate.
Once Mary has bought her property she should start looking at her long-term savings - a stocks and shares ISA would be a good place to start. Yearsley suggests that Mary should invest via a fund supermarket in order to get access to a range of different fund management companies under the same roof.
Mary has made a good start with her pension, and she would be happy to increase her monthly contributions. There's no reason why she shouldn't if she can afford to, but she is saving more than most people her age, so there's no rush.
However, Yearsley suggests that Mary should check that her pension funds are performing well. He also points out that, with so long to go to retirement, she can afford a higher degree of risk. Mary should realise, though, that her aim of retiring by 50 may not be possible as the pension rules are changing.
Another key issue is income protection, and Mary needs to check with her employer to see if they offer any sort of cover. Permanent health insurance or critical illness cover would be worthwhile for someone with no dependents. This type of insurance can be expensive, but will cover you if you can't work due to ill health.
For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail email@example.com
Switching your current account? Pick one that reflects the way you run your finances
Profiteering? British Gas customers hit again as energy giant fails to pass on profits hike
The most expensive cities in the world 2015
Payday lender Cash Genie forced to repay £20m to ripped-off customers
Five Questions On: GB Energy's new tariff
- 1 Top Gear team of Jeremy Clarkson, Richard Hammond and James May officially heading to Amazon Prime for new car show
- 2 Stuart Baggs: Apprentice star 'The Brand' found dead aged 27
- 3 How to cancel Amazon Prime: after Top Gear hiring, how to leave premium service
- 4 Tesco scraps 'unexpected item in the bagging area' as self-checkouts switch to less 'frustrating' audio
- 5 Living in Spain and commuting to London 'cheaper than actually working in London'
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
Calais crisis: For desperate migrants it is 'England or death' as they brave dogs, riot police and speeding trains
While we fixate on Calais, the Government is quietly deporting dozens of migrants on 'ghost flights'
iJobs Money & Business
Negotiable: Recruitment Genius: This company prides itself on its ability to p...
Negotiable: Recruitment Genius: This company prides itself on its ability to p...
£800 per day: Ashdown Group: A highly successful, global financial services co...
£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...
Day In a Page
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.