Wealth Check: This Renae won't walk away, but can she buy a home?


The problem: Debts cast a cloud over a Canadian's ambitions

Two years after moving to the UK, Canadian Renae Satterley wants to turn her money "into something substantial".

The 36-year-old, who lives in south-east London, earns £23,000 a year looking after rare books at the Middle Temple Library, which houses legal works.

She already has £1,000 in a mini cash individual savings account (ISA) with HSBC, paying 4 per cent interest, and she is now trying to put aside £300 each month to build a deposit for a flat.

"I was renting in Canada and have been renting since I moved to London, and would now like to buy my own place. The sooner I can do this, the better." Each month, Renae pays £520 in rent, £80 on bills and £500 on transport and living expenses.

There is also some debt to wrestle with. Although she has managed to whittle down her UK credit card debt to just £240 on an HSBC Mastercard, an C$8,000 (£3,800) student loan is still outstanding. This is paid down with separate savings held in a Canadian account but her worry is that this "cache" will run out next April. "At that stage, I'll have to work out a way of paying off this debt from the funds held in my UK account."

With an eye on the longer term, Renae also wants to start investing in stock market funds.

As for retirement, she joined a non-contributory final salary pension scheme with her employer in July 2005.

She has no protection policies.

The cure: The overseas student loan must be repaid first

Renae's priority should be to clear her student loan, says Philippa Gee of independent financial adviser (IFA) Torquil Clark. "Assuming she pays an interest rate of at least 7 per cent, I would suggest she targets the repayment of this money as soon as possible."

This will mean her plans to save for a house "take a back seat" for at least six months, warns Ben Yearsley of IFA Hargreaves Lansdown.

Gillian Cardy from IFA Professional Partnerships adds that Renae should hold off investing in the markets until she has bought a property.

Debt/savings

To pay off her Canadian loan, Renae must first increase her UK savings, says Mr Yearsley. "The best way is to build up enough money in sterling [between now and next April] and then pay off the debt in one go. If not, she will face the problem of having to transfer money to Canada every month [from April 2007] - and could get a poor exchange rate and be hit with currency-translation fees for every transaction."

If Renae uses the £1,000 ISA money to pay off her loan debt, he adds, she must then start again with another mini cash ISA.

Investments

There is no point in Renae building up equity exposure if she wants to buy a property in the next few years, says Ms Gee, as shares should be held for seven to eight years to ride out any stock market fluctuations.

Once she has purchased her home, Ms Gee recommends she look at investing in a fund rather than buying shares directly in individual companies.

"There are many funds to choose from, ranging from lower-risk UK large companies to the ultra-extreme emerging markets," she says. "Renae can choose one that suits her appetite for risk, and ideally, split her money between a number of funds to gain even greater diversification."

Property

On a £23,000 salary, Renae will struggle to afford a place on her own, warns Ms Cardy. "She could consider buying with a friend and sharing the costs. Alternatively, she may need to think about buying somewhere considerably cheaper than London."

If she settles most of her debts and amasses a small deposit, Renae will be able to secure a better mortgage deal than she would opting for a 100 per cent loan. Another option is a "guarantor" mortgage, where a family member underwrites the repayments and so makes the borrower eligible for a bigger loan.

However, Ms Gee suggests that while renting may seem poor value for money, it may be sensible for the next few years. "Renae needs to consider her longer-term objectives, and whether she will remain in the UK or return to Canada," she says. "It's not just the monthly costs of a mortgage she would need to commit to but also the one-off costs - the deposit, legal fees, stamp duty and valuation fees."

Retirement

Renae is "fortunate" to be in a final salary scheme, says Ms Cardy. "This is worth a vast amount of money. She should think carefully about the consequences if she were to leave her present employer."

Mr Yearsley urges her to check she is paying the correct national insurance contributions to ensure she qualifies for the UK state pension scheme.

Protection

Renae should see what benefits are offered by her employer, particularly for income protection, says Ms Cardy. "Meeting her financial goals is going to be closely linked to her continued good health and earning capacity."

She may have to set up her own separate policy to cover her income in the event of long-term illness or injury.

There is little point in Renae taking out life insurance as she has no dependants.

If you would like a makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email s.dunn@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
News
i100
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Project Manager (HR)- Bristol - Upto £400 p/day

    £350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

    Graduate / Trainee Recruitment Consultant - IT

    £25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

    HR Business Partner - Banking Finance - Brentwood - £45K

    £45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

    PA / Team Secretary - Wimbledon

    £28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

    Day In a Page

    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
    How live cinema screenings can boost arts audiences

    How live cinema screenings can boost arts audiences

    Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
    Shipping container hotels: Pop-up hotels filling a niche

    Pop-up hotels filling a niche

    Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
    Native American headdresses are not fashion accessories

    Feather dust-up

    A Canadian festival has banned Native American headwear. Haven't we been here before?
    Boris Johnson's war on diesel

    Boris Johnson's war on diesel

    11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
    5 best waterproof cameras

    Splash and flash: 5 best waterproof cameras

    Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
    Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

    Louis van Gaal interview

    Manchester United manager discusses tactics and rebuilding after the David Moyes era
    The children were playing in the street with toy guns. The air strikes were tragically real

    The air strikes were tragically real

    The children were playing in the street with toy guns
    Boozy, ignorant, intolerant, but very polite – The British, as others see us

    Britain as others see us

    Boozy, ignorant, intolerant, but very polite
    Countries that don’t survey their tigers risk losing them altogether

    Countries that don’t survey their tigers risk losing them

    Jonathon Porritt sounds the alarm
    How did our legends really begin?

    How did our legends really begin?

    Applying the theory of evolution to the world's many mythologies
    Watch out: Lambrusco is back on the menu

    Lambrusco is back on the menu

    Naff Seventies corner-shop staple is this year's Aperol Spritz